The Commonwealth Bank is the second most profitable bank in the world.
The Commonwealth Bank is the second most profitable bank in the world. Kieran Salsone

New study claims nation's big banks 'acting as a monopoly'

A NEW study claims Australia's big four banks are not as competitive or independent as they would have us believe.

Analysis by left wing think tank The Australia Institute shows 53% of each bank is owned on average by the same small number of nominee shareholders.

The study, which was compiled by senior research fellow David Richardson, examined the top 20 shareholders for the Commonwealth, NAB, Westpac and ANZ banks.

Mr Richardson claimed the concentration of ownership increased the potential for banks to "boost profits by acting as a monopoly".

In the past seven years the big four banks' share of total bank profit in Australia has grown from 75.9% in 2005 to 90.7% this year.

Prior to the deregulation of the banking industry in the 1980s that number was closer to 50%.

Mr Richardson also highlighted the fact Australia was home to four of the eight most profitable banks in the world - Commonwealth (2nd), Westpac (3rd), ANZ (5th) and NAB (8th).

"The big four banks make more than $1460 profit from every man, woman and child in Australia. They argue that these profits flow largely to mums and dads with superannuation, but our analysis calculates that the average superannuant gets just $142 per annum while most Australians get nothing," Mr Richardson said.

The analysis also found the three main regional banks - Bendigo and Adelaide Bank, Suncorp Metway and Bank of Queensland - were owned by the same custodial nominees as the big four.

He said the big four banks "largely avoid competition on price" and were only interested in competing for market share.

"These (shareholder) institutions don't own a big slice of just one bank; they own a big slice of all the big banks.

"The last thing these common shareholders seem to want is genuine price competition and this week's interest rate decisions illustrate that," he said.

But Australian Bankers' Association chief executive Steven Munchenberg showed up TAI's "poor understanding of the banking sector".

He said Mr Richardson's analysis of bank ownership was "completely wrong" and showed a misunderstanding of the role played by custodial nominees.

"They're not the ultimate owners of the shares. Superannuation funds are," Mr Munchenberg said.

"And they can't act without instruction from superannuation funds. So the whole premise is false. There's not this concentration of ownership."

He also scoffed as the suggestion banks were not competing on price, citing the heavily reduced home loan package rates and a reduction in bank fees of more than $1 billion over the past couple of years.

Meanwhile, Mr Richardson's study also found despite the dominance of the big four, non-bank lenders were more than competitive on price.

Using home loans as an example, Mr Richardson found the cheapest of the big four banks was often significantly more expensive than a number of individual mutual banks, credit unions, building societies.

Despite this the big four banks have succeeded in substantially increasing their share of the bank lending market - from 67% of all lending in August, 1991, to 87.5% in March this year.

Mr Richardson puts some of this down to the vast sums splashed on advertising by the big four.

Based on the banks' annual reports he found the total advertising spend was more than $1 billion in 2012.

 

LOOKING BACK

The last time the official interest rate was 3% in 2009, the average home loan mortgage rate with the big four banks was 5.8%.

After last week's cash rate cut by the RBA to 3%, the big banks are charging on average:

  • Commonwealth Bank 6.40%
  • Westpac 6.51%
  • National Australia Bank 6.38%
  • ANZ yet to announce

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