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Banks’ profits keep on growing

National Australia Bank Ltd (ASX: NAB) was the last of Australia’s major banks to report their first-half results yesterday with the big four now firmly on track to deliver a record $30 billion annual profit.

NAB yesterday announced an 8.5% gain in cash profit to $3.15 billion. Together with Westpac Banking Corp’s (ASX: WBC) $3.77 billion, Commonwealth Bank of Australia’s (ASX: CBA) $4.3 billion (which was announced earlier in the year) and Australia and New Zealand Banking Group’s (ASX: ANZ) $3.5 billion, the combined half-year profit was just over $14.7 billion.

Annualised, that puts them on track to record a profit of at least $29.4 billion, although that figure could certainly stretch out above $30 billion. Bad debts are at their lowest point and interest rates are expected to remain on hold for some time yet, which should help the banks hit that target.

However, investors wanting to take advantage of the banks’ profit boom have likely joined the party too late. It seems that the enormous profits are now fully priced into the shares, leaving them with little chance of delivering market-beating returns in the long-run.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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