Australian Banks Raking Billions Worth of Fees

Australian banks, the “big four” in particular gashed up to $1 billion in fees from families and businesses last year even as the economy is in the brink of recession.  The sudden surge in fees came as the banking sector benefited from a support package from the government to withstand the global financial crunch.

However, there are claims that the $1 billion- $961 million to be exact, came from a lush and previously undisclosed revenue from penalties for such things as the use of other banks’ ATM machines, overdrawn accounts, and surpassing credit card limits.

Figures released by the Reserve Bank revealed that fees are increasing at the nimblest pace in the last five years.  It was estimated that banks collected between $11 billion and $12 billion in fees in 2008, up from $10.5 billion in 2007.  Of those, $4.9 billion came straight from the pockets of households in the form of extra fees charged on loans and other transactions. These figures would likely disclose the banks to another wave of denunciation from consumer groups as well as from the federal government.

The big four - the Commonwealth, Westpac, NAB and ANZ Bank  have ameliorated from the government guarantee over bank deposits, which has literally handed them hoards of cash.  KPMG, an accounting firm revealed that these banks set a diffident rise in pre-tax profit to $12.5 billion in the first half of the 2008-09 despite the impact of the financial crisis on banks overseas.

A burst in bad loans transpose into a modest single-digit decline in cash profit for the big four for the said period. However, they have responded by heavily increasing their key market shares as smaller competitors have faltered in the face of funding pressures.

The sharp rise in fees last year transpired as banks tried to protect their profit margins as they try to rally behind the excuse of continued high international funding costs. Given such a scenario the banks found a reason to refrain from passing all of the 425 basis point fall in official interest rates since September.  However, KPMG divulged that the big banks’ net interest profit jumped 11 percent to $20.9 billion for the first half of 2008-09, with margins growing from 2.08 percent to 2.14 percent.

The Reserve Bank and the Australian Banking Association remained silent on the matter, but Senator Steve Fielding of Family First stated that the likely rise in fees brought to light the fact that the government needs to intervene and regulate the banking sector.