Submission to the Inquiry into the Post-Global Financial Crisis Banking Sector Profits

The major banks' return on assets has averaged around 0.9 per cent and the post-tax return on equity has averaged about 15 per cent since 1992 (Graph 11). Banks' returns on equity are similar to those of other major companies in Australia as well as those of banks in other countries prior to the global financial crisis. Australian banks' better performance than overseas banks in the period since the onset of the crisis largely reflects Australian banks' better bad and doubtful debt experience.^[14] Future profitability growth is likely to be constrained given the significant slowing in credit growth. Banks will have to be careful in how they respond to this as boosting profitability through cost cutting or overseas expansions is not without its risks.^[15]

Footnotes

See Edey M (2011), ‘Remarks to the Property Council of Australia’, Property Council Congress 2011, Darwin, 25 July. [14]

See Reserve Bank of Australia (2012), ‘The Australian Financial System’, Financial Stability Review, March, p 21. [15]