Our banks have very high percantage (45/50%?) of thier loan book in residential mortgage, even the US banks during height of GFC didn't have these percentages when they crashed. This makes our banks leveraged bet to aussie residential markets. Due to high leverage exposure a 15/20% wipeout in home loan book has the potentail to crash entire bank.
During GFC our banks were bailed out by tax payers(gov) via rmbs garantee, deposit garantee etc Few banks (nab/westpac etc) even got FED bailout.
Most of the mainstream media will continue to positive spins like hey we got FED bailout because every one else was getting it, every thing is fine :)
Our big fours were very recently downgraded, Important thing to note here, this downgrade is after implied government guarantee on the bond, Imagine what rating we would have without gov garantee. All this will increase funding costs, it means either reduced margins for banks or increase interest rate, HIgher IR will result in higher arrears from over leveraged borrowers which will force banks to further reduce lending or face risk of further downgrade ie a negative feedback loop.
No wonder APRA hurriedly loosened the banking regulation to allow covered bonds, Now covered bonds needs to be backed by very high grade mortgage debts, which means higher risk loans has to be shifted to banks balance sheet.
With debt saturation/defaltion(Basel 3 implementation), babyboomer demographic headwind ahead(housing/tax revenue negative), rising inflation(rising interest rate world wide) I don't see how banks profitablity(real) is maintained at current level let alone grow.
We have eaten up all we made during last decade boom and even borrowed out of future earnings (higher private dept to gdp ratio) (budget from surplus to deficit)
Borrowing to produce is the way poor nations become rich, Borrowing to consume is the way rich nations become poor.
