Controversies over bank profits are never far away in Australia, and the profit reporting season for banks that kicks off this week, with National Australia Bank the first to report, will no doubt refresh the arguments once more.The headlines may be pretty familiar. The news will be of profits for individual banks of somewhere between A$4 billion and $6 billion; reminders of the tactical repricing of variable-rate home loans, to increase margins 11 months ago; and more complaints over heavy-handed sales practices used by bank staff to sell more products (often credit cards and credit insurance) so as to maintain their take-home pay.For investors in bank shares this periodic debate is as much a material question as it is for bank boards and management: what is the maximum rate of profit they can earn and while keeping their critics at bay?The Australian Bankers Association sees the debate over bank profits as one with which the industry must continue to engage. For instance, a "fact sheet" from the ABA circulated last week makes the point that "only two banks feature in the 50 most profitable listed companies in Australia."We haven't checked the ABA data but will accept that it is correct. And it's important to note that the ranking of "most profitable" companies is measured by return on equity and is dominated by companies with low requirements for working capital such as Woolworths (who push this burden on to their suppliers).So, let's review the data.Australia's big banks produce annual revenue of $70 billion, and aggregate profits for 2011 were around $17 billion. Based on their present value on the stock exchange, ANZ, Commonwealth, National Australia Bank and Westpac are four of the five largest companies in Australia, with a combined market capitalisation of $250 billion. This is around one-fifth of the market cap of securities listed on the ASX.These four banks together account for 90 per cent of the profits of the banking industry, though they account for only 78 per cent of the industry's assets of $3 trillion.These are large numbers, but are they too much? And, by what measures can those cynical about banks practices form a view about their profits.Take the profit of just one bank as an example. In August, Commonwealth Bank reported a net profit for the year to June 2011 of $6.4 billion.To sidestep the problem created by large numbers one method to compare the profits of banks (and all companies) is to look at their return on capital. There are a variety of options for doing this in banking, with two common measures being return on equity (net profit divided by net assets) and return on capital (net profit divided by total assets).For Commonwealth Bank its return on equity is 18.4 per cent (if you use statutory net profit over the full year) or as high as 20 per cent (if you use the "cash" profit that management likes to talk about and look only at the second half of the year).So, what to