Banks: Laughing all the way…
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The Big Four Australian banks are laughing all the way to another round of obscene levels of profit.
Just a few days ago, NAB announced a cash profit of $6.6 billion, up 2.5% on the previous year. The cash profit is often a loosely constructed figure, not subject to independent auditing, and pushed through the media to boost investor confidence and share prices.
The more accurate figure is the independently audited statutory profit. What companies highlight in the media and to shareholders is often different to that which is in their statutory accounts. Statutory figures are those presented by the company in their formal company reports. They include asset write-offs. In 2016 NAB wrote of losses on the sale of the Clydesdale Bank in the UK and 80% of NAB Wealth’s life insurance business. Thus, in 2016 statutory net profit fell 94.4% to $352 million.
This year, statutory profit rose from 2016’s impairment-heavy $352 million to $5.285 billion. That still leaves a $1.4 billion gap between the cash profit and the statutory profit.
But even the statutory profit is open to question. Outgoing Australian Securities and Investment Commission (ASIC) Chairman Greg Medcraft has lashed out at the big four accounting firms (Deloitte, KPMG, PWC and Ernst and Young) for their poor auditing of big corporations, including the banks.
Criticised just weeks ago for being too soft on the big end of town, Medcraft urged that shonky auditors face criminal, rather than civil charges, and warned of an Enron-syle financial collapse.
The banks didn’t seem to care about Medcraft’s belated criticisms and just kept laughing.
And why shouldn’t they?
They had just won a victory over the SA government’s proposed budget measure involving a state charge of $36 in each $1,000,000 of their profits. The measure was voted down in the Legislative Council courtesy of the opposition Liberals, Australian Conservatives and a former Xenophon MLC. They had taken their cues from ex-Queensland Labor Premier Anna Bligh who continues her work for the capitalist class as the CEO of the Australian Bankers Association. Bligh pushed a Henny Penny style scare campaign, alleging that the sky would fall down over SA if the bank levy went ahead.
Do you think the banks weren’t laughing about that?
And just to show how funny they really could be, NBA included in its statement about a tidy little profit of $5.2 billion (or $6.6 billion - you choose) that it would sack 6000 existing employees and take on 2000 new employees in a restructure designed to save more than $1 billion in costs by the end of the 2020 financial year.
Only they didn’t use the word “sack”. Their “roles will be impacted”. In between guffaws they pledged “Throughout this process we will treat our people with care and respect and equip them for the future.”
The Big Four banks are real pranksters. They blather to the skies about their profitability but say nothing about their indebtedness to US finance capital.
According to a 2017 report, Indispensable Economic Partners: The US-Australian investment relationship, the Big Four banks are heavy borrowers from US finance capitalists. Between 25% and 36% (depending on the bank) of their funding is largely sourced from the United States and is more than triple the amount that comes from shareholders.
That means that much of the money they rip off from us is simply used to repay – with interest of course – their financial masters in the USA.
Expect to hear more laughter in the coming days and weeks as the other three banks release their cash profit and statutory profit misleading and confusing figures.
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