Foreign bank subsidiaries report a subdued 2007

Incorporated subsidiaries of foreign banks reported a decline in profit, in aggregate, in 2007 according to data published yesterday by APRA in the Quarterly Banking Statistics.

APRA said net profit for the 10 banks in this category fell to $831 million in the year to December 2007, down from $941 million in 2006.

Net interest income increased modestly to $2.5 billion over the year while operating income was flat at $3.9 billion.

Results for several of the larger foreign banks - such as BankWest and ING - have been reported before and are inconsistent with these aggregate trends.

The statutory financial statements of one other prominent foreign bank, Citigroup, tend to paint a misleading picture of that entity, or so management always say.

So perhaps a few of the smaller foreign banks whose 2007 earnings this newsletter hasn't reported are pretty weak.

Or perhaps subsidiaries of foreign banks report their financial statements to APRA in a different way.

On the basis of the APRA data, foreign banks reported a decline in return on equity in 2007, to 0.6 per cent from 0.8 per cent in 2006, and also a decline in return on assets to 9.7 per cent from 13.0 per cent.