Big Banks Set For The Decade
THE SUNDAY AGE
Saturday May 28, 1994
AUSTRALIA'S ``big four" banks are at their most profitable in real terms for nearly 20 years, and should collectively make about $4billion in profits this calender year, says accountants KPMG Peat Marwick.
The senior banking partner at KPMG, Mr Patrick Burroughs, says the main banks are in for a ``golden era" of profitability that should last to the end of the decade.
Mr Burroughs says the big four - National Australia, ANZ, Westpac and the Commonwealth - have all achieved returns on net assests of between nine and 17 per cent, which, given the inflation rate of two per cent, puts their real profitability at much higher levels than the 1980s, when returns were similar but inflation was almost 10 per cent.
``The main issues coming through with the latest results are that the major banks are in very good shape," he says. ``Whether margins will be squeezed as competition increases is yet to be seen. It certainly hasn't happened too much so far."
In the past two weeks, the private banks, NAB, ANZ and Westpac, have reported more healthy profits. Again, the National led the way with a half-year result of $874.1million, making it well-placed to top BHP as Australia's most profitable company.
The ANZ reported an after-tax profit of $363.8 million, more than double its previous six-month result, and Westpac maintained its steady improvement with $320 million in the six months to March.
The Commonwealth Bank, which reports to the end of December, had a $371.9 million profit in the six months to that date.
The latest profit releases indicate the Commonwealth is beginning to lag behind its private competitors, says KPMG Peat Marwick.
Mr Burroughs says the Commonwealth has demands ahead of it. It appears, prima facie, he says, that is faces a challenge to keep up with the big three and to adopt the correct management techniques.
Analysts say that, if the big banks achieve the profit growth expected of them through this decade, it is likely some of the burgeoning regional banks will become takeover targets as the big four move to shore up weaknesses in any one state.
The most attractive regional banks, analysts say, are Challenge Bank, because of its strong Western Australia base, and the Bank of Queensland, because of that state's rapid growth.
If the sale of the State Bank of New South Wales does not go through, it too could become a target.
© 1994 THE SUNDAY AGE