Industry profits in Australian banking took a tumble over 2016, the return on equity and return on assets for the sector both markedly lower than in 2015.The net profit for all banks AND ADIs was A$28.4 billion for the year ending December 2016, the Australian Prudential Regulation Authority said yesterday. This is a decrease of $8.4 billion (or 23 per cent) on 2015.The return on equity for all ADIs was ten per cent for the year ended December 2016, compared to 13.8 per cent for the year to December 2015. The sector's return on assets fell to 0.6 per cent from 0.8 per cent.While the aggregate sector data on profits for all banks and ADI is complete, APRA is yet to publish calendar year data for the combined four major banks, pending public release of results by banks.In an era in which banks are on notice to prepare for stiffer capital rules, the sector allowed its capital ratios to decline, modestly, over 2016.APRA said the total capital ratio for all ADIs was 13.8 per cent at December 2016, a slight decrease from 13.9 per cent at December 2015. The common equity tier 1 ratio for all ADIs was 9.9 per cent at December 2016, a decrease from 10.2 per cent on December 2015.Asset quality is also wandering. For all ADIs, the level of impaired facilities lifted 11 per cent to $15.3 billion at 31 December 2016, APRA said. Past due items increased ten per cent to $12.9 billion.Impaired facilities and past due items as a proportion of gross loans and advances was 0.92 per cent at December 2016, an increase from 0.86 per cent at December 2015.