Good morning everyone!
I want to put some numbers on the debate about the proposed bank tax.
Last night the head of the Bankers Association, Anna Bligh, told me big banks think Scott Morrison is like a jewelry thief or a bank robber.
Think about that!
It shows how fierce this fights going to become and of course the question is – do the banks have sufficient sympathy in the community and the corporate guards to mount a fight like Twiggy Forrest and Gina Rinehart got up over the mining tax?
After all, more than half the community supports Bill Shorten who’s still adamant there’ll be a Royal Commission into banking if he becomes the PM.
Now the last half year, the big four banks made $15.7 billion – up 4.6 per cent on the same time last year – so bank profits are rising faster than the economy and faster than your wages.
They pay taxes of $6.5 billion in the half year and yes, they’re big tax payers and yes they do actually pay their tax.
But the number you really need to watch is not the billions but the return on equity.
In other words, for every dollar of shareholders money – how much do the banks make?
The answer…13.96 per cent according to PwC and that’s up from 13.8 per cent a year ago.
So the banks are incredibly profitable! Amongst the most profitable in the world now the US Federal Reserve economic research team a year ago said the average big US bank has an average return on equity of 9.07 per cent.
KPMG says the biggest UK banks return just 4.6 per cent – they’ve been in bad shape since the GFC.
So Australian banks are in exceptional health and we want our banks to be strong, unassailable.
The question is whether they’re healthy enough to extend six billion dollars extra coming out of them over the next four years…and yes!
They will try to pass the rate rises on the customers because that’s the way business works.
But if there’s sufficient competition in the market, people should have alternatives and maybe that’s why the shares in Bendigo Bank and the Bank of Queensland that will not pay that tax was so strong on the market yesterday.
Dow Jones down 41 Aussie dollar this morning 73.6 US cents