At the same time as some financial planners worry about the dominance of the major banks, a new Morningstar analysis claims the big four banks are stronger now than they were before the Global Financial Crisis and more than capable of seeing off any competitive assaults.
The Morningstar analysis, which included an upgrading of the so-called "moat rating" to "wide", made clear that Australia's four major banks now joined only one other bank awarded a wide moat across Morningstar's global bank coverage universe.
In its analysis of the banks, Morningstar noted that the four major banks "have consistently and successfully fought off the threat of competition from foreign banks, regional banks and non-bank lenders".
"Shadow banking in the commercial and retail sectors in Australia and New Zealand is immaterial. Potential competitors have tried many times to break the stranglehold enjoyed by the major banks, but to no avail," the analysis said.
"In our opinion, the major banks are considerably stronger now than before the financial crisis and, even in the depths of the crisis, ROEs were still impressive (Commonwealth Bank fell to 15.8 per cent, Westpac Bank 13.8 per cent, ANZ Bank 13.3 per cent and National Australia Bank 11.8 per cent)."
While noting the effectiveness of the Australian Prudential Regulation Authority as a regulator, the Morningstar analysis said the dominant market position of the four major banks had strengthened "due to long-term industry consolidation over many years due to market share gains by major players and mergers and acquisitions to improve economies of scale and other competitive advantages".
The analysis said the four major banks "dominate a regulated and rational oligopoly, bestowing structural advantages that are strong and durable".
"This enables the banks to prosper compared with major banks in other global jurisdictions. We believe the economic moats surrounding the major banks are sufficiently wide to ensure global sector-leading returns on equity for the foreseeable future," it said.