Banks face more competition for profit
Banks are having to fight harder for business, and face increasing regulatory costs in a post-GFC climate, says accounting firm KPMG.
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Banks may face a more competitive future as consumers and businesses keep their wallets closed in the wake of the global financial crisis.
KPMG head of financial services John Kensington says banks may see a return to the "older days", when they had to work harder for business.
"They are not going to see consistently growing balance sheets.
"They are not going to see people always coming in and wanting to borrow because we have all had a bit of a fright after the GFC," he said at the release of KPMG's annual financial institutions performance survey.
It shows the combined net profits from the country's trading banks increased to $3.3 billion in 2011, up from $2.8b in 2010.
Mr Kensington says the profit rise is partly due to a shift towards floating mortgages.
"When you're on floating the bank finds it easier to get a margin over the rate they fund on.
"And without that increase in margin the bank result would not have been as strong as it was."
Mr Kensington says when the OCR and interest rates eventually go back up, demand for fixed mortgages will probably rise.
Despite the increase in profit, banks are struggling with high compliance costs as a result of new regulations.
Recently introduced regulations include the financial advisers regime, anti-money laundering legislation and the non-bank deposit takers regime.
"If we accept we're about to lift up from the bottom of an economic cycle, banks don't really want to be using their valuable resources doing compliance."
He says banks would rather be putting money into innovation and developing new products.
By Caleb Allison
Tue, 24 Apr 2012
Tue, 24 Apr 2012
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Banks face more competition for profit
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