Case Study
CAPITAL MANAGEMENT
Capital Management: Key Learnings
1. Regulation improves Bank safety but is costly and can reduce returns.
2. Funding is more easily accessible for banks which generate appropriate returns on shareholder funds.
3. Capital intensities vary by product (and perceived risk). Banks should optimise returns for capital deployed on their products.
Bank Regulation
17 July 2018
The Sydney Morning Herald
Overview of bank regulation
Capital & “Unquestionably Strong”
18 July 2018
The Sydney Morning Herald
Increasing capital – impact on returns
Capital Management
30 October 2018
Michelle Jablko – ANZ CFO
Risk Adjusted Returns and Capital
Shareholders’ Equity
Australian banks have had to raise significant amounts of capital
(AUD bn)
Common Equity Tier 1 Ratios
Capital ratios are increasing to achieve APRA’s “unquestionably strong” 10.5% ratio
Shareholders’ Equity : Assets Ratio
Whilst banks are deleveraging in relative terms, they are still highly leveraged
Return on Equity(%)
Higher capital levels are a major driver of declining ROE
Capital Management: Key Learnings
1. Regulation improves Bank safety but is costly and can reduce returns.
2. Funding is more easily accessible for banks which generate appropriate returns on shareholder funds.
3. Capital intensities vary by product (and perceived risk). Banks should optimise returns for capital deployed on their products.
