By Rob Starr, Content Manager, Big4.com

Ernst & Young has analysed the 2012 full-year results of Australia’s largest banks and found the challenges around cost of funding and low levels of growth.

“In the bank’s full-year reporting results we are seeing some of the vagaries of operating in different geographies and markets, with differing levels of confidence and risk appetite,” says Ernst & Young’s Oceania Banking and Capital Markets Leader, Paul Siviour. “The four major banks’ headline cash earnings of $25.2 billion in absolute terms (up 3.7% from 2011) clearly demonstrates the strength of Australia’s banking system. But within these results, a range of external factors highlight our reliance on the global recovery.”

There are a number of key themes across the industry including the fact that the results depict declining impaired assets levels, improved retail delinquency and strong provisioning coverage. However, there are signs of stress emerging in retail, commercial property, agribusiness and small to medium enterprises.

As well, changing market composition with new entrants who are coming to the market with strong capital bases and deep deposit funded balance sheets. Japan and China in particular are starting to mobilise for greater presence in the Australian market on the back of further withdrawals from some of the European banks.