Good debt drives bank profit

Australian banks are more profitable than other industries because they have a low bad debt ratio, not because there is a lack of competition in the industry says the deputy governor of the Reserve Bank Ric Battelino. Australian big banks have escaped the worst effects of the sub-prime crisis and have continued to make good profits and pay dividends. However, market conditions for banks are tough as mortgage arrears have risen and margins contract. Commonwealth Bank's margin on home loans has contracted to 0.16 per cent as sales have grown 16 per cent. ANZ has announced more than $3 billion in write-downs. NAB CEO John Stewart says global losses from sub-prime crisis will top $1 trillion. NAB has announced more than $1 billion in losses. St George bank has particularly been pressured by the global debt crisis.

Source: The Australian Financial Review