Bank profits below long-term trend

Strong bank profit results need to be put into context, since they remain slightly below the long-term trend, according to Australian Bankers’ Association (ABA) chief executive Steven Münchenberg.

Münchenberg said the ratio of banks’ profits to their assets was not yet back to the levels prior to the global financial crisis (GFC) and bank margins remained at historically low levels. However, a healthy banking sector strengthened the economy as it was able to raise and lend money during the GFC, he said, adding that bank profits also supported superannuation savings and job growth.

“Around 70 per cent of the banks’ profits are paid to shareholders in the form of dividends – with the majority of this payout going to superannuation funds and ‘mum and dad’ shareholders,” he said. “In fact, over the past year, dividends paid to shareholders were at a record level of $16.8 billion.”

Münchenberg noted that during a period of significant employment reductions in the banking sector in other countries, employment at the main Australian retail banks showed only a 1 per cent decrease to the end of 2010, adding that the number of bank branches had actually increased by 15 per cent over the last nine years as at June 2010.

The Finance Sector Union (FSU) stated that the significant bank profits revealed that the big four banks had the resources to support their staff, who had contributed to the strong results.

The FSU stated that the banks had the resources to provide increased fixed pay outcomes, proper staffing and relief, full payment for hours worked, staff training and career development, and safe and healthy workplaces. It added that investment needed to be made in creating more Australian jobs rather than sending work and jobs overseas.