Australia's big four banks cut back returns bad as loans losses mount

08 May 2009

Loan losses at Australia's big four banks are like to keep piling up at a rate of more than $1 billion a month with the industry shrinking across the world, employing fewer people, generating lower profits and paying less tax.

The bleak outlook has been forecast by accounting firm KPMG at the end of the interim profit reporting season in which Westpac once again came out as the strongest performer.

Westpac's net profit declined 1 per cent to $2.18 billion, as a surge in bad debts hit revenue growth. Bad debts soared to $1.56 billion from $433 million.

However, Westpac's total provisions at 1.6 per cent of risk-weighted assets compared with nearest rival ANZ Bank's 1.45 per cent provide strong provisioning buffer. 

Industry analysts said that Westpac faced the sector-wide challenge of a deteriorating economic environment and the integration of it $12 billion St George Bank purchase.  They say that the merger integration would likely yield several years of cost synergy benefits if it went though as expected.

Westpac led the banking sector again, with its shares rising 48c to $20.44.