Thursday, February 26, 2009

Hola! Australian and Spanish banks beat the world

Manuel   Hogan

Gidday!  Que?

In a Winnie Blue & Gazpacho fuelled triumph, banks in Australia and Spain have scooped the pool as the world’s most profitable, according to a paper by the esteemed Boston Consulting Group.

The paper entitled “Creating Value in Banking 2009 – Living with New Realities” looks at a variety of performance indicators over the period 2004-2008.  This one caught my eye in particular:



It seems that the Aussie and Spanish banks in averaging around 16% ROE over 2008 have left the rest of the world in their dust.  But I’ll reiterate the issue I raised earlier – namely, if Govt bonds are sitting around 6% (before tax) and banks are earning 16% (after tax), does this imply a 10% risk margin?  What does this say about the nature of the risks being run to generate that 16% return?

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