The banks have endured a turbulent few years as a result of increasing regulatory constraints, slowing credit growth, and the fallout from the royal commission. 2019 was no different, with the banks generating a total return of 9.5 per cent for the calendar year, less than half that of the broader market return of 23.8 per cent.

Of the major banks, the Commonwealth Bank of Australia was the standout performer, delivering a total return of 16.9 per cent – still below the return of the broader market. The worst performer was Westpac, with its share price hit hard toward the end of the year as a result of its weak full year result, a large capital raising, and the release of a statement of claims against it by AUSTRAC.

While loan book growth should improve marginally in the coming year, the major banks are likely to experience continued low growth due to increasing competitive pressure from second tier and non-bank lenders.

The increase in loan application activity should improve, but fee growth is likely to remain constrained given political and social pressures on fee pricing.

“Smaller lenders who rely on wholesale funding are benefitting significantly from falling benchmark interest rates, narrowing the gap in their funding cost relative to the major banks. This allows these smaller lenders to price mortgages and other loan products more competitively.”




Brian Becker

As a long term customer of WBC and medium term CBA (personal and business banking) I wouldn't touch their equities with a barge pole. Based on recent experience they appear to be staffed by check box tickers who either have no authority or no interest in relationship banking. I don't expect ANZ or NAB are any different, but would switch in an instant if they are.

Stuart Jackson

Thanks for the comment Brian. The removal of any authority at a branch or relationship level is largely a function of the Royal Commission. Allowing staff to have autonomy also allows them to make exceptions and potentially bad decisions for reasons that may not be in the best interest of the customer. Unfortunately, in order to ensure a reduction in the number of people that shouldn’t get loans and prevented from doing so, it also means that a large number of people that probably should will be rejected. This is because there is no hard line between someone that should and someone that shouldn’t get a loan. There is merely increased or reduced risk of problems. Given the current political climate, I wouldn’t expect this to reverse in the foreseeable future. However, this does potentially present an opportunity for some of the smaller and more nimble players in the market