WESTPAC is the world's most profitable bank and Australia the most lucrative banking market, according to a new survey by Boston Consulting Group.
The report, entitled Living with New Realities, found that Westpac (wbc.ASX:Quote,News) was the only full-service commercial bank to generate a return on equity of more than 20 per cent last year.
The glowing report came as ratings agency Moody's said it was reviewing the "AA" credit ratings of the four major banks because of the worsening Australian economy.
"The outlook for the Australian economy continues to weaken," Moody's stated in a report. Peter of Sydney "Moody's will consider the potential impact on asset quality and earnings - and how this may affect Australian bank financial strength ratings."
With a return on equity of 20.4 per cent in 2008 Westpac was rivalled only by Spain's BBVA on 19.8 per cent.
Return on equity (ROE) is one of the leading measures of financial performance and gauges how well a company uses earnings from previous periods to produce more profits.
Australia's four major banks - NAB, CBA, ANZ and Westpac - delivered the biggest combined returns to shareholders along with Spanish banks.
The Australian and Spanish banking sectors generated composite ROEs of 16.5 per cent.
The next most profitable banks were in Canada.
While the Australian economy has deteriorated since the end of the 2008 financial year, local banks are being backed by the Rudd Government's funding guarantee announced late last year.
The guarantee effectively shifts some of the business risks associated with banking to Australian taxpayers.
The Boston Consulting findings are likely to be used to increase pressure on the government to get the banks to continue to pass on the benefits of official rate cuts to mortgage and business borrowers.
NAB boss Cameron Clyne and Commonwealth chief Ralph Norris have both cast doubt on the industry's ability to fully pass on future RBA rate cuts.
It will also add fuel to arguments put forward by the Finance Sector Union this week that banks have an obligation to abandon planned redundancy programs in light of the special support they are receiving from taxpayers.
"If banks take taxpayer support, they can accept some rules to protect taxpayers," said FSU spokesman Rod Masson.
"Banks are being uneven. They take taxpayer support with nothing in return."
Source: http://www.news.com.au/business/story/0,27753,25081465-462,00.html