Despite a stagnant property market and falling interest rates, Australia’s big banks are still raking in huge profits.
ANZ, Commonwealth Bank, National Australia Bank and Westpac are among the world’s most profitable, earning $1460 for every person in the country, a new report has revealed. The combined annual cash profit of Australia’s big four banks sits above $24 billion.
The report by the Australian Institute claims that only a tenth of the banks' super profits find their way back into the nation's superannuation accounts and that more than 50 per cent of the owners of the big four are held by the same nominee companies.
Last week, three of the four - NAB, CBA and Westpac - lowered their mortgage rates by exactly the same amount within hours of each other.
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None of them, however, passed on the RBA’s rate cut in full.
Research from the Australian Prudential Regulation Authority reveals that in the past 20 years the big banks have lifted their share of the home and business lending market from 67.2 per cent to 82.6 per cent.
Pre-tax profits of the big four rose from 0.7 per cent of GDP to a whopping 2.3 per cent of GDP, the report said.
Late last week, ratings agency Moody’s predicted that profits for the major Australian banks will stagnate in 2013 but the sector will still remain profitable.
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"For the next year, 2013, we expect bank earnings growth to slow as a result of low credit growth - mostly due to general business and consumer caution, mainly related to the non-resources sector - a lower interest rate environment, and ongoing funding cost pressures," Moody's senior vice president Patrick Winsbury said.
"Profitability metrics are likely to stay strong by international comparison, but profit growth is expected to stagnate in the current low credit growth environment."
The big four banks made $22.8 billion in net profits in the 2011/12 year, while cash profits, a clearer reflection of underlying performance, totalled $25.2 billion.
But cash profit growth of four per cent in 2011/12 was the slowest rate in several years.
Moody's also forecast a rise in bad debt charges for the banks, as businesses and consumers come under financial hardship.