Australias banks the most profitable in the world

Analysis by The Australia Institute of The Banker’s survey of the top 1000 banks around the world showed Australia’s banks make the highest profit as a share of GDP. 

Table 1 – Bank Profit share of GDP% 

Rank

bank profit share of GDP %

1

Australia

2.9

2

China

2.8

3

Sweden

2.6

4

Canada

2.3

5

Netherlands

1.9

6

Spain

1.8

7

France

1.7

8

Japan

1.4

9

US

1.2

10

UK

0.9

Source: The Banker, IMF, TAI calculations

“Australian banks enjoyed a privileged place in Australia’s economy,” Executive Director of The Australia Institute, Ben Oquist said.

“Their profits equate to a staggering 2.9% of GDP making Australian banks effectively the most profitable in the world.

“Excessive profits provide a drag on the economy and hurt consumers who pay higher margins on bank products.

“The reserve bank found the big four banks enjoy an implicit government subsidy worth almost $4 billion dollars a year. 

“These super high profits combined with this taxpayer subsidy means extra scrutiny and potential additional regulation on the banks is not only warranted but required,” Oquist said.

Breakdown of the data:

The Banker’s survey of the top 1000 banks in the world revealed that in terms of pre-tax profit Australian, ranked 13th biggest economy by nominal GDP ranked sixth highest in the world for bank profits. Those figures are reproduced in Table 2:

Table 2 – Bank Profit by Country

Rank

pre-tax profit (US$m)

1

China

307,993

2

US

206,431

3

Japan

57,280

4

France

41,394

5

Canada

35,767

6

Australia

35,077

7

UK

25,327

8

Spain

21,810

9

Netherlands

14,361

10

Sweden

12,634

Source: The Banker

A more meaningful measure is to calculate those profits as a share of GDP and when we do that Australia jumps to top of that list of countries. Those calculations are given in Table 1 (above) which calculates bank profits in $US compared with IMF data for GDPexpressed in $US. All data refer to 2015.

The figures in Table 1 show 2.9 per cent of every dollar earned in Australia ends up as bank pre-tax profit compared with the US and UK at 1.2 and 0.9 per cent respectively.

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