Industry revenue is anticipated to grow over the next five years as interest rates start climbing.
Melbourne, Australia (PRWEB) September 15, 2014
The Australian banking system has remained solid during a time when other global banking markets have faltered considerably. However, the lower interest rate environment is putting pressure on growth for players in the National and Regional Commercial Banks industry in Australia. Industry revenue is forecast to grow at an annualised 1.1% over the five years through 2014-15 to $180.9 billion. Despite sluggish growth, Australian banks remain well capitalised. However, with no further interest rate reduction expected by the Reserve Bank of Australia (RBA) in 2014-15, the industry is expected to post its first consecutive year of growth since 2007-08, with a growth rate of 4.5%. According to IBISWorld industry analyst Ryan Lin, “The industry is undergoing some structural changes.” The current low interest environment and limited potential growth in the saturated lending market have forced the major players to look elsewhere for revenue streams. Furthermore, new entrants are increasing the competition for established banks.
Although profit was substantially lower in 2009-10 as margins struggled to grow and revenue fell, the industry's overall profitability and that of individual players remained robust, in contrast with the catastrophic losses in other global markets. “Australia's banks were shielded from spiralling global funding costs by the Federal Government's wholesale funding guarantee,” says Lin. With house prices and the economy remaining relatively strong, Australian banks faced comparatively low levels of bad debts. This was in part driven by economic stimulus and continued international demand for commodities. Much of the increase in loan loss provisions was offset by slightly higher net interest margins over the first half of the five years through 2014-15. Industry profitability was further aided by declining borrowing costs. The industry displays a high level of market share concentration. Major players include Westpac Banking Corporation, Commonwealth Bank of Australia, National Australia Bank Limited, and Australia and New Zealand Banking Group Limited.
Over the next five years, industry revenue is anticipated to grow as interest rates start climbing. A stabilised economy will reinvigorate business confidence. However, competition in the National and Regional Commercial Banks industry could erode profit margins, with the four major banks expected to continue to dominate the market. The gradual contraction of the retail and manufacturing sectors is expected to impede revenue growth.
For more information, visit IBISWorld’s National and Regional Commercial Banks industry in Australia report page.
Enterprises in this industry are Australian-owned and operated banks engaged in banking activities. National and regional banks generate revenue through investments, interest income on loans, advances, fees and commission income.
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