Banks profit from each other

Bank balance sheets are ballooning on each side of the ledger, but especially on the asset side.

Monthly data on credit aggregates from the Reserve Bank of Australia show that credit increased by 1.2 per cent in the month of September and by 15.9 per cent in the year to September.

Housing credit increased by 0.8 per cent over the month and by 11.7 per cent over the year - the weakest rate of growth since the 1990s.

Personal credit growth actually fell for the second time in three months. Growth in personal credit was 11.4 per cent over the year.

Business credit increased by 2.0 per cent in September (down from growth of 2.5 per cent in September when the crisis hit) and increased by 23.3 per cent over the year.

Australian Prudential Regulation Authority figures on lending to business show similar trends.

The APRA data also show a five per cent increase in lending by banks to other banks in September. Bank lending to other financial institutions increased by 35 per cent over three months and by 54 per cent over six months.