Banks profits to remain subdued: ANZ chief

SYDNEY (AAP) - Profits for Australia's banks will remain subdued over the next two years, ANZ Banking Group chief executive Mike Smith says.
Banks' return on equity (ROE), a broad measure of profitability, will likely remain between 15 and 20 per cent, Mr Smith told AAP during an interview.
"If we're somewhere between 15 and 20 per cent, I think that would be quite credible - probably for the next two years," he said after unveiling ANZ's record interim net profit of $2.66 billion.
ANZ's ROE for the first half of fiscal 2011 was 16.7 per cent.
Like its rivals, this pales on the ROE ratio achieved before the financial crisis, which was typically above 20 per cent for the big four banks.
"I think the issue is will banking be allowed to make a return of over 20 per cent again," he said.
"That all depends very, very heavily on where the regulations actually pan out in terms of what sort of capital we are required to maintain. And that still is not clear."
Banks are facing bigger capital and liquidity requirements under new global regulations known as Basel III, which Mr Smith claims were heavily influenced by "seriously undercapitalised" European banks rather than their more healthier Asia-Pacific peers.
But there was still uncertainty surrounding the new rules, with different definitions for what constituted risk weighted assets in every country, he said.
Banks' capital requirements depend on their risk weighted assets, or the relative riskiness of different forms of lending.
"So I don't think anyone is clear."
Westpac will report its interim earnings on Wednesday, followed by National Australia Bank on Thursday.
Commonwealth Bank will deliver its March quarter trading update next Monday.