The Australian Bankers’ Association (ABA) says banks have produced solid full-year results and argues that the sector is continuing to make an important contribution to the Australian economy economy.
Their announcement follows the latest major bank full-year results, with Westpac indicating its statutory net profit rose 14%, to a massive $6.8 billion.
“The sector is an important contributor to our country’s economic activity and growth. In 2013, the finance and insurance industry contributed around $142 billion to our economy – about 10.4% of GDP, according to ABS data. The finance and insurance industry is the second largest contributor – just behind mining,” says Steven Münchenberg, ABA CEO.
Münchenberg further dismisses claims that bank profits in Australia are unreasonable, claiming the figures need to be taken ‘in context’.
“The banking industry recognises that when people look only at the headline profit figures, there are some in the community that are concerned with their size. But these figures need to be seen in context against important profitability measures. For example, the banking industry’s return on assets is around 1%. The standard and accepted measure of profitability - return on equity (ROE) - has remained at 16%.”
In comparison, says Münchenberg, when compared with the profitability of the top 50 companies on the ASX, based on size, the big four are middle-ranking.
“The ROEs of our four major banks are placed between 14th and 27th on the list of the 50 largest companies. There are quite a number of companies ahead of them, many of them household names,” he says.
Banks are also major taxpayers, he argues, especially when compared with other major corporate groups. Tax paid by the banking sector increased by 16% this year and is now at a record level.
“There’s also been further downward pressure on net interest margins – these remain at very low levels...The Federal Government continues to benefit from our stable banks as the tax paid by the sector was more than $12.1 billion this year and over the past five years tax paid totalled $47 billion.”