With the great fad towards body ink these days and the sudden emergence of the tattoo parlour on every other street corner, it is a wonder more Australians haven't opted for the traditional knuckle slogans LOVE and HATE, a la Robert Mitchum from 1955's The Night of the Hunter.
For it is an attitude that has been imprinted on the national psyche, particularly when it comes to dealing with our financial institutions.
As more than 170,000 bank customers line up to deliver a right old thumping to our major banks via the nation's biggest class action over fee gouging, investors are embracing them, deeply attracted by their relative safety and the tantalising allure of hefty dividends.
Consumers fume over their belligerence in refusing to pass on interest rate cuts, and then quietly squirrel bank stocks into their superannuation accounts. What's that old saying? If you can't beat them, buy them.
Even the atrocities committed during the Storm Financial collapse - and the prospect of it all being aired again in court, replete with lurid tales of gouging that denuded small investors and retirees of more than $3 billion - cannot dent their reputation or tarnish their attraction.
Who could ever have imagined that such fundamentally dull institutions could incite such passion?
The Commonwealth Bank of Australia yesterday delivered yet another record profit. At $7.1 billion, it was the biggest ever recorded by an Australian bank and, if not for our two resource giants, would have been the largest haul by an Australian corporation.
It was a stellar performance that seemed to fly in the face of the organisation's constant moaning during the past four years of higher funding costs and squeezed margins. Even more startling, it was a result delivered during a period of high anxiety for households and business alike.
Yet another consumer confidence survey by Westpac and the Melbourne Institute yesterday painted a portrait of a nation deeply uncertain about the future, on a par with the crisis levels of 2008 when the entire financial system appeared to be unravelling.
While that was reflected in yesterday's result - the contribution from traditional banking certainly was restrained as credit growth slowed to a crawl - it also raised questions about the bank's ability to continue the record run into the future.
If the CBA can deliver earnings of such proportions at a time when brittle consumers, home owners and businesses are so desperately keen to reduce or even eliminate debt, imagine what could happen if confidence levels ever returned to more normal levels or even boom-time standards.
This is a well-oiled machine barely idling along in neutral and still breaking speed records.
The story is similar at its competitors. In a rerun of the "difficult and uncertain" environment of recent years, each of the big four is on track to deliver record earnings, a whopping $24 billion between them. Even the National Australia Bank, hampered by its British businesses, indicated this week that it too would post a personal best.
In days gone by, one or two of the big banks would have been hitting their stride with one perhaps marking time and another in crisis.
That all are firing is testament to a combination of good management at each bank along with the market power they managed to consolidate during the first round of the financial crisis when smaller banks were mopped up and non-bank lenders evaporated.
That power shift, which has delivered an incredible 86 per cent of the home mortgage market to the four, has enabled and emboldened them to swing the favour pendulum towards investors in the never-ending tussle between owners and customers.
Recently installed CBA boss Ian Narev made no bones about this yesterday. He was proud of the returns he had delivered, he said. And to add a little more icing to the cake, he bumped up the second-half dividend to $1.97 (89 per cent of earnings), taking the full-year payout to $3.34 a share.
Even after the hefty share price advances made by our banks in recent months - they have well and truly outperformed the local stockmarket - the banks are still yielding incredible returns.
On yesterday's prices, CBA is delivering a yield of about 6 per cent while NAB is yielding even more.
Obviously, dividends depend on results. And while each of our banking leaders no doubt will look drawn and haggard, worried about the situation in Europe, the potential for another freeze on wholesale funding markets and the slowdown in China, the medium to longer-term outlook is far from bleak, at least in Australia.
Economic growth remains healthy, inflation and unemployment both are low and there is the potential for further interest rate cuts, which will feed into higher earnings, particularly if our banks choose to keep a portion.
Should the global situation really deteriorate, the federal government already has quietly assured each of our banks that they will be protected to the same degree as in 2008.
It would be reasonable to assume that foreign investors seeking safe havens also have targeted Australian banks, despite their recent downgrades. After their share price advances in the past few months, our banking sector now carries a higher price tag than the entire European banking industry. Then again, European banks may soon be valued lower than Liberia's if trends continue.
Australians may hate to admit it, but they still feel the love, even if it is being bought.
Frequently Asked Questions about this Article…
Why are everyday investors buying Australian bank stocks despite public anger over fees?
The article explains investors are drawn to banks for relative safety and high dividends. Even as more than 170,000 customers join a class action over fee gouging and consumers complain, banks’ strong profits and attractive yields are enticing investors to buy and hold bank shares.
What did the Commonwealth Bank report and what does that mean for investors?
Commonwealth Bank (CBA) posted a record profit of $7.1 billion and boosted its second‑half dividend to $1.97 (89% of earnings), taking the full‑year payout to $3.34 a share. For investors, that signals powerful earnings capacity even in a cautious economic environment and supports the bank’s dividend appeal.
How high are bank dividends right now and which banks are yielding well?
According to the article, CBA was yielding about 6% at recent prices and National Australia Bank (NAB) was yielding even more. The piece notes that dividends depend on future results, but current yields remain strong despite recent share price gains.
Are Australia’s big four banks still on track to deliver record earnings?
Yes — the article says each of the big four is on track to deliver record earnings, amounting to a combined $24 billion between them. That performance reflects strong management and market power consolidated since the financial crisis.
What risks could threaten bank profits and dividends going forward?
The article highlights several risks: weak consumer confidence (at levels similar to 2008), the situation in Europe, the potential for another freeze in wholesale funding markets, and a slowdown in China. Slower credit growth at home can also restrain traditional banking contributions.
How much of the home mortgage market do the big four banks control?
The article states the big four now hold about 86% of the home mortgage market, a shift that has increased their market power and helped them prioritise returns to investors.
Will the Australian government step in if the global situation worsens?
The article says the federal government has quietly assured each major bank they would be protected to the same degree as in 2008 should the global situation seriously deteriorate.
Should everyday investors consider buying bank stocks now?
The article suggests why investors are attracted to banks—record profits, hefty dividends and perceived safety—but also flags clear risks such as global economic uncertainty and funding market pressures. Those trade‑offs are the core considerations for investors weighing bank shares today.
Call 1300 880 160
Start a chat
Schedule a call
