Cash money: Record low interest rates have boosted subdivision profitability

The Finance subdivision has operated in a challenging trading environment over the past five years, with a falling cash rate and declining private capital expenditure weighing on its performance. Although residential property prices have surged over the period, other segments of the economy have lagged behind, leading to historic lows in the cash rate. The RBA has been hesitant to raise the cash rate, given weak wage growth and low inflation. The cash rate's decline has contributed to falling subdivision revenue, as interest revenue derived from lenders' loan portfolios has fallen. As a result, subdivision revenue is expected to decline at an annualised 0.2% over the five years through 2018-19, to $202.0 billion. Subdivision revenue is expected to rise by 2.6%...read more.

Industry Statistics & Market Size
Revenue
$202bn
Annual Growth 14-19
-0.2%
Forecast Growth 19-24
Profit
Employment
218,525
Businesses
38,889

Industry Threats & Opportunities

  • The cash rate's decline over the past five years has contributed to falling subdivision revenue
  • Despite declining revenue, subdivision profitability has risen due to lower funding costs
  • Subdivision revenue is forecast to increase on the back of a higher cash rate
  • Industry Report - Starting a New Business Chapter

    The Finance subdivision exhibits high barriers to entry. Many financial institutions, particularly the large banks, operate across several different industries. The big four banks have substantial resources and dominate the markets in which they operate. Additionally, major players in industries such as banking benefit from economies of scale and their cost-to-income ratio is generally lower. This makes it harder for prospective entrants to compete successfully.Funding is one of the biggest barriers to entry. New entrants that do not have the necessary scale and access to retail depositors have to rely heavily on wholesale markets to raise funds. Lar...purchase to read more.

    Additional Insights for the Finance Industry

    IBISWorld has determined the most important Key Success Factors for the Finance are:

  • Having an extensive distribution/collection network
  • Ability to pass on cost increases
  • Having a good reputation
  • IBISWorld analysts also discuss how external factors such as Cash rate and Residential housing prices in the Finance industry impact industry performance..

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    What's in this report

    What is the Finance Industry?

    The Finance subdivision covers firms that provide financial services (excluding insurance and superannuation) in Australia. The most significant industries in the Finance subdivision are domestic banks, foreign banks, non-depository financiers and financial asset investors.

    Industry Products
  • Home loans
  • Business loans
  • Consumer credit
  • Industry Activities
  • Building society operation
  • Financial asset investment service provision
  • Credit union operation
  • Banking service provision
  • Money market dealing
  • Non-depository financing
  • Table of Contents

    Industry Definition
    Main Activities
    Similar Industries
    Additional Resources
    Industry Statistics Snapshot
    Industry Structure
    Executive Summary
    Executive Summary
    Key External Drivers
  • Cash rate
  • Residential housing prices
  • All Ordinaries index
  • Capital expenditure by the private sector
  • Consumer sentiment index

  • Current Performance
  • Domestic banks
  • Demand for credit
  • Major player dominance
  • Chart: Revenue Growth

  • Industry Outlook
  • Banking and superannuation
  • Regulation
  • Table: Finance Industry Revenue Outlook

  • Industry Life Cycle
  • Life cycle reasons
  • Chart: Benchmarking - Finance Industry Lifecycle vs The Economy

  • Supply Chains
    Key Buying Industries
  • Finance
  • Professional Services
  • Consumers

  • Key Selling Industries
  • Accounting Services
  • Legal Services

  • Products & Services
  • Home loans
  • Business loans
  • Other
  • Consumer credit
  • Chart: Finance Industry Products and Services Segmentation

  • Demand Determinants
    Major Markets
  • Retail clients
  • Commercial clients
  • Government clients
  • Chart: Major Market Segmentation for the Finance Industry

  • International Trade
    Business Locations
    Chart: Business Locations by State
    Market Share Concentration
    Key Success Factors
    Cost Structure Benchmarks
  • Profit
  • Interest expense
  • Wages
  • Other
  • Chart: Cost Structure Benchmarking – Sector vs Finance

  • Basis of Competition
    Barriers to Entry
  • Table: Barrier to Entry Checklist for the Finance Industry

  • Industry Globalization
    Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank Limited, Australia and New Zealand Banking Group Limited,
  • Table: Commonwealth Bank of Australia - financial performance
  • Table: Westpac Banking Corporation - financial performance
  • Table: National Australia Bank Limited - financial performance
  • Table: Australia and New Zealand Banking Group Limited - financial performance

  • Capital Intensity
  • Chart: Level of Capital Intensity for the Finance Industry
  • Chart: Tools of the Trade: Growth Strategies for Success

  • Technology & Systems
    Revenue Volatility
  • Chart: Volatility vs Industry Growth

  • Regulation & Policy
    Industry Assistance
    Table: Industry Data for the Finance Industry
    Includes:
  • Industry Revenue (2010-2024)
  • Industry Gross Product (2010-2024)
  • Establishments (2010-2024)
  • Businesses (2010-2024)
  • Employment (2010-2024)
  • Wages (2010-2024)

  • Table: Annual Percentage Change for Key Industry Data
    Table: Key Ratios for Industry Key Data
    Funds Under Management
  • The collective value of assets under the management of an investment or portfolio manager.
  • Loan Loss Provisions
  • A charge for bad and doubtful debts.
  • Net Interest Margin
  • Net interest income as a portion of interest revenue.
  • What Our Customers Say

    Why buy this report?

    The Finance market research report provides key industry analysis and industry statistics, measures market size, analyzes current and future industry trends and shows market share for the industry’s largest companies. IBISWorld publishes the largest collection of industry reports so you can see an industry’s supply chain, economic drivers and key buyers and markets.

    IBISWorld industry market research reports enable you to:
    • Find out about key industry trends
    • Identify threats and opportunities
    • Inform your decisions for marketing, strategy and planning
    • Quickly build competitive intelligence
    This report on Finance:
    • Provides Market Size information to assist with planning and strategic decisions.
    • Includes the necessary information to perform SWOT, PEST and STEER analysis.
    • Helps you understand market dynamics to give you a deeper understanding of industry competition and the supply chain.
    • Analyses key performance and operational metrics so that you can benchmark against your own business, that of your customers’ businesses, or your competitors’ businesses.
    The Finance market research report includes:
    • Historical data and analysis for the key drivers of this industry
    • A five-year forecast of the market and noted trends
    • Detailed research and segmentation for the main products and markets
    • An assessment of the competitive landscape and market shares for major companies
    • And of course, much more

    IBISWorld reports on thousands of industries around the world. Our clients rely on our information and data to stay up-to-date on industry trends across all industries. With this IBISWorld Industry Research Report on Finance, you can expect thoroughly researched, reliable and current information that will help you to make faster, better business decisions.

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