The financial and insurance sector is in rude health, and perhaps much better health than is appreciated.
ABS business indicators data for the December 2024 quarter shows the aggregate pre-tax profit for financial and insurance services hit a post-GFC quarterly high of $7.1 billion.
When you dig deeper, you may wonder how?
APRA’s quarterly ADI statistics for the September 2024 quarter show it costs a mammoth $103 billion to run the entire banking industry in Australia over one year. Industry costs have more than doubled over 20 years.
The ratio of personnel to operating expenses is 59 per cent, a ratio that’s climbed steadily for more than 10 years. Bear that in mind the next time you hear a senior banker yapping about productivity.
The cost to income ratio, the industry’s beloved (if misleading) indicator stands at 52.2 per cent for the sector.
A decade ago the industry C/I ratio was in the 40s and at one point was as low as 41 per cent.
Westpac’s economics team yesterday pointed out that headline company profits (across all industries) in the ABS data “surprised materially to the upside, rising 5.9% in the December quarter, well exceeding its forecast (1.0%), the market median (1.8%), and even the highest forecast in the range (3.5%)” a surprise largely explained by technical factors relating to the measurement of inventories.
The ABS will publish quarterly GDP data on Wednesday.