The Australian banking industry isn’t as profitable as you may think, according to the Australian Bankers’ Association, even after a strong year of results for our major banks.
Over the past financial year, the Commonwealth Bank set a record cash profit for any Australian bank – increasing its net cash profit by 12% to $8.7 billion. This was followed by
Westpac, which recorded an 8% rise in its net cash profit to $7.6 billion and
ANZ, which recorded a 10% rise in its net cash profit to $7.1 billion.
NAB was the only major bank to record a decrease in net cash profit, decreasing by 9.8% to $5.2 billion – although; this was due to extraordinary circumstances.
However, Steven Münchenberg, chief executive of the ABA says Australian banks are “certainly not” the most profitable in the world; they aren’t even among the most profitable companies in the country.
“To understand where Australian banks sit, we need to compare our banks with a similar country. The closest comparison we have is Canada because of our many similarities. Canada, with a population about 50% bigger than Australia’s, has six big banks, and is on par with Australia, with an average ROE of nearly 16%. In China, for instance, the major banks have ROEs of over 20%,” he said.
“In terms of how the banking industry compares to other Australian companies, of the 50 most profitable listed companies in Australia, none are banks.”
Regardless, the contribution from our banking sector to the Australian economy is vital and the solid financial performance of Australian banks will continue to underpin the essential contribution banks make to our economy,
says Münchenberg.
“In 2013-14, the finance and insurance industry contributed almost $130 billion to our economy – 9% of GDP, according to ABS data. The finance and insurance industry is the second largest industry of the Australian economy after mining. It is a major contributor to employment, providing more than 400,000 jobs,” he said.
“Banks are major taxpayers – paying amongst the highest effective corporate tax rates. Tax paid by the banking industry increased by 10% or $1.2 billion to $13.3 billion this year. Tax paid is now at a record level.”
