Banks’ next results rest on regulatory outcomes

The performance of the big four banks in the next half year will be intrinsically linked to the outcome of regulatory reforms in the financial services sector, according to Ernst and Young.   

Commenting on half-year results from the major banks, the global accounting firm said the last six months had seen strong fund inflows and equity markets for wealth management arms, tempered by disability claims and insurance policy lapses.  

Going forward, however, all eyes would be on the Federal Budget, Financial Systems Inquiry (FSI) and changes to Future of Financial Advice (FOFA) reforms, EY’s Oceania banking and capital markets leader, Paul Siviour, said.  

“In the wealth space, current proposed changes to the FOFA reforms and the ability (or not) for banks to be able to provide default superannuation arrangements under employment awards could have major implications,” he said. 

“Arguably, our financial services system is facing an unprecedented level of potential policy and structural change.”  

Siviour said regulators had been heavily focused on the banking sector, locally and globally, and “this is fundamentally changing the design and sale of products and services and is challenging banks to re-orient their organisations with an emphasis on core values and behaviour”.  

The National Commission of Audit report and the Federal Government’s first Budget since its election present both “challenges and opportunities” for the sector, Siviour said, depending on what is implemented.  

“The market is eagerly awaiting the outcome of next week’s Federal Budget.”   

Siviour’s comments follow the release of half-year results from the big four banks this week, which showed they continued to perform well, with headline cash earnings at $14.7 billion for the period - a spike of 10 per cent from the 2013 half-year results.