So much for all the moaning and groaning from the big four banks this week about the impact of the way the federal government and opposition were taking pot shots at them earlier in the year – the bank levy imposed in the 2017-18 budget, Labor’s calls for a banking royal commission, the toughening of regulations governing bank managements and the way the regulators forced the banks to boost their capital to make them “unquestionably strong’?
Those capital boosts were handled easily by the big four (and Macquarie Group) although the NAB still has a way to go to meet that 10.5% minimum from APRA (Westpac said it was at 10.6% in yesterday’s announcement).
In fact we gained the impression that the attacks and the levy would damage the banks and make them weaker, and that customers would pay.
Well, once again we have had heard a collection of porkies from the country’s pre-eminent whingers and oligopolists after Westpac completed the profit reporting timetable of the big four banks on Monday morning.
Millions of customers might complain, but millions of shareholders and super funds will be happy – the big four left their payouts steady in 2016-17, including the ANZ which lopped its payouts the year before.
Collectively the big four earned a record combined cash profits (their preferred way of measuring their profits) of $31.522 billion, up from the $29.8 billion the year before when they were depressed by asset write-downs, and sales and bad debt impairments, especially in Queensland and Western Australia in the wake of the ending of the mining investment boom.
In fact the banks did better without some of what were thought key assets – the NAB sold 80% of its life insurance business, Westpac sold down its stake in BT Asset Management and the ANZ sold Australian and Asian assets and loans. And yet cash earnings rose.
The banks claimed the levy would affect their financial strength and some murmured that good old standby of moaning Australian business – ’sovereign risk’ in pushing back against the levy and other changes.
The $31.522 billion was made up of cash profits from the Commonwealth ($9.88 billion), Westpac ($8.062 billion), the ANZ (6.938 billion) and NAB (6.642 billion). It compares to the previous record of $30.6 billion eared by the big four in 2014-15.
It is only back in 2009 when the banks collectively earned $17 billion (which was depressed in part by the costs of cleaning up dodgy loans and boosting capital in the wake of the big losses in the GFC).
The banks’ combined statutory profits totalled just on $29 billion – up from $22.7 billion a year ago and the all time high of $30.6 billion recorded in 2014-15.
The full year impact of the bank levy starts this year – Westpac provided an estimate of $95 million re-tax in Monday’s report, but we will have to wait until the interim profits next February for the CBA and April and May from the ANZ, NAB and Westpac.
The CBA’s profit was the largest ever by an Australian bank and came despite the rising costs of handling the Austrac money laundering claims. The CBA holds its annualmeeting next week when a further statement is expected from chair Catherine Livingstone, as well as a first quarter trading update.
The CBA is expected to reveal its defence to the Austrac charges next month. But it is clear the impact on the bank has been minimal so far.
Investors didn’t like the Westpac result and sold the shares down more than 2% by the close to $32.55. NAB shares lost 0.7% to $31.56, ANZ shares were half a per cent lower at $29.75 and the Commonwealth also fell half a per cent to end at $77.40.
