Australia's banks perform above par

Australia's Big Four banks had a more profitable year in 2014 than most of their global peers, according to the Bank of International Settlements. In its 2014 annual report, using pre-tax earnings as a percentage of assets as a proxy for profitability, BIS said the Australian majors returned 1.28 per cent.  

By way of comparison, out of the systems monitored by BIS only the largest three or four banks from the emerging economies of China (1.83 per cent) and Brazil (1.66 per cent) out-performed Australia's four major banks.

This continues a trend established over several years, with pre-tax profits for Australian banks rising from 1.04 per cent in 2010 to 1.27 per cent in 2013 and 1.28 per cent in 2014.

The next best performance from major banks in a developed economy was from the US, where earnings as a percentage of assets reached 1.1 per cent last year - down from 1.24 per cent in 2013.

The average net interest margins (a measure of banks' funding costs compared to what they charge for loans) fell to 1.75 per cent for Australian banks.

This has been in constant decline in recent years: down from 1.89 per cent in 2010 to 1.82 per cent in 2012 and to 1.78 per cent in 2013.

The Australian major banks' overall NIM was lower than their peers in all of the emerging markets' banks, the US and Spain, the BIS analysis showed.