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Australia’s Banking Industry: General

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    Australia’s Banking Industry >3 Australia ranked fifth amongst the world’s leading financial systems and capital markets in the 2010 World Economic Forum Financial Development report. Executive Summary Australia has a strong, profitable, sophisticated and well regulated banking sector which is welcoming of new entrants and increasingly engaged in regional and global markets.

    The financial sector is the largest contributor to Australia’s national output, around 11 per cent of Australian output or A$135 billion of real gross value added in 2010. 1 Australia ranked fifth amongst the world’s leading financial systems and capital markets in the 2010 World Economic Forum Financial Development report. Total assets of Australia’s banks, defined as Authorised Deposittaking Institutions (ADIs)2, were A$2. 7 trillion. Australia has four large domestic banks (the “four pillars”) that provide full service retail and commercial lending to the Australian economy; Australia and New Zealand Bank (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac Banking Corporation (WBC).

    Each has a AA rating (Standard & Poor’s) with only nine of the top 100 banks globally enjoying a rating of AA or higher. 3 Foreign banks4 are also well represented in the Australian market with 20 of Forbes’ top 25 banking institutions having a presence in Australia. The majority of these foreign competitors are focused on commercial banking and capital market activities, although a number are now significant players in the retail banking market. Australia’s retail banking sector is relatively concentrated, with twenty one banks providing the bulk of banking services to consumers (12 domestic banks, 9 foreign owned subsidiaries).

    Consumer lending in Australia totalled A$1. trillion as at October 2010, of which the largest component is mortgage lending. While the major Australian banks have dominant market shares across most consumer finance lines, there is also increasing competition from foreign banks and regional Australian banks and competition from non-bank lenders (credit unions, building societies and non-deposit-taking specialist finance companies). Australia’s payments system has undergone, and continues to undergo, change designed to increase competition and innovation. Australians are early adopters of new technology, as reflected in the significant growth in electronic payments, EFTPOS and ATMs in the country.

    The commercial banking and corporate finance and advisory sector incorporates a full range of services provided to commercial, corporate, government and institutional sectors. Specialist expertise exists in mining and resources, infrastructure and project finance (including public-private partnerships), agriculture, and property. Competition in this sector includes the major and regional domestic banks, foreign banks, securities brokerage companies, specialised corporate advisory firms, and asset finance companies. Australia’s commercial and corporate advisory market comprises: A$620 billion commercial lending market. A sizeable syndicated loans market that has raised US$336 billion over the five years to 2010, equivalent to 2. 1 per cent of world issuance.

    The second largest project finance market in Asia-Pacific after India, with US$14. 6 billion worth of deals in 2010, or 15 per cent of the region’s total. The second largest free-floating stock market in the Asia-Pacific region, and sixth largest globally, with a capitalisation of US$1. 1 trillion and 2,072 listed companies. One of the three largest Mergers and Acquisitions markets in Asia-Pacific, with announced deals totalling US$132 billion in 2010 and US$528 billion for the five years to 2010; 3. 5 per cent of globally announced deals. The second largest Equity Capital Market in Asia-Pacific and fifth largest globally, with US$199 billion of equity issuance over the five years to 2010.

    A securitisation market that has resumed growth following the global financial crisis, with A$19. 5 billion in RMBS issuance in 2010, up from A$9. 9 billion in 2008. A fast growing Kangaroo bond market that has increased from A$9 billion to A$129 billion bonds outstanding over the ten years to October 2010 – a compound annual growth rate of 28 per cent. The world’s seventh largest foreign exchange market with total FX turnover averaging US$192 billion per day in April 2010. The US$/A$ pair being the world’s fourth most traded pair after the Euro, Yen and Pound Sterling. The Asia-Pacific’s second largest pension fund industry after Japan, at US$1,261 billion in 2010 – and, by some measures the fourth largest globally.

    Australia’s banking sector has sought to leverage the country’s strengths in natural resources, infrastructure, public-private partnerships, property and related capital market activities. Foreign banks operating in Australia have also been attracted by our reputation for product innovation, advanced capital and risk management systems, our highly skilled workforce and our proximity to key regional markets. Decisions have also been influenced by our political stability, strong rule of law, transparent and highly regarded regulatory environment, advanced social and economic infrastructure, and enviable lifestyle.

    Australian Bureau of Statistics cat no. 5206. – Australian National Accounts: National Income, Expenditure and Product, Dec 2010 (released 02 Mar 2011), Table 6, Gross Value Added by Industry, chain volume measured.  ADIs include banks, credit unions and building societies.  Ranked by The Banker, “Top 1000 World Banks 2010”, 6 July 2010.  Includes foreign banks with locally incorporated subsidiaries, a foreign bank branch licence or representative office. Australia’s Banking Industry >5 Australia’s Banking Industry The financial sector is the largest contributor to Australia’s national output, generating more than 10 per cent of Australian output or A$135 billion of real gross value added in 2010.

    As at February 2011, total assets of Australia’s banks,6 stood at A$2. 7 trillion accounting for around 56 per cent of the total A$4. 9 trillion in financial sector assets. This represents a compound annual growth rate (CAGR) of 13 per cent over the past decade. Australia’s Financial Sector Assets – September 2010 (A$ Billion) General Insurance Of? ces $134b or 2. 7% Securitisation Vehicles $141. 6b or 2. 9% Life of? ces, Superannuation Funds & Other Managed Funds $1,707b or 35. 0% Authorised deposit-taking Institutions $2,724b or 55. 9% Registered Financial Corporations $169b or 3. 5%.

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