Banks today rejected claims made by politicians and others that they are making record profits due to reduced competition. As the reporting season gets underway, National Australia Bank reported a $4.22 billion profit while Australia & New Zealand Banking Group announced that profits soared to 69 percent.

Steven Münchenberg, Chief Executive of the Australian Bankers' Association said, "There is no evidence to support this claim. The facts show that the profits of the major banks are no larger today than they would have been, if there had been no global financial crisis (GFC)."

"If you look at the trend in the banks' profits before the GFC, it shows that banks' profits today are in line with that trend."

"Suggestions that major banks are making excessive profits due to a fall in competition are without foundation."

Mr Münchenberg said the 'headline' profit numbers of banks are always large because they are very large Australian businesses. "Four of our top five businesses are banks," he said.

"There is clear evidence of competition in Australia's banking system. In the past two years, banks have slashed or removed altogether a range of unpopular fees, such as late payment and overdrawn account fees, as they fight for customers' business. Banks would not have cuts fees by $500 million if there was insufficient competition."

"The main reason banks have a greater market share at the moment is because Australia's healthy banks stepped in to fill the credit gap left when other smaller lenders, particularly non-bank lenders, were disadvantged by soaring funding costs during the GFC."

"Had banks not increased their share of lending to home buyers, businesses and others, Australia would have experienced the sort of credit rationing that has badly damaged the economies of some other countries."

Mr Münchenberg said he had heard politicians and commentators claim that banks had to be 'propped up' during the GFC.

It is important to note that, unlike overseas banks, no Australian bank has been bailed out by taxpayers. In fact, Australian banks and other lenders have already paid around $1.1 billion for the use of the Government's wholesale funding guarantee and will pay more than $5 billion over its full life.

Profits made by Australian banks are crucial to the returns of Australia's superannuation funds which assist Australians saving for retirement and provide income for retirees. Dividends are paid out of company profits to their shareholders which can be individuals and our superannuation funds.

"Banks do not keep all profits. Around three quarters of profits each year are paid back into the community. Over the last four years, dividend payouts to ordinary shareholders have totalled more than $55 billion," Mr Münchenberg concluded.