“Balancing of shareholder and customer interests will be required in future to ensure disruptors are not further emboldened to attack established lenders’ business models,” said KPMG Asia Pacific’s head of banking, Andrew Dickinson.

Mr Dickinson also cautioned that all major banks will be challenged by declining return on equity (ROE).

“Revenue and margin headwinds, rising costs and capital levels, with a deteriorating credit quality outlook all mean the majors will face challenges in reversing declining returns in the years ahead," he said.

The report stated that while the cost to income ratio decreased from 45.6 per cent last financial year to 45.3 per cent this year, banks will need to change their operating models to enhance the customer experience and reduce their cost base.

“In order to enhance their level of agility, the majors will need to intensify their efforts to simplify, standardise and automate their operating models, as well as preserve optionality in their strategies in order to capitalise on opportunities as they arise,” said KPMG Australia’s head of banking, Ian Pollari.

The report found that ROE was down from 15.5 per cent to 15 per cent from the previous year, despite a 5.4 per cent increase in combined cash earnings.

Speaking to SMSF Adviser, investment analyst at sharemarket advisory firm Wealth Within, Janine Cox, said while double-digit earnings have been the norm in recent times, investors should expect single digit returns to be the norm subsequently.

“There will be opportunities for investors to think about [whether] they’ve got too much exposure to the banks. If they’re holding all four banks that could be a bit of an issue for their portfolio going forward, particularly in the short term,” Ms Cox said.

However, she cautioned against any “drastic” portfolio moves.

“I’d be looking at it from a longer term perspective. Banks are always going to be good for any portfolio to hold; it’s just the question of will they get the same sort of growth as they did in 2012-13 – I think probably not for the coming year or so. It may be a flatter or lower level of growth over that time,” she said.

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