10 November 2016
Sydney, 10 November 2016: Australian households benefited from the banking industry’s solid performance for the 2016 reporting year, with banks returning most of their profits to shareholders and the broader community.
Eighty per cent of the main retail banks’ profits – $25.6 billion – were returned to the community, primarily through dividend payments to everyday Australians who own bank shares directly and indirectly through their superannuation savings.
Banks again paid more tax than any other industry – $12.8 billion in 2016 – providing a valuable revenue stream to help fund the Federal Government’s provision of essential infrastructure such as schools and hospitals.
Banks continued to invest in initiatives to improve customer service, including a $6.9 billion spend on technology. This included a $1 billion investment in a new payments platform launching in 2017 that will allow customers to transfer money online between accounts in real time.
Australian Bankers’ Association Chief Executive Steven Münchenberg said banks needed to continue to perform well for Australia to have a strong and well-functioning economy.
“Given ongoing economic uncertainty here in Australia and overseas, it is as important as ever that our banks remain strong, stable and profitable,” Mr Münchenberg said.
“Bank profits provide an income stream for Australians through dividends, superannuation payments and interest on bank deposits and bonds; as well as to the Federal Government. Profitable banks also help fund economic growth through lending to business customers and homeowners, and in their role as significant employers.”
In 2016, $25 billion in wages was paid to the 140,000 people employed by the main retail banks. Households earned $66 billion in interest on bank deposits and bonds.
$600 million was provided in donations and ‘in-kind’ support to the not-for-profit sector and other community initiatives.
Mr Münchenberg said, like most industries, banks were facing tougher operating conditions in a low interest rate, low growth environment.
“In addition to finding growth in a challenging market, banks are also responding to increasing regulation and the challenges associated with rapid advances in technology and new market entrants,” he said.
“In this environment, it will be more important than ever that banks work hard to get the balance right between looking after their customers, shareholders, employees and the community.”
The profitability of the main retail banks declined in the 2016 reporting year.
Return on equity for the major banks dropped from 15.6 per cent in 2015 to 13.6 per cent, while net interest margins for the major banks fell to a record low of 202 basis points.
Contact: Stephanie Arena 0477 470 677 or Nic Frankham 0435 963 913