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RESERVE BANK OF AUSTRALIA

Financial Stability Review – September 2005

List of tables

Table 1: World GDP Growth

Table 2: House Prices

Table 3: Banks' Return on Assets and Equity

Table 4: Banks' Half-yearly Profit Results

Table 5: Bank Business Lending by Loan Size

Table 6: Banks' Australian Commercial Property Exposures

Table 7: Australian Banks' Foreign Exposures

Table 8: Traded Market Risk

Table 9: Long-term Ratings of Australian Banks

Table 10: Long-term Ratings of Selected General Insurers

Table 11: Assets under Management

Table 12: Owner-occupied Residential Mortgage Risk Weights

Table 1: World GDP Growth
Year-average, per cent(a)
2004 2005 2006
Consensus forecasts
(September 2005)
(a) Aggregates weighted by GDP at PPP exchange rates unless otherwise specified
(b) Weighted using market exchange rates
(c) Weighted using merchandise export shares
Sources: CEIC; Consensus Economics; IMF; RBA; Thomson Financial
United States 4.2 3.5 3.3
Euro area 2.1 1.3 1.7
Japan 2.7 2.0 1.8
China 9.5 9.1 8.1
Other east Asia(b) 5.8 4.3 4.8
Australia's trading partners(c) 4.9 3.9 3.8
World 5.1 4.3 4.3
Table 2: House Prices
Year-ended percentage change to June 2005
  ABS APM(a)(b) CBA REIA(a)
(a) Preliminary
(b) Composition-adjusted median
Sources: ABS; APM; CBA; REIA
Sydney −5.0 −4.8 −6.8 −3.9
Melbourne −1.4 1.0 −3.0 −2.0
Brisbane 1.8 1.1 1.6 0.6
Adelaide 7.0 4.6 12.0 3.8
Perth 11.7 13.1 7.0 16.5
Canberra 2.5 −0.2 −8.7 −6.0
Australia −0.1 0.0 −1.4 −0.4
Table 3: Banks' Return on Assets and Equity(a)
Before-tax earnings, per cent
  Sample Return on Assets Return on Equity
2002 2003 2004 2002 2003 2004
(a) Annual results for selected large banks as ranked by Tier 1 capital.
Sources: Banks' annual reports; The Banker; BankScope; Bloomberg; RBA
Australia 4 1.5 1.4 1.4 21.9 20.6 19.2
United States 19 1.8 2.1 1.7 21.0 24.9 19.3
Canada 5 0.6 1.0 1.2 11.8 18.9 22.6
Japan 9 −0.8 0.2 0.4 −24.8 4.7 9.2
United Kingdom 7 0.9 1.1 1.2 16.8 19.2 20.4
France 6 0.5 0.6 0.7 12.4 14.2 16.0
Germany 9 0.0 −0.1 0.2 0.1 −2.6 5.2
Italy 6 0.5 0.8 0.9 9.2 13.1 15.1
Sweden 4 0.6 0.8 1.0 15.3 17.9 22.6
Other Europe 18 0.5 0.7 0.8 10.7 16.2 18.7
Table 4: Banks' Half-yearly Profit Results(a)
Five largest banks, consolidated
  2004
$b
2005
$b
Growth
Per cent
(a) The six months to March 2005 for the ANZ Banking Group, National Australia Bank, St George Bank and Westpac Banking Corporation, and the six months to June 2005 for the Commonwealth Bank of Australia.
(b) Includes Commonwealth Bank of Australia's 'Which New Bank' restructuring costs; National Australia Bank's foreign currency options trading losses, sale of stakes in AMP and St George Bank, the disposal of two Irish banks and reversal of HomeSide provisions.
(c) Before outside equity interests.
Sources: Banks' annual and interim reports
Income
Net interest income 12.0 12.8 7.3
Net income from wealth management 2.5 3.0 17.1
Other non-interest income(b) 6.6 7.8 18.9
Expenses
Operating expenses(b) 10.6 11.7 10.6
Bad and doubtful debts 1.0 1.0 −0.1
Goodwill amortisation 0.4 0.5 5.7
Profit(c)
Net profit before tax and revaluations 9.1 10.5 15.4
Net profit before tax 9.1 11.0 21.1
