The Regionals have experienced continued competition from the major banks in 2011. Despite this, they have managed to increase profit before tax by 16.1 percent, with three of the four banks recording growth in profits. However returns on equity remain low – posing a challenge for the sector.
- Market share has been strong and margins remained tight, rising just three basis points to 1.64 percent.
- Return on equity for the sector of 6.75 percent. Strongest performers were Bendigo and Adelaide Banks (return on equity of 9 percent).
- Increased profits due to lower bad and doubtful debt expense. A positive result given the impact of the extreme weather events in Queensland and Victoria.
- Competitive cost to income ratios. Across the sector the cost to income ratio averaged 52.2 percent, reflecting well-managed institutions.
- A major challenge for the Regionals is how to access funding at a competitive prices in wholesale markets.