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BANK PROFITS - DIVIDENDS CONTRIBUTE TO AUSTRALIANS' RETIREMENT SAVINGS
Sydney, 10 November, 2004: The Australian Bankers’ Association (ABA) says the profits created by Australian banks[i] are critical to the returns of Australia’s superannuation funds. Banks make up one quarter of Australia’s stock market capitalisation and are the most important investment stocks.
Fourteen million Australians have superannuation accounts, and building a sound retirement nest egg is increasingly dependant upon strong business profit growth. Over the last decade, banks have generated strong profits which have helped increase superannuation returns by offsetting poor performances in other sectors.
An estimated 70% of the $11.1 billion of the banks’ profits is paid to investors who own bank shares directly or indirectly through their superannuation fund.
This year, banks will pay around $8 billion in dividends to investors. This can be categorised as follows:
- $3.6 billion will go to people who own superannuation – via superannuation and other funds;
- $2 billion will go to people who hold bank shares directly – this includes tens of thousands of retirees; and
- $2.5 billion goes to other payments which include foreign investors and 34% of Australian bank profits are earned overseas.
In addition to dividend payouts, banks will retain around $3 billion in profits for future investment as a means of ensuring the sustainability of dividend payments into the future.
For those low income[ii] Australians who do not have bank stocks or do not benefit from superannuation fund returns, banks provide free and low-cost banking.
Some other key facts on bank profits are:
- Australian banks are profitable institutions, not only within Australia, but also when compared to banks overseas.
One of the key reasons cited as to why Australia was able to withstand the Asian financial crisis was the strength, safety and security of our domestic banks.
Australian banks source around 34% of their profits from overseas. This is a remarkable export success story.
Banks are not driving increasing profits through charging personal customers with fees on their day-to-day transaction accounts. Only 1% of bank revenue comes from these fees.
The reason why banks are profitable is because the Australian economy is very robust and has been growing strongly for more than a decade. The stronger the economy, the wealthier people become and the more they borrow for housing, other personal goods and invest to provide for their retirement.
Banks have increased profits by reducing their operating costs. This has been facilitated by increasing the supply of electronic banking services. Nearly 90% of transactions today are done outside the branch.
Income generated by banks is not only shared with investors but profitable banks also invest in the future. Australian banks reinvest more than $3bn into growing their businesses, including better technology, expanding the range of products and services offered to customers and training staff.
ABA member banks employ around 123 000 staff. Wages paid by the financial sector are among the highest of any industry. Average weekly earnings in finance are $1,009, the second highest industry and well above the all-industry average of $744, according to figures from the Australian Bureau of Statistics.
For further information:
Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
ENDS
[i] All data in this media release has been estimated or obtained from annual results reported in 2004 from the four major banks: ANZ, Commonwealth Bank of Australia, National Australia Bank Ltd, and Westpac Banking Corporation.
[ii] Five million Australians are eligible for basic bank accounts offered by Australia’s banks. Eligible customers are holders of the Commonwealth Government Health Care Card, Commonwealth Government Seniors’ Card and the Commonwealth Government Pensioner Concession Card.
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