Domestic Shares – Banks – volume growth has been the game

Australian Banks have enjoyed a generational “stronger for longer” that dwarfs anything the resources market enjoyed before the consequent fall. BHP this year will make the same ebit it made a decade ago; CBA made $5b pre tax a decade ago and will make $13b this year. The driver for this increased profitability is simple; flat margins, and other revenues and costs growing in line with revenues, have meant that volume growth has been the game, set and match for bank earnings through this time. A little more than a decade ago, monthly housing finance approvals were $10b, and today they are in excess of $30b. No products innovated nor exported, no global competitive advantage, no efficiency in production, but some lessons were learnt from abroad as ASIC is now making public. It can be rightly argued that the banks have been rational in maintaining pricing through this strong volume environment, but BHP moved to a market linked price for iron ore as demand increased as well. Rad more in “Taking Stock: A motley lot ignites diversity” (VIEW LINK)