Investment bank Nomura Australia released a report showing the strong capability to face funding and liquidity issues.

The financial and industrial conglomerate group from Japan expressed confidence in Australian banking institutions through its 180-page report. The lengthy document highlights the unwavering financial strength of the country's banks even as it waded through the global financial crisis.

Nomura analyst Victor German said, “While the banks still need to address funding and liquidity issues (which ultimately will lead to higher costs), we believe they are well-placed to recover at least some costs and, therefore, the impact on margins is likely to be manageable.”

Comments on share price gains, however, balanced off the report. Nomura noted a 16 percent drop in share prices since August 2007.

According to German, “Over the past few years, the majors have gained market share, successfully managed credit losses and appear relatively well-positioned for pending regulatory changes.”

German expects a one percent fall in returns over the medium term. Returns on tangible equity is expected to remain at 20 percent.

The Nomura report places the banking industry at 10 percent ahead of other Australian sectors. It has placed the banks along with Canadian and Asian peer groups in terms of financial capability.