Monday, May 27, 2013

The awesome foursome banks parasitic profits continue to rise

Vanguard June 2013 p. 9
Max O.

AUSTRALIA'S big four banks pocketed a record high half-year profit of more than $13.4 billion, after not passing on past interest-rate cuts in full, therefore collecting fatter margins from mortgages and through sacking thousands of employees. This is an overall 7.4 per cent increase on last year's interim profit levels, making the big 4 banks some of the most profitable in the world!

The profit results for each bank are as follows:

ANZ - $3.18 billion six-month cash profit, March 2013

Commonwealth - $3.8 billion six month cash profit for the half year ended 31 December 2012

NAB  - $2.9 billion six-month cash profit, March 2013

Westpac - $3.5 billion six-month cash profit, March 2013

Banks increase their capital power

Consequently this has pushed up the big 4s asset share values, with the largest increase going to the National Australia Bank whose shares rose 31 per cent higher since the start of the year, followed next by Westpac up 26 per cent, with ANZ up 19 per cent and the Commonwealth growing 14 per cent.

Money capital and the finance industry have grown enormously over the last 40 years. Finance capital is now so powerful it repeatedly obliterates industrial capital and workers' livelihoods as witnessed in the Eurozone with the Troika's -European Central Bank (ECB), the European Commission (EC), and the International Monetary Fund (IMF) - implementation of austerity programs.

Marx on money capital

Marx methodically examined the operation of money and credit under capitalism in volume 3 of Capital way back in the 19th century: "The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner - and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 (The Bank Charter Act 1844 was an Act of the British Parliament which restricted the powers of the British banks to issue their own bank notes and gave exclusive note-issuing powers to the central Bank of England) are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers."

Banks in Australia have been notorious in raising their profit margins through the ruthless implementation of more than 7000 job cuts from 2012 to 2013, by the increase in bank fees of some 362% from 1997 (households paid $1.16 billion in bank fees) to 2010 (bank fees risen to $4.2 billion) and after refusing to pass on the full interest-rate cuts to customers. The big 4 held back about 27 basis points of the 150 basis point fall in the official RBA cuts in the past 12 months.

Competing for profits in a economic slump

However the good times for banks are coming to an end. Those in the finance industry who are in the 'know' are now starting to acknowledge that Australia is heading for what they euphemistically call "soft economic conditions", in other words an economic slump. 

Gail Kelly, the CEO of Westpac, stated: "I'm not negative on growth in our economy, I simply think we are going to have lower levels of credit growth,"...... "We need to be smarter in how we go about it and that will help support our earnings prospects".

Ratings agency Fitch reported that banks needed to keep increasing deposits and reduce their dependence on funding from global wholesale markets to meet the new international banking rules. The need to meet the Basel III accord has encouraged intense competition for deposits, pushing up rates for savers but lowering banks' margins.

So the race is on between the big 4 banks to increase the number of depositors and mortgages. Competition amongst the awesome foursome oligopoly has now seen them give the full RBA interest-rate cut of 25 basis points, with the ANZ going further giving 27 basis points cut in their interest-rates.

Making profits or meeting people's needs

As Nomura analyst Victor German stated, with a weak credit growth, pressures in institutional banking and high profits in mortgages, it "makes sense for banks to give up a little bit of margin and grow a little bit faster in mortgages. If we continue to see a situation where other parts of the business are just not growing, banks in my view will compete more and more aggressively for mortgages, which is still a very high and attractive earning business."

The Australian economy has been bottoming for some time and in particular the housing industry has been in decline with layoffs in both construction firms and building supply firms. Figures show that building approvals fell 5.5 percent in March this year.

Banking and finance capital profits should initially be subject to a super profit tax and then eventually nationalised. This is the only solution to capitalism's ongoing economic crisis and to meet working people's needs. But don't hold your breath waiting for the Labor or Coalition governments to carry out this solution. The Chiefly Labor government planned to do just this in 1947 and it was viciously opposed and defeated by the banksters, via the High Court on the basis of states' rights.

 It will only come when Australia achieves an independent socialist society.

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