In an exquisite piece of timing, Australia’s big banks were in the news last week as: the most profitable in the developed world; and for increasing fees to small business by 24 percent over the past three years.
According to the Swiss-based Bank for International Settlements (BIS), the Australian banks have been the most profitable in the developed world for three years running. Only banks in the somewhat higher-risk countries Brazil, Russia, India and China are more profitable.
Total profits for Westpac, CBA, ANZ and NAB – which dominjate banking in Austrlaia with 80 – 90 percetn market share – amounted to around $26 billion. The BIS figures also show Australian banks have lower costs than most of their peers and enjoy wider interest margins. (Not to mention the Big Four being partially guaranteed by the Australian government.)
An RBA report was the source for the bank fees data. In response, the Australian Bankers Association has been glowing with pride in the banking oligopoly’s reduction of fees to consumers:
‘Compared with three years ago, bank fees paid by households have fallen by $1.12 billion or 22 percent. In 2012 bank service fee revenue from households fell by $13 million (0.3%),’ the ABA says.
But the same set of RBA figures the ABA is using to applaud the big banks also show escalating fees to small business more than compensated for reductions to the household sector, and were being driven by rises in account servicing fees and debit card transaction services. While charges paid by households fell slightly to $4.1 billion in 2012, the total value of bank fees rose 4.3 percent, to $11.4 billion last year, a result of the higher costs to business.
Businesses paid $7.3 billion in 2012 in bank fees, an increase of 7 percent from 2011.
There is also a disconnect between the banks’ stated enthusiasm for lending to small business and the reality, with just under half of all credit applications made by small and medium businesses in the past year knocked back.
They also failed to pass on the RBA’s interest rate cuts in full to business.