Bank Australia CTI keeps climbing

John Kavanagh

Bank Australia might take the gong for highest cost-to-income ratio for a bank in the 2019/20 financial year, reporting an increase in CTI from 73.48 per cent in 2018/19 to 73.52 in the year to June 2020. But the bank makes no apologies for its high level of expenses.

Bank Australia managing director Damien Walsh said: “We’ve continued to deliver on our strategy of developing the capacity of our people as values-based leaders and to enhance our technology platforms, cyber security and digital banking services to meet customer needs and expectations.

“This multi-year program of investment in people and technology has resulted in a cost-to-income ratio of 73.5 per cent.”

The bank made a net profit of A$19.6 million in the year to June – down 14 per cent from the $22.8 million profit in 2018/19.

Net interest revenue rose 4.6 per cent to $114.1 million and total revenue rose 5.4 per cent to $131.4 million.

The loan impairment expense rose from $1.1 million in 2018/19 to $7.7 million in the year to June. Of that amount, bad debts accounted for $500,000 (unchanged from the previous year) and the COVID-related expected credit losses accounted for $7.2 million.

Other expenses rose 6.4 per cent to $96.6 million.

Total assets increased by 13.7 per cent to $7.2 billion. Gross loans grew 6.4 per cent to $5.6 billion, while loan origination during the year were down 0.5 per cent to $1.4 billion.

Customer deposits increased by 12.2 per cent to 5.9 billion.

The net interest margin was 1.68 per cent – down from 1.79 per cent the previous year. Return on equity fell from 4.37 per cent in 2019 to 3.61 per cent in 2020. Capital adequacy fell from 16.4 per cent to 15.8 per cent.

At June, the bank had assisted 1464 customers with loan repayment deferrals and other measures, representing $425 million of loans (7.6 per cent of the portfolio).

At September 6, the balance of loan subject to payment deferrals had fallen to $260 million.

Bank Australia is a mutual that aims to have a positive social and environmental impact. Its “impact finance portfolio”, which is designed to create positive impacts, grew from $610 million in 2018/19 to $746 million in the year to June.

It also launched a clean energy home loan this year, which offers incentives for borrowers building, buying or renovating energy efficient homes.