Monday, November 25, 2013

Who owns and controls Australia's banks?

Vanguard December 2013 p. 3
Max O.

Once again the Big Four 'Australian' banks’ profitability is doing quite handsomely. A key measure of bank profitability is the net interest margin, the difference between the cost of borrowing and income from lending. The net interest margin is 213 basis points (2.13%), down from 217 basis points from last year. It is the lowest number on record.

However, the Australian Bank Full Year Profits for 2013 are the following:

Westpac $6.8b 14% up

CBA $7.7b 8% up

ANZ $6.3b 11% up

NAB $5.5b 34% up

That’s a total of $26.2b with an average 16% increase from last year
What are they worth you might ask? Well they have a market value of approximately $100b each. More than 80% of all loans are owed to the big 4 banks, which amounts to $1.5 trillion. More than 85% of all home mortgage debt owed to the big 4 banks, which amounts to $1.0 trillion. 79% of all deposits are with the big 4 banks, which amounts to $1.3 trillion. They hold 20% (297)of managed funds. Off the shelf products sold by them make up almost 1/3 of the market. Nearly 40% (6,600) of all financial planners are on the big banks’ payrolls.

What is very interesting and concerning is the concentration of ownership and control.

Whilst Australia’s Big 4 feign competitiveness amongst themselves, they are essentially owned by the same (mostly foreign) financial interests; namely HSBC Custody Nominees, J P Morgan Nominees Aus Ltd, National Nominees Ltd and Citicorp Nominees Pty Ltd.

Unexpectedly, smaller competitors like St. George and Aussie Home Loans – who declare they offer consumers a 'fair go', are subsidiaries of the same corporate giants. The chart below was sighted at the following website address:

The Australian Institute's study called, "The rise and rise of the big banks" provides another set of interesting and concerning statistics of the concentration of bank ownership and control in Australia.

The Australian Institute makes the following observation about the pattern of bank ownership in Australia.
"An inspection of the top 20 shareholders in the big four banks reveals a very interesting pattern. On average, over 53 per cent of each big bank is owned by shareholders that are among the top 20 shareholders in all the big banks. Most of the owners, and certainly the top four shareholders, are nominee companies. Nominee companies hold shares on behalf of other entities that for some reason want to hide their identity. They tend to be both foreign investors and fund managers; increasingly they are investors acting on behalf of superannuation funds.

"The common ownership of the big four banks seriously challenges the idea that there are four separate big banks in Australia. Given the common ownership of the big banks, it is to be expected that the owners will put pressure on the banks to act as one and reap the monopoly profits. That seems to have been the motive of the investors who encouraged the NAB to move back in line with its competitors. Moreover, ownership figures for the second tier banks, the big three regionals, show they are also owned by the same organisations that own the big four."

1 comment:

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    Australian Owners Corporation Management