You can question how “unquestionably” strongly capitalised Australian banks may be, but you can’t argue with one theme in the data.
The country’s four major banks now rank right at the top in a table of the world’s most strongly capitalised banks.
Westpac, in its half year results yesterday, presented its compilation of data on the common equity tier 1 ratio for more than 40 of the world’s leading banks.
ANZ headed the list, followed by Commonwealth Bank, with Westpac in fourth spot and NAB at number six.
This analysis relies on each bank’s assessment of its “internationally comparable” tier one equity ratio, given APRA’s more conservative methodology for measuring capital.
Writing at the ANZ Bluenotes portal on Friday, Kevin Corbally, the bank’s chief risk officer said, “ANZ, in some surveys, is the most highly capitalised bank in the world”.
In 2021, APRA said it intended “to undertake a more thorough international comparability study”, a piece of work still in progress.
Doug Nixon, Oceania banking and capital markets leader for EY said of Australian banks, “they’ve always been well capitalised on a relative basis to their global peers. That has been the case for a number of years.”
The rocky road ahead for the domestic and global economies will test the strength of our banks, Nixon cautioned.
“Look at the volatility; the sector has been holding its breath, to see what the impact on Australia been.
“So far it’s been mild. But history teaches that down cycles flush out weakness in the industry,” Nixon said.
Australian banks have had a robust first half of the financial year, with a combined profit for the four major banks of A$16.8 billion, a rise of 11 per cent over a year, EY said in analysis of the industry reporting season.
Operating expenses increased a surprisingly modest 3.7 per cent across the four major banks, with NAB an outlier with cost growth of 13 per cent.