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Access to wholesale funds challenging: KPMG

Staff Reporter 3 minute read

In a sign that access to affordable wholesale funds remains challenging for Australia’s smaller banks, the country’s regional banks recorded a slim combined net profit of just $494 million for the 2009 reporting year.

According to accounting firm KPMG, the profit was modest in comparison to recent years when double digit growth was common place.

“The regional banks came into 2009 expecting it to be a challenging year and they were right.

“The two largest regional banks were acquired by two major banks; the government guarantee helped in terms of deposits but disadvantaged the ‘regionals’ in relation to accessing wholesale markets; bad debt expense has increased markedly; interest margins have been squeezed, and securitisation markets – which prior to the GFC provided the ‘regionals’ with much of their funding – are effectively closed,” KPMG banking partner Martin McGrath said.

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According to Mr McGrath, the regional banks have come through a tough year to achieve a better-than-expected result.

The outlook for the next year will now depend on access to funds at an attractive price.

“Access to the wholesale markets at a price that offers profitable growth remains a challenge,” Mr McGrath said.

“In this context, the differentiated pricing of the government guarantee remains a hurdle for the smaller regional banks.

“There may be an opportunity for the regional banks to increase scale through targeted acquisition. This could facilitate cost efficiencies and potentially assist in accessing funding markets.”

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