Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts. These are copied directly from the broadcaster's website.
Crisis? What global financial crisis, say big -

View in ParlViewView other Segments

The ABC's economics correspondent Stephen Long takes a close look at the latest numbers from the
banking regulator, which show the profits of the big four banks continued to rise last year. The
major banks also made hefty profit margins that eclipsed those of their smaller rivals.

PETER CAVE: The global financial crisis and the economic downturn haven't done too much harm to
Australia's major banks.

The latest numbers from the banking regulator show that the profits of the big four banks continued
to rise last year.

And the big four also made hefty profit margins that eclipsed those of their smaller rivals.

Joining me in The World Today studio with more details is our economics correspondent Stephen Long.

Stephen, how have the banks fared overall?

STEPHEN LONG: Well Peter, it really is a case of two tiers - a tale of two tiers if you like - with
the big four banks doing really, really well and the second tier banks, the other domestic banks,
actually doing pretty badly.

So if you look at the profit margins for banks, over the 12 months to the end of last year the
overall profit margin was 23.2 per cent but the big four banks operated with a profit margin of
30.6 per cent.

For the other banks the profit margin was just 12 per cent.

The assets of the big four banks have soared. They have risen from $180-billion in 2007 to
$244-billion in assets in the following year, last year, whereas they've absolutely gone backwards
by a rate of knots for the other domestic banks.

So what you're seeing is the big four banks gobbling up more and more market share, making a hefty
clip on it, so that - just on some other statistics - the net interest income for banks in the 12
months to the end of last year was just shy of $47-billion.

But nearly 80 per cent of that was with the big four - nearly $37-billion in interest income and on
fees and commissions, $21-billion for banks and 71 per cent, nearly $15-billion of those fees and
commissions, was with the big four.

So what you're seeing is that the major banks are doing really, really well despite the crisis and
the second tier financial institutions in Australia are really getting hit pretty badly.

PETER CAVE: OK so no tears for the top tier. How did that compare to the previous year, before the
crisis began to really bite?

STEPHEN LONG: Well, what you're seeing is that there really has been no substantive hit to the big
four. So if you look at their operating income for the big four, it has gone up from $51-billion to
$56.7-billion, so they've actually increased their income and the net profits are roughly the same.

They have gone up by $30-million so roughly the same, no hit there, and their return on equity has
fallen because they've had to raise, issue more shares to sure up their capital and all that kind
of stuff because of the crisis so the return on equity has fallen a little bit from just shy of 19
per cent to 16.5 per cent but not much and the return on assets is pretty much the same.

Again, if you go to the other banks, you have seen a collapse on their return on equity from 15 per
cent in 2007 before the worst of the financial crisis hit to less than 8.5 per cent last year. So
the same story, a tale of two tiers.

PETER CAVE: Why isn't the share market impressed by all of this?

STEPHEN LONG: Well, I think that there's a couple of things going on there Peter. One is that the
Australian banks are just getting hit by a global run on financial stocks and they are just hit by
guilt by association if you like and the other thing is that their loan losses and impairments have
risen and the expectation is that they will see more bad loans on the books but really, despite
that, you've got a situation where they are doing very, very well and to, you would have to imagine
at some stage, if they keep going well like this, then the share prices will bounce back.

PETER CAVE: Our economics correspondent, Stephen Long.