Submission to the Inquiry into the Australian Banking Industry List of tables

House of Representatives Standing Committee on Finance and Public Administration

Table 1: Financial Institutions Shares of Total Assets

Table 2: Real Interest Rates

Table 3: Growth in Credit by Sector

Table 4: Concentration Ratios in Selected Australian Industries: 1987–88

Table 5: Concentration Ratios in 1983

Table 6: Components of Profit for Major Banks

Table 7: Return on Shareholders' Funds

Table 8: Major Innovations in Bank Products and Services Since 1985

Table 2: Real Interest Rates
(short-term interest rates deflated by the change in CPI)
1970s 1980s
United States −0.8 3.3
Japan −1.8 3.6
Germany 1.9 3.8
France −0.5 3.5
United Kingdom −3.7 3.8
Italy −1.9 3.6
Canada −0.3 4.7
Australia −1.0 5.8
Netherlands −0.4 4.3
Belgium 0.4 5.7
Table 3: Growth in Credit by Sector
(year to June)
Bank NBFI
Credit		 Total
Credit
Housing Personal Business Total
1981 10.2 33.4 15.7 15.7 22.6 18.7
1982 8.9 27.2 18.2 20.9 17.0 17.6
1983 12.9 24.4 13.9 14.9 6.1 11.1
1984 13.9 27.9 16.2 14.8 10.4 13.7
1985 27.3 26.6 23.2 20.8 21.0 22.3
1986 19.4 11.8 26.1 32.3 15.7 21.9
1987 28.8 3.6 26.3 29.3 5.9 18.5
1988 18.1 −0.7 28.2 36.1 17.5 24.5
1989 28.2 23.1 26.2 25.8 10.5 21.1
1990 14.6 8.5 14.6 16.0 1.1 10.6
Average 18.2 18.6 20.9 22.6 12.8 18.0
Table 4: Concentration Ratios in Selected Australian Industries: 1987–88
(proportion of total turnover accounted for by largest four firms)
Tobacco 1.00
Pulp & Paper .93
Beer .91
Glass .87
Butter .85
Motor vehicles .81
Iron & Steel .80
Banks .69
Poultry .65
Bread .60
Cotton .56
Household appliances .49
Cosmetics .40
Footwear .40
Knitwear .33
Pharmaceuticals .25

Source: Manufacturing Industry Concentration Statistics: 1987–88. Cat. No. 8207.

Table 5: Concentration Ratios in 1983
(percentages of total assets)
Country All financial intermediaries
3 5 10
Germany 16.6 24.0 38.2
Italy 17.5 25.5 40.4
Spain 17.6 26.3 35.7
Japan 22.9 29.6 41.5
Australia 30.4 46.4 65.5
France 33.1 47.3 60.9
Belgium 35.8 52.1 67.7
Switzerland 44.8 51.8 59.3
Sweden 52.0 60.4 67.5

Source: J. Revell, ‘Comparative Concentration of Banks’, Research Papers in Banking and Finance, Institute of European Finance, Bangor, United Kingdom.

Table 6: Components of Profit for Major Banks
(as a proportion of total assets)
1980–85 (%) 1986–90 (%)
Net interest income 3.7 3.3
Non-interest income 1.8 1.7
Operating expenses 3.9 3.2
Bad debt expense 0.2 0.5
Tax 0.6 0.6
Profit after tax 0.8 0.7
Table 7: Return on Shareholders' Funds
(per cent)
Major Banks All Banks All companies
Average for  
1982–1985 16 15 9
1986–1990 13 11 10
Table 8: Major Innovations in Bank Products and Services Since 1985
Deposit Products Beneficiaries
Cash Management Accounts Customers who wish to earn ‘money market’ interest rates, without the need for constant monitoring of the market and with the convenience of having the money available at call.
Comprehensive Transaction Accounts For customers wanting one account which includes cheque book, ATM access, daily crediting of interest, links to credit cards, regular payment of bills, and an overdraft facility. May also include a telephone banking option.
Transaction Account with Sweep Facility For customers who do not wish to regularly monitor the balance in their transaction account. The balance above a certain amount is moved into a higher-yielding deposit account, such as a cash management account. Generally aimed at high-net-worth customers.
Incentive Savings Accounts Accounts with interest rate structures which reward consistent savings records.
Interest Offset Facility For customers with both a loan account (usually a home loan) and a deposit account. The savings act to reduce interest commitments which tends to shorten the term of the loan.
Minimising Bank Charges Customers may choose from a combination of high/low transaction fees and high/low rates of interest, depending on their particular needs.
Interest Receipt Options Monthly receipts, or deferred receipt of interest earned on deposit accounts, including term deposits. Customers can choose which suits best.
Foreign Currency Deposits For customers who wish to hold foreign currency deposits for transaction, hedging or speculative purposes.
Facilities for Special Groups Promotional sets of products for special groups, e.g. retirees, young people.
Lending Products
Flexible Repayment Arrangements
e.g. low-start loans		 For customers whose capacity to meet mortgage commitments is expected to change over the period of the loan.
Fixed-Interest Rate Housing and Business Loans, Also Capped Rate Loans Customers who wish to fix, in dollar terms, their interest payments stream, and/or customers who wish to avoid interest rate risk.
Residential Property Investment Loans Customers who wish to purchase real estate for investment purposes.
Home Equity Loans/Secured Lines of Credit Customers with significant equity in their residential property (or in some other asset) who wish to borrow, for any purpose, against that equity.
Foreign Currency Loans Customers who wish to borrow in a foreign currency to meet a foreign currency commitment, or in order to speculate on the exchange rate.
Services
Some banks have developed into ‘financial supermarkets’ with services including investment and business management advice, insurance, superannuation, property and equity trusts, and risk management.