Reporting season - facts on banks’ profits

Sydney, 3 November, 2010: The Australian Bankers’ Association (ABA) says

now that the bank reporting period is coming to an end, it is important that all
bank customers, shareholders and the wider community are aware of some
important facts about banks’ profits1.

Steven Münchenberg, Chief Executive of the ABA, said: “The 'headline' profit
numbers of banks are always large because they are very large Australian
businesses. Four of our top five businesses are banks.”

“Australia’s banks survived the global financial crisis (GFC) because they are well
managed and highly regulated. A solid, reliable and healthy banking sector is
important so it can continue to make loans to businesses which provide jobs and
keep our savings safe. Banks underpin our growing economy.”

“In the US and UK, we’ve seen that weak banks equal a weak economy. These
countries’ economies demonstrate the impacts of banks making losses –
unemployment in those countries remains stubbornly high at around 8 – 10%,
compared to Australia’s at around 5%.”

Some key facts:

• One of the key reasons cited as to why Australia was able to withstand the
global financial crisis and the Asian financial crisis was the reliability, safety
and security of our banking system.

• There is no evidence to support the claim that banks are making increased
profits due to reduced competition. The facts show that the profits of the
major banks are no larger today than they would have been, if there had been
no GFC. If you look at the trend in the banks’ profits before the GFC, it shows
that banks’ profits today are in line with that trend.

• Over the past year, the banks have paid out a record $15.8 billion in
dividends. Dividends are paid to ‘mum and dad’ shareholders, to working
Australians who are saving for retirement through superannuation accounts
and to retirees who are increasingly dependent upon positive business profit
growth. In the past five years, banks have paid out $70.5 billion in dividends.

• Despite assertions by some commentators, Australian taxpayers have not

spent one cent on banks throughout the GFC. In fact, banks have paid
taxpayers $2 billion for the use of the wholesale funding guarantees and will
pay $5 billion by the end of the scheme.

1
Based on the results of the main retail banks – ANZ, Bank of Queensland, Bendigo and Adelaide
Bank, Commonwealth Bank of Australia, National Australia Bank, Macquarie Bank, Suncorp and
Westpac Banking Corporation.
AUSTRALIAN BANKERS’ ASSOCIATION INC. 2

• Australian banks already pay a significant amount of tax and continued to do

so throughout the GFC. In fact, last year when many international banks
were bailed out by taxpayers the Australian retail banks paid out $8 billion in
taxation. Over the past five years, they have paid almost $40 billion.

• Australian banks are significant employers in Australia. Over the past year,
banks took on almost 10 000 new employees, taking their domestic staff
numbers close to 150 000.

• Australia’s retail banks paid out $21 billion in wages – this was 55% of their
total operating expenses. At $1,471 per week, average wages in the finance
and insurance sector are 18% higher than the national average of $1,2432 per
week.

• Australian banks will reinvest more than $7 billion back into their businesses
out of this year’s profit outcome. This will fund new technology, expansion of
the range of products and services offered to customers, and staff training
and development.

Mr Münchenberg concluded: “The reason why banks are profitable is because

they are well-run, well regulated and the Australian economy is very robust.”

“The stronger the economy, the wealthier people become, and the more they
borrow for housing, other personal goods and invest to provide for their
retirement. Similarly, the business environment is improving which means that as
businesses invest and grow, there will be increasing demand for loans and
financial products and services.”

“Anyone who invests in banks’ shares or has a superannuation fund which invests
in banks’ shares benefits from bank profits. Customers are provided with a safe,
stable, reliable and competitive banking system, providing a wide range of
products and services."

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439

ENDS

2
As at May 2010.