Australia’s big four banks have been ranked most profitable in the world for the third year running, according to Bank for International Settlements (BIS) data.
Last year, the major lenders made better returns than banks in 10 other developed nations, including the US, Britain and Europe – and total profits this year are expected to exceed $26 billion.
The Swiss-owned BIS says pre-tax profits for the majors were equal to 1.18% of their total assets, putting Australian banks far ahead of other wealthy countries on the list. According to News Ltd, only lenders in the emerging economies of Brazil, Russia, India and China are making better returns.
Consumer group Choice head of campaigns, Matt Levey, told News Ltd the figures undermined bank claims that that conditions are tough.
''It shows we have inadequate competitive pressure in that market. We still have don't have a situation where consumers are willing enough to look beyond the big four banks,” said Levey.
''These are institutions which enjoy a privileged position in the community. They are supported to a huge extent by government and taxpayers and in return I don't think we are seeing the amount of competitive pressure that we deserve to see.”
But Australian Bankers’ Association CEO, Steven Münchenberg, tells Australian Broker that the fact Australian banks are doing so well has less to do with inadequate competition – and everything to do with the nation’s economic situation.
“Banks are more profitable in countries that have stronger economies. It’s not surprising that banks in Europe, where there’s a recession, are less profitable than those in Australia or Canada. The Australian and Canadian economies are growing,” says M nchenberg.
“There is actually a lot of competition in Australia; there’s over 100 providers of mortgages and consumers are not afraid to exercise that choice.”
Furthermore, he adds, major bank profits, when measured by return on equities, are less than they were before the GFC.
“We’re always open to suggestions to improve the situation and we’re always open to sensible policy, but I don’t think there’s a lack of competition in Australia.”