Peak profit margins to protect

Quarterly banking statistics published by APRA yesterday highlight one dimension of the bank profit debate: that it's peak profit levels banks are seeking to secure and entrench.

Bank profit margins reached the high 20 per cent mark, and sometimes more than 30 per cent, in the industry's best years, in the mid-2000s.

For major banks in Australia, the industry trotted out five quarterly profit margins of 30 per cent, 35 per cent, 35 per cent, 38 per cent and 32 per cent, profits earned in the closing phase of the boom.

It look likes major banks have their sights set once more on the high profit levels of that era and are seeking to entrench them.

Profit margins for major banks climbed to 33.3 per cent in the June 2010 quarter, up from 26.1 per cent in the March quarter. The profit margin was 31.7 per cent in the December 2009 quarter.

On a one-year basis, profit margins for major banks were flat, at 25.2 per cent.

For the wider industry, profit margins climbed to 28 per cent, from 22 per cent, over the latest quarter, and increased to 21.4 per cent, from 20.4 per cent, over the full year.

The rationale for lifting the margins on home loan products over the last two weeks is to recover profit margins eroded by the rising cost of funds.

Profit margins may be lower in more recent months, as banks say. However, the most recent dip is from elevated levels.