Big four banks still making fat profits

Despite a stagnant property market and plummeting interest rates, Australia’s largest banks are still raking in multi-billion profits.

With Westpac posting a $5.97 billion net profit today the combined annual cash profit of Australia’s big four banks sits above $24 billion.

The Commonwealth Bank and ANZ both grew their profits this year to $7.11 billion and $6.01 billion respectively. Meanwhile, the National Australia Bank reported falling profits, following problems with its UK banks, with earnings falling 0.5 per cent to $5.43 billion.

Analyists were expecting a better result from Westpac, but tax implications from its takeover of smaller rival St George saw profits fall by 15 per cent from $6.99 billion last year.

Widening profit margins

Even though Australia’s major banks aren’t enjoying the growth in profit they have in recent years, widening profit margins and a reduction in bad debts have helped them to again post strong headline numbers.

The level of new home loans continues to run at near three-decade lows however, with an annualiased growth rate of just 5 per cent.

Australian bank customers continue to tip their money into deposits and remain lecuctant to take on more debt, the latest figures from the Australian Prudential Regulation Authority (APRA) show. 

APRA’s September figures show that Australian households have injected a toal of $36.7 billion of deposits into the banking system since the start of 2012. This puts the rate of deposit growth for the banking system at an annualised rate of 8 per cent, compared with just 5 per cent for overall credit growth.

These figures are important as it suggest our big banks are funding their new lending from their customers deposits, which in turn reduces the need to raise costly funds on global money markets.

While housing lending remains subdued, lending to small and mid-sized businesses continues to show signs of strength with the September APRA data showing a 10 per cent aunnualised growth rate.