The Banks' Big Payout

Something that was almost overlooked by the media in recent weeks, is the fact the three big banks, ANZ, Nab and Westpac, all reported their half yearly profits this month with the CBA doing so a few weeks earlier.

So, with interest rates on the rise, inflation hitting a record high, a cooling house market and a change of Government in the works,  just how have the banks performed.

Happily, the answer is extremely well.

All four banks have reported a lift in their interim dividends, which is good news for retirees as it is the big banks and their high yielding fully franked dividends that are making such good money for retirees. Let's take them one by one.

The NAB probably had the best outcome to report with revenue growth up 6.9 per cent and cash profit growth up 30 per cent, which combined to prompt a 21.6 per cent jump in the Bank's dividend payment.

The outcome reflects a longstanding commitment by the NAB to drive down costs while focusing on investing in technology and driving shareholder returns ever higher.

The ANZ Bank was cautious on its outlook for the future, citing recent floods, rising inflation and interest rate hikes as potential drags on the bank's performance. Nevertheless, it posted a 2 per cent rise in revenue and 16.7 per cent boost to its interim dividend.

Against this, Westpac reported an almost 8 per cent drop in revenue, driven it says by lower interest rates over the period and increased price competition from other financiers. It still lifted dividends by 5.0 per cent.

The giant Commonwealth Bank which appears to be the bank to watch in terms of technical innovations and catching the fintech wave, lifted revenue growth by 2 per cent and its interim dividend by 16.7 per cent.

All the banks reported 'NIM compression' during the period. This is the difference between the average price it pays for funds via term deposits and bank accounts and how much they earn via interest rates on home loans and other products.

This is unlikely to change during periods of rising interest rates as all the banks take the opportunity to lift rates whenever the Reserve Bank decides to increase the cash rate.

The big challenge for all the banks is how quickly and how successfully they can embrace technology.

The Commonwealth Bank has introduced a new home loan product, where clients and potential clients can apply online and effectively obtain a new mortgage without ever speaking to anyone.

The advantage of this product is that it is quick and easy and reflecting these factors, the Commonwealth is charging 30 basis points less in interest rate charges for it than its next lowest home loan product.

It will also reduce the rate on this loan by one basis point for ever year the loan is held.

This is the future of banking. Even less person-to-person contact and more reliance on ''on-line" products, where the banks can go toe-to-toe in on reducing price.