"More than any other factor, a series of housing booms is what has fuelled the growth in banks? profits. Mortgages are banks? single biggest asset class? they make up 65% of total assets at the CBA and Westpac, 55% at ANZ and 50% at NAB. They are also more profitable than any other type of loan?"
"Some simple numbers illustrate the pickle the banks are in. According to the Australian Prudential Regulatory Authority, there was just over $1 trillion of mortgages sitting in the banking sector in March. Growth at 6.6% [the rate of mortgage growth in the 12 month's to March] means $66 billion of mortgages in 12 months.
Applying a 1% net interest margin ? the difference between the rate at which a bank borrows money and lends it ? means the entire banking sector can expect $660 million in additional revenue in the next 12 months from mortgages.
If housing credit growth was running at 15%, as it did for most of the last two decades, the additional revenue would be $1.5 billion. That?s just under $900 million that is no longer trickling into the banks, and most of it would have gone straight to the bottom line.
There is no way an increase in business lending will plug the gap?"
