Profits
The four biggest banks raked in record net profits this year: National Australia Bank ($3.24 billion); the Commonwealth Bank ($2.7 billion); ANZ ($1.747 billion); and Westpac ($1.715 billion). The combined total was $9.4 billion, $2.2 billion more than in 1999 and a 60% increase over the last five years.
For both Westpac and the National Australia Bank (NAB), this was the eighth consecutive year in which they made a record profit. The NAB result is the third highest annual profit in Australian corporate history.
Transaction fees
A NSW government-commissioned study by financial services research group CANNEX this year revealed that since 1993, over-the-counter charges have jumped by 376% (from 50 cents to $2.38) and ATM fees have jumped by 140% (from 25 cents to 60 cents). Many families are paying up to $582 a year in transaction fees.
NAB's profit included $250 million from transaction fees. Its new fee structure offers fee-free banking to customers with big deposits and borrowings, while increasing the cost of banking for everyone else. Over-the-counter fees will increase to $3, ATM and EFTPOS fees will increase to 60 cents, and charges will apply to phone and internet banking for the first time.
Interchange fees
The Australian Competition and Consumer Commission (ACCC) has accused the four major banks of engaging in price fixing with credit card interchange fees. More than a third of the banks' revenue from credit cards comes from these fees.
Each time you use a credit card, the bank which issued your card charges an interchange fee (about 0.95% of the value of the transaction) and the shopkeeper's bank charges an interchange fee. The total of the two interchange fees (about 1.78% of the value of the transaction) is then passed on to the shopkeeper for payment. The shopkeeper then passes the cost of the fees onto customers. According to the ACCC, these interchange fees are inflated up to 67% above cost.
The ACCC also slammed banks for overcharging interchange fees when customers are charged nearly three times the cost of providing the service when they use another bank's ATM.
Deeming accounts
Deeming accounts are special bank accounts for pensioners who are only entitled to a part-pension. The government sets "deeming" interest rates to determine what income pensioners should be getting from their savings and calculates the part-pension accordingly.
Banks are meant to pay 3.5% interest on deeming accounts with a balance of less than $31,600, but the NAB, the CBA and Westpac have only been paying 0.1% to 0.2% on deeming accounts with a balance of less than $2000. This difference can cost pensioners several hundred dollars per year because they are not getting their full entitlement of interest and receiving a reduced pension as if they are receiving the deeming interest rate.
Cost cutting
Over the past six years, banks have closed more than 2000 bank branches and axed more than 40,000 jobs. These figures don't include NAB's plan to close a further 100 branches and retrench a further 250 workers or the Commonwealth's plan to close 250 branches and axe 2500 jobs since its merger with the Colonial State Bank earlier this year.
Cost cutting by closing branches and retrenching workers contributed significantly to the banks' record profits. Westpac's record profit was boosted by the $317 million it slashed from its cost base but it still intends to cut more branches and more jobs.
Bank workers
NAB boasts that each "full-time equivalent" employee now contributes a little under $85,000 in profit each year, up from less than $65,000 a year ago.
This productivity increase is not simply a result of increased use of technology. Bank workers are often intimidated into doing substantial amounts of unpaid overtime to make up for the jobs which have vanished.
Now, the CBA and the ANZ bank are trying to foist individual contracts on their workers.
CEO salaries
Banking chief executive officers are becoming fat on their salaries: the CBA's CEO David Murray gets $2.045 million, Westpac's CEO David Morgan gets $1.72 million and the NAB's CEO Frank Cicutto gets $2.7 million. On top of these salaries, they are granted generous parcels of shares. For example, Murray gets $1 million in CBA shares and 250,000 options on top of his salary.
BY SUE BOLAND