Sydney, 9 November, 2007: The Australian Bankers’ Association (ABA) estimates that this year around $14.2 billion worth of dividends or almost 70% of bank profits will flow through to Australians’ superannuation accounts and to other owners of bank shares.
Profits created by Australian banks are crucial to the returns of Australia’s superannuation funds which assist Australians saving for retirement and provide income for retirees.
Banks make up 27% of Australia’s stock market (ASX 200) and bank shares represent a significant proportion of Australian stocks held in superannuation funds.
David Bell, Chief Executive of the ABA, said: “Ownership of bank shares is widespread throughout the community either through their superannuation funds or through direct share ownership.”
“Nearly all Australian employees have bank shares as a key component of their superannuation funds which are building nest eggs for their retirement. The size of their nest eggs will depend on strong business profit growth. Over recent years, banks have generated solid returns which have contributed to the significant gains in superannuation, offsetting poor performances in some other sectors.”
This year banks will pay an estimated $14.2 billion in dividends to investors and it can be broadly categorised as follows:
- $6.5 billion will go to people who own superannuation – via superannuation and other funds;
- $3.3 billion will go to people who own shares directly – this includes retirees;
- $4.4 billion goes to others which include foreign investors (around 25% of Australian bank profits are earned overseas).
Other important facts about bank profits:
- Fees on day-to-day personal transaction accounts represent only 2.2% of bank revenue. Most revenue comes from lending activities, overseas customers, corporate banking, and business areas such as insurance, superannuation and funds management.
- Over the past year, banks have donated around $120 million to community organisations and charities.
- Around $7.4 billion of the banks profits is invested back into the banks’ business. This funds new and improved technology, expansion of products and services, staff training and development.
- Strong Australian banks are one reason cited as to why Australia withstood the Asian financial crisis.
Mr. Bell said: “The solid profits of Australian banks are a result of sound management and sustained economic growth. The stronger the economy, the wealthier people become, the more they borrow for housing and other personal goods and invest to provide for their retirement. Similarly, the business environment is also strong which means that businesses invest and grow, as demonstrated by their strong demand for financial services.”
“Profitable banks are a cornerstone of the Australian economy and are essential for the security and stability of the Australian financial system.”
For further information:
Heather Wellard
ABA PR
Tel: 02 8298 0411
Mobile: 0409 830 439