Abstract:
This report mainly analyse the competitive condition in the Australia banking industry through three different aspects. First we investigate and compare the total assets of all banks from 2006 to 2012. Second, we measure the level and evaluation of banking competition between 2006 and 2012. Competition is measured by the concentration ratios and Herfindahl Index, using the data on total assets of all banks. Third, we support our analysis by linking competition with all banks and credit unions profitability base on the net interest income data. Our results show that during the period of 2006 to 2012 in Australia the four major banks account for more than half of market share and earned huge profit through bigger market share, compare to other banks and credit unions. It is not unexpected the Australia banking industry is dominated by the four major banks.
Total assets analysis
Australia has a sound and well capitalised banking industry. Its banks are large by global standards and have strong wealth management capabilities. Since from the first Australian bank established in 1817, there are more than 60 banks operating in Australia with total assets of more than AUD$ 3034.922 billion as December 2013. That includes four major banks which are National Australia Bank Limited (NAB), Commonwealth Bank of Australia (CBA), Westpac Banking Corporation (WBC) and Australia and New Zealand Banking Group (ANZ), some Regional banks such as Bendigo and Adelaide Bank Limited and Bank of Queensland Limited, and the foreign banks like Citigroup Pty Limited and so on. For the past few years, some might suggest that Australia’s four major banks stand out as the dominant market players have too much market share whereas others might think even the four major banks account for tremendous market shares, it is still a competitive market as Australian banking industry has seen many new entrants as well as leavers in the market (Claessens & Laeven, 2004). Hence, it is necessary to have assets comparison among four major banks, regional banks, foreign banks and even credit unions to verify if four major banks have too much power.

In Australia, the largest group of depository institutions generally refers to banks. They perform functions such as accept deposits (liabilities) and make loans (assets). Those banks account for more than 97 percent of all depository institutions assets in Australia (Lange, Saunders, Cornett, 2013).

Table 1: National Australia Bank Limited total assets versus all banks total assets year NAB Total assets AUD$ billion
All banks total assets AUD$ billion
Proportion of all banks assets (%)
2006
484.785
1720.4
28.18%
2007
574.22
2161.32
26.57%
2008
656.799
2672.628
24.58%
2009
654.12
2582.046
25.33%
2010
685.952
2668.792
25.70%
2011
753.757
2821.766
26.71%
2012
763.09
2965.276
25.73%
Source: Bankscope database
Graph 1: NAB total assets and all banks total assets

Source: Bankscope database
As the graph above shows that the amount of NAB total assets show an upward trend from 2006 to 2012. During the financial crisis period, NAB total assets only decreased by around $3 billion, which is the only decline within four major banks.

Table 2: Commonwealth Bank of Australia total assets versus all banks total assets year CBA Total assets AUD$ billion
All banks total assets AUD$ billion
Proportion of all banks assets (%)
2006
369.103
1720.4
21.45%
2007
440.157
2161.32
20.37%
2008
487.572
2672.628
18.24%
2009
620.372
2582.046
24.03%
2010
646.33
2668.792
24.22%
2011
667.899
2821.766
23.67%
2012
718.229
2965.276
24.22%
Source: Bankscope database
Graph 2: CBA total assets and all banks total assets

Source: Bankscope database
As we can see that CBA total assets have increased from around $369 billion in 2006 to $718 billion in 2012, especially during the global financial crisis, CBA total assets grew almost $135 billion.

Table 3: Westpac