Net profit after tax 6.6 8.1 23.1
Table 5: Bank Business Lending by Loan Size
As at June 2005
Loan size Level
$b
Share of total
Per cent
Growth
Year to June, per cent
Source: APRA
< 100k 24.2 6 −2
100k – 500k 65.5 17 9
500k – 2m 66.9 18 16
> 2m 219.5 58 12
Total 376.2 100 11
Table 6: Banks' Australian Commercial Property Exposures
Per cent, as at March 2005
Type of exposure Growth
Year to
March 2005
Share of total
commercial lending
Impaired assets
Share of commercial
property exposures
Source: APRA
Office 9 9 0.1
Retail 20 7 0.0
Industrial 24 4 0.1
Residential 22 11 0.3
Tourism and leisure 17 1 0.1
Other 34 4 0.3
Total 19 36 0.1
Table 7: Australian Banks' Foreign Exposures
As at June 2005
Country Total of which:
Level
$b
Share
Per cent
Cross-
border
$b
Local
$b
(a) Includes Hong Kong and Singapore
Source: APRA
New Zealand 165.1 47.8 11.1 154.0
United Kingdom 83.2 24.1 13.7 69.5
United States 30.7 8.9 15.5 15.2
Other developed countries 43.8 12.7 41.6 2.2
Developing countries 12.2 3.5 6.1 6.0
Offshore centres(a) 10.3 3.0 6.8 3.5
Other 0.3 0.1 0.2 0.1
Total 345.6 100.0 95.1 250.6
Memo: Per cent of total assets 27.1 7.5 19.6
Table 8: Traded Market Risk(a)
Per cent of shareholders' funds, four largest banks
  2004 2005
Half-yearly average 
(a) Value-at-risk is calculated using a 99 per cent confidence interval and one-day holding period.
(b) Other market risks include commodity, equity, prepayment, volatility and credit spread risk.
Sources: Banks' annual and interim reports
Interest rate 0.03 0.03
Foreign exchange 0.02 0.01
Other(b) 0.02 0.01
Diversification benefit −0.02 −0.01
Total 0.06 0.04
Table 9: Long-term Ratings of Australian Banks
As at 22 September 2005
  Standard & Poor's Moody's Fitch
Sources: Fitch; Moody's; Standard & Poor's
Adelaide Bank BBB+ Baa1 na
AMP Bank A− A3 na
ANZ Banking Group AA− Aa3 AA−
Arab Bank Australia na Baa2 BBB+
Bank of Queensland BBB+ Baa3 BBB
BankWest A+ A1 na
Bendigo Bank BBB+ na BBB+
Commonwealth Bank of Australia AA− Aa3 AA
HSBC Bank Australia AA− A1 na
ING Bank (Australia) AA Aa2 na
Macquarie Bank A A2 A+
National Australia Bank AA− Aa3 AA
St George Bank A A2 A+
Suncorp-Metway A A2 A
Westpac Banking Corporation AA- Aa3 AA−
Table 10: Long-term Ratings of Selected General Insurers
As at 22 September 2005
Source: Standard & Poor's
Insurance Australia AA
Vero Insurance (Promina) A+
QBE Insurance Australia A+
Suncorp Metway Insurance A
Table 11: Assets under Management
Consolidated, as at June
  1990 2005
Level
$b
Share of total
Per cent
Level
$b
Share of total
Per cent
Sources: ABS; APRA
Superannuation funds 75.4 37.5 496.3 54.2
Life insurers 81.2 40.3 188.9 20.7
Other managed funds 44.7 22.2 230.0 25.1
Total 201.3 100.0 915.2 100.0
Table 12: Owner-occupied Residential Mortgage Risk Weights
Per cent
LVR Loans with Mortgage Insurance Loans without Mortgage Insurance
Standard Non-standard(a) Standard Non-standard(a)
Current Proposed Current Proposed Current Proposed Current Proposed
(a) Non-standard loans are mostly low-doc loans.
Source: APRA
<60 50 35 50 35 50 35 50 50
60-80 50 35 50 50 50 35 100 75
80–90 50 35 50 75 100 50 100 100
90–100 50 50 50 75 100 75 100 100
>100 50 75 50 100 100 100 100 100