Aussie banks grateful for wealth management income
Australian banks are relying on recurring revenue from their wealth management and insurance divisions to relieve pressure on earnings, according to Fitch Ratings.
Income streams from wealth management and insurance are particularly useful to the banks because they tend to be less correlated with credit growth, which is currently subdued, said the ratings agency.
Cost management is likely to be a major focus for Australian banks in 2012-13, and asset quality and revenue growth will continue to emerge as challenges.
"From the perspective of asset quality, the best point in the credit cycle is now behind Australian banks," said Fitch Ratings.
"Early signs of deterioration are emerging in lending to domestic sectors such as agriculture, manufacturing, retail and tourism - which are exposed to the strong Australian dollar," said Fitch Ratings.
The ratings agency also expects a slight increase in impairment charges in 2012-13 as the broader economy adjusts to a slowdown in China. Fitch Ratings recently pointed to the challenges facing regional banks in Australia following the announcement of Bank of Queensland's annual loss.
Australian banks are well placed for a slowdown in the economy, having built sizable capital buffers over the last four years, according to Fitch Ratings.
Dependence on offshore funding is becoming less of a concern as Australian banks continue to increase customer deposits and reduce the use of offshore wholesale funding, according to the ratings agency.
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