The big banks are announcing big profits, but still contend margins are under pressure.
Commonwealth Bank yesterday announced a half-year net profit after tax of more than $3.6bn. The result is up 19% on the same period last year. Chief executive Ian Narev said the strong profit result meant the bank would not have to follow in the footsteps of its rivals in announcing massive job cuts.
"Our strength enables us to continue to take a long term view of the business. For some time, we have been enhancing our customers’ experience with us, while increasing productivity. We have focussed on investing in new technology, improving inefficient processes and developing our people. That will continue. We have no plans to send jobs offshore. And we have no plans for major redundancy programs," Narev said.
Westpac has also announced strong profits, but its cash earnings were down on the previous two quarters. In its first quarter update released today, the bank declared a statutory net profit of $1.4bn. Chief executive Gail Kelly has claimed a fall in cash earnings for the bank could be attributed to a "more challenging operating environment" leading to a $200m decline in markets related income.
Both banks also pointed to pressure on margins. CBA said its headline net interest margin was down 10bps on the prior half to 2.15%. Westpac also saw a 10bp decline in net interest margins, which it said was mostly due to higher deposit costs.
"This trend continued into the 2012 calendar year with both higher deposit costs and increases in wholesale funding costs further impacting margins," the bank said.