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25% fewer players: Banking boom set to reverse

By Grace Ormsby · May 15 2020
Reading:
egg

Borrow

25% fewer players: Banking boom set to reverse

By Grace Ormsby
May 15 2020
Reading:
egg
Banking boom set to reverse

25% fewer players: Banking boom set to reverse

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By Grace Ormsby · May 15 2020
Reading:
egg
Banking boom set to reverse

Up to a quarter of Australia’s banks could exit the market within five years due to pressures associated with COVID-19.

According to GlobalData, the “enduring squeeze” of coronavirus on smaller players in the financial industry could result in the long-term consolidation of the marketplace.

The forecast comes after the recent announcements by a number of banks that profits have taken a hit

According to GlobalData retail banking analyst Resham Karira, government support and cheap funding will go some way in buffering impacts on the banking sector, “but it can only mitigate the impact”.

She said the recent upswing in authorised deposit-taking institutions (ADIs), which was driven by the launch of neobanks, “appears set to reverse”.

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“The next five years could see up to a quarter of ADIs exit the market via sales or mergers.”

It’s not all bad news, however: GlobalData itself has acknowledged that its revised post-COVID-19 forecasts “are not as bleak in Australia as in other countries”.

While growth figures are down across lending and mortgage categories, mortgage balances are still expected to grow across the calendar year.

Consumer loans should also stay relatively steady, with the expectation of a decline of just 0.2 per cent.

Credit card balances are expected to take a larger hit over the year – at 5.5 per cent – but GlobalData was quick to point out that this figure is on par with pre-COVID-19 forecasts.

Still looking ahead, Ms Karira pointed out that “spending, barring panic buying, will decline, and businesses will be hesitant to take on even attractive loans when they have no income”.

With retail customers and small businesses being more vulnerable, she added that banks could see a rise in the delinquency rate, resulting in higher non-performing assets.

25% fewer players: Banking boom set to reverse
Banking boom set to reverse
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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

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