Ralph Norris, boss of the Commonwealth Bank of Australia and previous head of Air NZ, is predicting wafer-thin banking industry margins in this country are likely to become a feature of the Australian industry within five years.
Mr Norris' bleak assessment suggests Australian margins, now in a range
of 220 to 230 basis points, will erode to 170 to 180 basis points over five years.
"We have to be prepared for it," he told a Financial Services Institute of Australasia lunch in Melbourne yesterday.
His commentary came as investors punished the banking sector, with the share market retreating 1.6 per cent, The Australian newspaper reported today.
CBA has a cost-to-income ratio of 47.7 per cent, ahead of big-four bank leader ANZ on 45.6 per cent, with a target to go below 40 per cent.
Mr Norris pointed to CBA-owned ASB Bank in New Zealand as a template.
"Their (ratio) is around 41 to 42 per cent, and that's operating on a net interest margin of about 170 basis points," he said.
- NZPA
