Dividend strippers rule Australian banking

Industry dividend growth outstripped banking profit growth by better than two times in 2014.

The Australian Bankers Association said dividend growth hit 13 per cent, 2.3 times the rate of growth in profit.

Credit growth was only 5.2 per cent for the industry and a tad higher for the big banks.

EY said Australia's Big Four banks made combined headline cash earnings of A$28.6 billion in 2014.

Core earnings increased two per cent to $44 billion, held back by NAB.

Net interest margins tightened over the second half, to 2.06 per cent. PwC in an analysis said this was "the lowest since the all-time low of 2.05 per cent in the first half of 2008."

Only two banks - ANZ and CBA - produced a better cost to income ratio in 2014 on EY analysis. NAB suffered self-inflicted wounds while Westpac's ratio puts a different light on the productivity story it featured yesterday.

PwC said Big Four operating costs "remain on the rise, up $3.2 billion or 9.7 per cent compared to last year.  

"NAB's additional provisions and writedowns of $1.7 billion account for more than half of this increase," it said.

"The remainder reflects salary expenses which increased 4.5 per cent, well ahead of inflation, while IT costs are up 10.7 per cent - largely due to a 20 per cent increase in capitalised software amortisation."