Four big banks made $49bn in total – and paid $13bn in tax

The four big banks made a big headline figure of $49bn in profit – but don’t forget the $13bn in tax paid and $42bn they injected into the economy.

ANZ chief executive Shayne Elliott.

Back in 2019 – that last ‘normal’ year before Covid flew out of Wuhan and changed ‘everything’ – the four big banks made a total operating profit before tax between them of $42.7bn.

With the ANZ rounding off the results Monday, we can now see that in this first full semi-normal post-Covid year, they made $48.8bn between them.

That’s an increase of some 14.3 per cent- which is actually a very modest increase running at just a little over 3 per cent a year over the four years.

Further, as I explained last week, all of that could be attributed to the ‘free gift’ from the Reserve Bank: the $188bn in total that the RBA lent (all) the banks for three years at an interest rate of just 0.1 per cent.

I should further explain that those figures – the $42.7bn in 2019 and the $48.8bn for the year just gone (to end-June for the CBA; to end-September for the other three) – are before tax and before loan loss provisions.

Like ‘everything else’ through Covid, very strange things happened with the bank loan loss provisions, and which distorted how they really performed. Which is why the best measure of both individual and group performance is the profit before tax and those provisions.

Initially in 2020, in the general Covid fear and loathing, they made huge provisions for losses that never arrived – excessively reducing their reported bottom-line profits.

Then in 2021 and 2022, they, sheepishly, wrote back those huge provisions, artificially increasing their reported bottom line numbers.

So the numbers before loss provisions are the best guide to real performance.

The most obvious message is that the banks are in robust good health – and that is unquestionably a great thing, benefiting all Australians. Better a bunch of profitable, even too-profitable (which they were not), banks, than a collection of borderline operators.

Not just so you don’t have to worry about banks going broke, but so that they can operate effectively and make the huge multi-billion dollar tech investments they and we need them to do.

More specifically, out of that $49bn combined profit, they provided and paid $13.2bn in company tax.

And their combined profit was arrived at after they’d injected a combined $42bn into the economy in their expenses – by far the biggest component, being of course wages and salaries paid to their 180,000 or so employees, plus of course contractors.

It is certainly worth reminding everyone that banks play two hugely important roles in our prosperity. They provide the financial grease that keeps the economy working; they are also very big components in themselves of that economy.

Further, given their size – total loans out to borrowers between them adding to over $3tn – their profits are not excessive; barely 1c of profit per dollar of loan. And that’s before loan losses.

The CBA and NAB clearly did best over the four years. The CBA’s profit was up from $13.1bn to $15.4bn; NAB’s from $9.1bn to $11.6bn.

The ANZ lifted profit from $9.7bn to $10.8bn; Westpac from $10.5bn to $11bn. Again, before tax and loss provisions.

Originally published as Four big banks made $49bn in total – and paid $13bn in tax