The quarterly profits of the Australian banks will be significantly down and an enduring squeeze on smaller players could result in the long-term consolidation of the market, according to GlobalData, a leading data and analytics company.

Resham Karira, Retail Banking Analyst at GlobalData, comments: “Government support, particularly the cheap funding, will help, but it can only mitigate the impact. The recent upswing in ADIs (Authorized deposit-taking institutions), driven by the launch of neo-banks, appears set to reverse. The exit five years could see up to a quarter of ADIs exit the market via sales or mergers.”

However, GlobalData’s revised post-COVID-19 forecasts are not as bleak in Australia as in other countries. While growth has been revised down across lending and mortgage categories, mortgage balances are still expected to grow in 2020 and consumer loans are only forecast to decline by 0.2%.

Credit card balances are forecast to decline by 5.5% in 2020, though that is the same figure as in the pre-COVID-19 forecasts.

Karira concludes: “We expect total consumer loans to see a very slight decline, and other consumer loans to see a larger one, in 2020. Spending, barring panic buying, will decline and businesses will be hesitant to take on even attractive loans when they have no income. Retail customers and small businesses are more vulnerable. Banks could see a rise in the delinquency rate, resulting in higher non-performing assets.”