The major banks' FY23 cash earnings hit a record A$32.5 billion, up $4 billion (or 14 per cent) in FY22, eclipsing the previous record of $31.2 billion set in 2017, according to banking analysts from PwC and KPMG.
Ernst & Young Australia, meanwhile, reported that the four major banks earned $31.99 billion in combined statutory earnings. This was up $2.43 billion (or 8.2 per cent) from the 2022 full-year results.
All pundits were keen to point out that these record profits came courtesy of the RBA's series of rate rises, which allowed the banks to expand their net interest margins, and hence their net interest income.
Net interest margins increased overall, but declined in the second half as competition for lending and deposits forced the "rate-bounce" to be shorter and shallower, PwC reported.
“Despite a 400 [basis points] increase in cash rates from the start of the tightening, margins rose only 11bps for the year as a whole and actually fell 7bps in the second half as competition intensified,” said Sam Garland, banking and capital markets leader at PwC Australia.
KPMG chimed in with some specific data: NIM was, on average, 1.90 per cent in the first half of FY23r, and decreased to 1.84 in the second half of the year.
"In combination with an increase in interest-earning assets of 7.3 per cent compared to FY22, net interest income increased by 13.8 percent to $74.9 billion," KPMG reported.
The major banks' overall average cost-to-income ratio decreased from 50.2 per cent in FY22 to 46.3 per cent, which KPMG said was mainly attributable to the increase in income.
The increased interest earnings also underpinned an increased return on equity to an average of 12 per cent across the Big Four banks, the highest in five years – well short of the 13.6 per cent return recorded in FY17.
"This is because average equity, at $272 billion, is up $3 billion on the previous year and $43 billion more than in FY17," PwC said.
However, operating expenses also increased by 3.9 per cent compared with FY22 reflecting an increase in personnel costs of 8.2 per cent from FY22 in line with an increase in headcount of 1.9 percent.
Credit growth also remained healthy for the year despite the steady rate tightening, with the majors growing 5 per cent for the year, PwC said.
This growth was not without extra costs, as credit impairment charges increased $2.96 billion, from a net write-back of $0.13 billion at the 2022 full-year, to $2.83 billion this period, according to EY. Credit provisions rose $1.5 billion to $21 billion against impaired assets of $7.4 billion, signalling continued caution about the economic outlook.
And KPMG noted that the banks' 90 day+ delinquencies, as a percentage of gross loans and advances, increased to 1.91 per cent, up from 1.73 per cent in FY22.