Bank profits soar on the back of rate rises while consumers struggle
Australian bank

Bank profits soar on the back of rate rises while consumers struggle

As Australian consumers struggle financially due to interest rate hikes, data has shown that banks are raking in profits. According to reports, the country’s big four banks will make billions due to the rate hikes seen over recent months. Meanwhile, many homeowners face increasing difficulties in keeping on top of rising mortgage repayments.

Australia’s big four, Commonwealth Bank (CBA), Westpac, NAB, and ANZ, are expected to enjoy combined annual cash profits of $28.4 billion this financial year. This results from hiked interest rates increasing the income they make from loans. One bank has already released its year-end report, with others set to follow.

CBA sees cash flow increase by 11%

cash flow

CBA released its year-end figures several months ago, showing that its cash flow was already up by 11%. Over the past 12 months, the bank enjoyed profits of $9.6 billion. The other three leading banks have not yet released their full-year profit figures, but estimates put their combined earnings at around $18.8 billion.

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According to estimates, NAB will see profits of around $7.1 billion, while ANZ could hit earnings of $6.3 billion and Westpac $5.4 billion. The fact that borrowing rates are rising much faster than savings and deposit rates means that banks are benefitting hugely.

Speaking to, AMP economist Dr. Shane Oliver said: “In a rising interest rate environment, deposit rates are going up at a slower rate than mortgage rates.”

He added that the property boom across the country, which ended earlier in the year, had also had an impact on profits made by the leading banks. However, he admitted this situation was not likely to be ongoing.

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Dr. Oliver said: “That’s not necessarily going to last; there’s a bit of a lag there at the moment. The risk is that the banks will slow down like other parts of the economy as interest rates rise, especially if economic activity declines, unemployment rises, or we go into recession.” 


Interest rate hikes set to continue

The situation for borrowers is already dire, with many unsure how they will make repayments on their mortgages due to rapidly rising interest rates. In another blow, finance experts said they believe that interest rates will continue to rise as the central bank battles to bring inflation under control. This means even more mortgage misery for borrowers and could lead to even bigger bank profits.

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Oliver said some of the profits made by the banks might be used to assist borrowers who fall into serious financial difficulties but that banks were almost certainly likely to continue hiking their rates in line with the RBA.