(9 May 2011 – Australia) The Australian Bankers’ Association (ABA) came out in support of the country’s banks record profits, saying it is crucial for Australia’s economic stability.ABA chief executive Steven Münchenberg said weak banks equal a weak economy.
“Due to Australia’s healthy banking sector, our banks were able to raise and lend money during the Global Financial Crisis (GFC).”
“This shows, that for our nation, there’s an important social benefit of profitable and well capitalised banks – they underpin economic growth by providing finance to businesses, keep people employed, keep our savings safe and continue to support the financial decisions of Australians,” Mr Münchenberg said.
The association also released in a statement that householders benefit from bank’s profits through superannuation – whether through saving for retirement or being retired.
“Around 70 percent of the banks’ profits are paid to shareholders in the form of dividends, with the majority of this pay-out going to superannuation funds and ‘mum and dad’ shareholders. In fact over the past year dividends paid out to shareholders were at a record level of A$16.8 billion,” Mr Munchenberg said.
To avoid confusion and prevent any debate on banks’ interim profit reports, the ABA released some facts in a statement saying that less than half of the profits come from households, instead the majority of bank profits were generated from businesses, institutional banking, funds management and other activities.
“Bank profits need to be put in context. During the GFC profits fell, but they are now increasing although still below the long-term trend,” the ABA said.
Out-of-cycle interest rate rises are not driving profits, this would cause an increase in margins, but competition has driven down margins from over 4 percent in the 1990s, to 2 percent today.
The main Australian domestic retail banks paid A$38 billion in tax over the past five years, with A$8.1 billion of that paid in the past year.