Chief executive of the Commonwealth Bank of Australia (CBA), Matt Comyn, says every country needed a strong banking system and those banks need to be profitable.
It comes after the bank announced on Aug. 9 that it had delivered a $10.2 billion profit driven by rising interest rates in its business and home loan lending.
This attracted criticism from Greens Senator Mehreen Faruqi who labelled the profits “obscene” at a time when many Australians were struggling with cost-of-living challenges and rising higher interest payments on mortgages.
But Mr. Comyn said they were “very conscious” about how many Australians were feeling pressured in the current economic environment, but that banks can be both profitable and deliver good service for their customers.
“It is not a choice ... You can do both,” he said during an analyst briefing following the announcement.
“Every business, certainly over the medium- or long-term, has to do both. If you’re not doing a good job by your customers, you’re not able to grow, and you can’t possibly generate sustainable returns.”
Mr. Comyn highlighted that higher profits were also a benefit to the 12 million Australians who own a share or stake in the business.
He added that CBA has increased its deposit rates more than its home loan rates, an increase of 1.5 times over the last financial year, while interest payments on deposits increased about 5.5 times.
“Strong banks for Australia is a good thing. It enables us to continue putting our customers investing in our communities and providing important strength and stability for any challenges that may come in,” Mr. Comyn told ABC radio.
Unprofitable banks were a “drag” on the entire economy and individuals because they would not be able to facilitate lending, which promotes economic growth.
Banking Competition Concerns
Meanwhile, the Australian competition watchdog has raised concerns about the retail banking industry, particularly its “Big Four”—CBA, ANZ, Westpac, and NAB—which collectively hold over 75 percent market share.Australian Competition and Consumer Commission (ACCC) on Aug. 4 announced it blocked ANZ Bank’s proposal to acquire Brisbane-based Suncorp bank, one of its second-tier competitors.
“These banking markets are critical for many homeowners and for Queensland businesses and farmers in particular,” ACCC Deputy Chair Mick Keogh said.
“Competition being lessened in these markets will lead to customers getting a worse deal.”
This means the loss of better prices, innovative services, and differentiated products with a strong focus on customer relationships.
Mr. Keogh said if the deal was let through, it would cement the dominance of the big four banks and facilitate comfortable profits.
“That, therefore, meant we would have four majors very similar in many respects and more likely to be engaged in live-and-let-live competition rather than the fierce competition that would benefit consumers,” he said.
In response to concerns of weakening competition, Mr. Comyn believes the opposite was happening, noting that the CBA expects its margins to reduce over the financial year to June 30, 2024.
“That’s probably the easiest way to consider the level of competitive intensity, which has continued to be higher over the course of this year,” he said.
