What does the future hold for the Big Dogs (CBA, ANZ, NAB & St George)?
Towards the end of 2018, shareholder meetings across Australia’s Big Four banks grew tense. Recent scrutiny from the Royal Commission highlighted how banks, somewhat unsurprisingly, prioritised shareholder well-being over the customer experience a little too much. For those who are future-focused, it’s obvious that this customer experience and shareholder gains don’t have to be mutually exclusive entities - banks can, and should, support both. However, with NAB receiving an 88% hostile vote, it’s clear there are some frustrations brewing and anger mounting.
With that in mind, it’s worth examining what the future holds for Australia’s Big Four, and how the status quo we've known for so long could be about to change.
The 'fees for no services' scandal could continue growing
One of the biggest scandals to attract the Royal Commission’s attention was the fee for no services scandal. In a nutshell, it was found that customers were collectively paying millions of dollars in fees, without receiving services in return.
In August it was announced that the Big Four would need to pay just over $220 million to make up for this. However, analysts also noted how that figure could grow to in excess of $800 million. As far as the fees for no services scandal goes, the ultimate figure is yet to be determined.
Customer focus and the future of banking
One of the biggest grievances amongst shareholders attending the meetings of CBA, ANZ, NAB, and St George was the new emphasis on customer focus. This may seem strange. After all, the banks are designed to serve the general public. However, you only need to scratch beneath the surface slightly to identify why there’s so much disquiet.
First, the need for stronger customer focus has come following damning reports. Those reports identify how the Big Four are not performing as strongly as they could. At the same time, the banks are still issuing large performance bonuses. It’s therefore not surprising that shareholders are feeling disappointed at their short-term losses when the employees of poorly performing banks continue to make gains.
There are also some grumblings over banks using non-financial metrics to create remuneration outcomes. Taking both of these reasons for dissatisfaction into account, it’s clear that shareholders will no longer experience significant short-term gains while the Big Four attempt to improve their customer service performance.
The forecast for the Big Four banks: There’s still potential for things to pick up
As you likely already know, the Big Four saw significant financial losses last year. At one stage, CBA experienced a 5% drop in share value. Despite this, the bank’s CEO remains fairly optimistic about its long-term prospects, stating that matters will improve for those who take a future-focused approach to investing with them.
Unfortunately, CBA’s CEO didn’t highlight precisely how long 'long-term' really is. But, it’s worth remembering that some of the issues that have resulted in share dips have since been resolved or will do so soon. A stronger economy and greater housing prospects are predicted, perhaps not immediately but both situations will likely improve before 2019 comes to a close. And if the banks can maintain their new customer-focused approach, the improved customer environment could deliver promising results.
Overall, the future of the Big Four isn’t entirely damned. There may be a few more bumps in the road, but nothing that’s so significant it can’t be overcome.
This website contains general information only and is not intended to provide any person with financial advice. It does not take into account any person's (or class of persons) investment objectives, financial situation or particular needs, and should not be used as the basis for making investments.