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The notion that these super competitive mortgages – in particular if they were sold through mortgage brokers – were unprofitable is something banks are largely now admitting to.
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This has weighed on the profitability of all four banks, including those that have attempted to stay out of the fray.
Another point on homogeneity is the position taken by all four to pursue or extend share buybacks.
This reflects two things. First, the banks are comfortably capitalised and in strong financial nick with arrears remaining low. Regulations around responsible lending and strong capital buffers have ensured this.
So that’s a tick. But the avalanche of buybacks and strong dividends also demonstrates that banks’ growth options are limited.
The banking royal commission put paid to any ambitions to grow outside their traditional core banking operations. In the wake of the royal commission, wealth management and insurance divisions (where most of the misconduct was found) were jettisoned.
Earnings season showed the big four banks experienced a fall in profits and the themes were remarkably similar.Credit: Dominic Lorrimer
So expansion outside core banking is no longer a source of growth.
And decades of poor international acquisitions that were later abandoned has left the current batch of chief executives without a shareholder mandate to grow offshore – even if they had a mind to do it.
Of course shareholders, and retail shareholders in particular, love the dividends and buybacks and the receipt of franking credits, which in part explains why bank shares have generally been so strong.
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But it means growth has to come from taking market share, so banks are effectively left to eat each other.
Migration is perhaps the only tailwind and Comyn referenced growth in new transaction accounts from this cohort as a positive element to the results.
But migrants tend to rent for a couple of years before moving into the buyers market. The latest large influx is also putting a strain on housing. And the general deterioration in housing affordability is limiting credit growth across the banking sector.
With higher for longer being the message on interest rates, it’s difficult to see where the growth in banking will come from – at least in the short to medium term.
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