(24 April 2012 – Australia) When the banks start announcing their half year profits next week, they will be reporting a decline in profit margins on loans. Despite this decline in loan profits, the big four are still in line to report combined profits of A$12.5 billion for the first half of this year.The combined profits are expected to be up on last years’ A$12 billion and are a result of cost cutting measures and returns in other business areas such as wealth management.
Customer deposits, which now comprise more than half of the banks’ total funding is the area really hurting their lending profit margins due to higher interest rates paid to depositors and each bank aggressively competing for each deposit.
National Australia Bank, which has committed to maintaining the lowest variable home loan rate of the big four domestics banks, is forecast by analysts to record the biggest drop in net interest margins.