APRA says Hayne helping ‘slow but steady’ decline in big four’s dominance

As policymakers attempt to inject more competition into banking, Mr Byres said smaller banks had in recent times gained some “competitive advantages” over their larger rivals, Commonwealth Bank, National Australia Bank, ANZ Bank and Westpac.

Mr Byres said the most “critical” of these advantages was “a far better reputation among consumers” following the royal commission into banking misconduct, conducted by former High Court judge Kenneth Hayne.

“This is contributing to the slow but steady erosion in the dominance of the majors,” he said.

“At the same time, the long-term decline in the share of mutuals appears to have definitely ceased and, albeit slowly, mutuals are starting to win back market share.”

Policymakers have previously sought to boost mutuals, which have $120 billion in combined assets. Former Labor treasurer Wayne Swan sought to push the sector as a “fifth pillar” to the majors with a series of policy changes at the start of the decade.

Mr Byres acknowledged the big four were a dominant presence, but noted that mutuals had grown faster in the last decade.


Mutuals’ total assets have expanded by 87 per cent since 2009, compared with 57 per cent growth for the major banks, he said, and the sector’s share of new lending was at its highest since the global financial crisis.

“There is undoubtedly a real opportunity for the mutual sector to take collective advantage of its favourable perception,” Mr Byres said.

However, he also noted they could wear more pain from a period of very low interest rates than their larger rivals. Mutuals were more exposed to the crunch on profit margins that comes from declining interest rates, he said, because they were more reliant on funding from low-rate transaction accounts.

In response, Mr Byres urged mutuals to consider cutting costs, while also suggesting the sector look at ” collective initiatives” to generate the scale needed to compete more strongly.

The speech follows a round of bank results that showed profits across the big four fell 8.8 per cent last financial year, to $27 billion.

Citi analysts led by Brendan Sproules, in a note titled The Dark Shadow of Hayne, said a key surprise from the results had been the weakening outlook for 2020, due to fallout from the royal commission. The report said CBA and Westpac would be most affected by moves to cut or scrap fees, but more positively, remediation costs had probably peaked.

Most Viewed in Business



Related posts

Make a comment