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Banks’ profits – Australian banks strong despite
the global financial crisis
Sydney, 4 November, 2009: With recent news that more than 100 banks have failed in the United States, Australian banks1 have endured the ultimate stress test of the global financial crisis to emerge strong and still delivering profits.
The Australian Bankers’ Association (ABA) said the reporting season for Australian banks has come to an end and shows that their profits have declined compared to the previous reporting year.
The ABA has analysed the results and found that the profit attributable to ordinary shareholders was down around 20% over the past year. This measure, however, includes the impact of one-off events such as provisions as well as the effect of mark-to-market accounting. Analysts also focus on a broader underlying measure of bank performance called cash earnings which removes these impacts. Cash earnings were down around 3.5% this year.
David Bell, Chief Executive of the ABA, said: “In a very difficult year in which the impacts of the global financial crisis continued to affect our economy, Australian banks continued to deliver profits but not as high as last year.”
“This performance contrasts with some overseas banks only just recovering this year from the global financial crisis to report negligible profits and others ordered by regulators to sell off assets to repay debt provided by Governments. Against this backdrop, Australian banks have performed exceptionally well."
The Reserve Bank recently concluded that an important reason for the profitability of Australian banks is the unusually low bad debt experience compared to overseas banks.
“Another factor is that the quality of banks’ on-balance-sheet loans did not deteriorate to anywhere near the same extent as occurred in the United States and Europe. The difference here is particularly striking for the housing loan portfolio.”2
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. Over the last four years, dividend payouts to ordinary shareholders have totalled more than $52bn and this year’s payout was $13.4bn.
In an environment which has seen significant employment reductions in the banking sector in other countries, employment at the main Australian retail banks showed only a small 1% decrease. Australian banks employ 135 400 people.
For further information:
Heather Wellard, ABA PR, P: 02 8298 0411, M: 0409 830 439
ENDS
[1] The US Federal Deposit Insurance Corporation website provide a list of bank failures in brief for 2009 at http://www.fdic.gov/bank/historical/bank/index.html
[2] RBA Speech, “The Evolving Financial Situation, by Malcolm Edey, Assistant Governor Financial System, 28/10/09, page 7 |
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