Great barriers to bank profits in Oz

Maintaining profit momentum will be a struggle for Australia’s banks as the economy changes gear and regulators apply the brakes.

Australia’s highly prosperous banks are entering a new era of tighter capital rules, slower economic growth, and competitive pressure on margins, making it increasingly difficult for them to deliver stellar profits. The country has a highly concentrated market with the four biggest institutions Commonwealth Bank of Australia, Westpac, ANZ, and National Australia Bank accounting for 80% of banking business.

The Big Four could soon be the best capitalised banks in the world following moves by the local regulator the Australian Prudential Regulation Authority to make the banks “unquestionably strong” by placing them in the top quartile of institutions globally in terms of capital adequacy.

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