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Morningstar's global equities week includes Australian perspectives. Against the global banking crisis,  Morningstar's online funds and ETF editor Christine St Anne looks at the relative strength of Australia's banks.

As part of Standard & Poor's new global bank ratings criteria, Australia's big four banks were down graded a notch from AA/stable to AA-/stable.

Despite the latest credit ratings downgrade, these four major banks are still in relatively good shape.

Commonwealth Bank of Australia (CBA), Westpac Banking Corporation (WBC), Australian and New Zealand Banking Group (ANZ) and National Australia Bank (NAB) have maintained strong credit ratings thanks to leaner businesses and manageable gearing levels.

All four major banks posted a combined $31.9 billion (before tax) profit for 2011, up a solid 12 per cent from 2010.

Australian banks are also well-placed to meet the new capital requirements under the Basel III regime.

Under these reforms, banks will be required to have a sufficient deposit of high-quality liquid assets.

Lessons learnt

Australia's major banks did not always have robust business models. The sector was caught up in the property bubble of the early 2000s. High lending and borrowing costs forced the banks to write down significant losses.

However, the banks learnt from that crisis. Lending practices were tightened and debt levels became manageable.

Australia's banks subsequently emerged from the global financial crisis (GFC) relatively unscathed. The government's guarantee on bank deposits certainly helped them garner the support of investors.

Financial services also play a dominant role on the Australian Securities Exchange. It's not surprising that Australian banks are among the top large-cap holdings of an investor's portfolio.

Strong growth in dividends has also made these banks favoured stocks among Australian investors.

Australian investors also benefit from franking credits that support higher dividend payouts in Australian companies. Banks have traditionally tended to pay higher dividends compared with other local firms.

Morningstar head of Australian banking research David Ellis says he has always been a long-term supporter of the major banks.

He believes banks will continue to deliver sustainable strong dividends due to solid earnings, an insignificant exposure to European sovereign debt, and strong capital positions.