Low growth a threat to Aussie bank profits

Australian banks enjoy stronger risk-adjusted profitability than other banks in the region but an extended period of low growth ahead is set to make it harder to earn a crust.

Australia’s major commercial banks continue to report some of the strongest profits among their global peers, according to Moody’s Investors Service.

They recorded an average pre-provision income to risk-weighted asset ratio of above 3% in the first half of 2013, according to Moody’s, compared to 2%-2.5% for banks in Singapore, Hong Kong, UK and the US.

“Other banking systems in Asia like in Indonesia for example might offer the highest returns, but when you look at the profit Australian banks have made over the past two decades, relative to their credit losses, they are a standout,” said Patrick Winsbury, a senior banking analyst at Moody’s in...

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