Credit rating agency, Standard & Poor's has said Australia's banks are among the safest in the world despite high property prices and risks in China persisting.
According to the ratings agency, Australia's banking system ranks in the top five alongside those from Germany, Canada, Switzerland and Hong Kong. The report took into account both economic and industry-specific risks which pose threats to our biggest banks.
"We believe that Australia is currently one of the five least-risky banking systems of the 86 for which Standard & Poor's has published banking industry country risk assessments," S&P credit analyst Gavin Gunning was quoted as saying in the Australian Financial Review. "Our most likely scenario for 2014 is that it will be a year of continuing investment-grade ratings resilience."
The countries facing the biggest risks includes Belarus, Egypt, Greece, the Ukraine and Cambodia.
Australia's big banks, including Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) have consistently outperformed many of their international counterparts thanks largely to a strong and robust regulatory environment. "Credit ratings in the Australian banking sector have remained strong and extraordinarily stable by global standards in the aftermath of the global financial crisis, which began over five years ago. In our view, we anticipate a continuation of this trend throughout 2014," S&P's report stated.
Earlier this week, ANZ and the Commonwealth Bank shrugged off concerns over Chinese growth and a property bubble to notch up record cash profits despite increased competition from regional lenders. Record low interest rates and low levels of unemployment have enabled the banks to lessen their exposure to bad and doubtful debts, boosting profitability.
Foolish takeaway
Although our banks are some of the safest and highest-yielding in the world, they are also the most expensive. Investors are reminded that although they are boosting profits, the banks are not cheap investments and should be treated as such.