ABA Defends Bank Profits
Australian Bankers' Association Chief Executive Steven Munchenberg defended Thursday the healthy profits registered over the week by local banks.
"Healthy profits highlight the strength and stability of our banking system. A solid and reliable banking system underpins our economy at a time when countries overseas are still dealing with high unemployment, poor business conditions, negative economic outlooks and depressed consumer sentiment. This is the result of the continuing impacts of the global financial crisis," Munchenberg said in a statement.
He pointed out that Australian banks did not fail during the 2008 global financial crisis nor require government bailouts, and disputed the common notion that Australian banks are enjoying excessive profits.
"A standard measure of profitability - return on equity - shows banks are in the middle of the pack compared to other industries. Of the 50 most profitable companies listed on the ASX, only two are banks," Munchenberg said.
He added that profits represent only 1 per cent of bank assets, and revenues only 5 per cent.
He added banks are major contributors to government coffers, citing that in the last five years Australian banks paid $42 billion in tax and $3 billion more for the government bank funding guarantee.
The latest Australian bank to report profits was Australia New Zealand Bank, which disclosed on Thursday a windfall net profit of $5.36 billion for the year. It represents a 20 per cent hike from 2010 results of $4.5 billion due to an 8 per cent increase in loans and 16 per cent growth in deposits.
The National Australia Bank was criticised on Wednesday by Treasurer Wayne Swan for not passing in full to borrowers the 25 basis points cash rate cut approved by the Reserve Bank of Australia earlier this week.
In the U.S., Bank of America backtracked on Wednesday over a plan to charge debit card holders $5 monthly. The about-face by the bank was fear of a consumer backlash as more than 300,000 people signed an online petition asking BofA not to collect the fee and another 21,000 depositors threatened to close their current accounts if the bank would insist on imposing the fee.
