Profitability of Australian Banks: 1985-2001

This paper examines the profitability of Australia's four major banks, covering the time period 1985 to 2001. The level of profitability achieved by the banks across this period is determined and individual components of the profit rate examined. The contribution of efficiency gains and growth in non-interest income to profitability is discussed and the extent to which these gains have been passed on to consumers is measured. Apart from a period in the early 1990's banks have been able to maintain a relatively consistent level of profitability. However, the maintenance of these levels of profitability following on from their recovery in 1992 has been at the expense of customers.