Bad debt stalls CBA growth
(12 August 2009 – Australia) A rise in impairments has stalled a positive operating performance by CBA, with full year profit coming in seven percent less than last year at A$4.4 billion.
Commonwealth bank recorded full year net cash profit to June 2009 of A$4.4 billion, down from A$4.7 billion one year earlier.
An increase in bad loans resulted in impairment expenses rising by over A$2 billion in the year, from A$930 million to $2.935 billion, plus A$113 million from BankWest.
This impairment expense cancelled out gains that CBA made in its underlying operations, including the BankWest acquisition and positive loan growth.
Operating performance for CBA increased by a significant 23 percent over the year to A$9.04 billion, with BankWest operations pushing this figure to A$9.32 billion.
The retail banking services unit of CBA continues to be the main profit winner, with A$2.1 billion of cash profit for the year, a ten percent increase on last year.
The Institutional Banking and Market’s division had a much tougher time over the year, with impairments of A$1.703 billion nearly wiping out the operating performance, which was just A$15 million more. Cash profit dropped by 78 percent, to just A$166 million.
The only other division of the bank to grow in cash profit was the bank’s second biggest profit-making unit, the business and private banking division, which saw two percent profit growth to A$736 million.
Chief financial officer, David Craig, said that trouble was still being experienced by households, where arrears are still gradually increasing and by medium sized businesses of between $20 million and $100 million.
Craig also noted that impairments are still well below levels seen in the last recession.
An increase in bad loans resulted in impairment expenses rising by over A$2 billion in the year, from A$930 million to $2.935 billion, plus A$113 million from BankWest.
This impairment expense cancelled out gains that CBA made in its underlying operations, including the BankWest acquisition and positive loan growth.
Operating performance for CBA increased by a significant 23 percent over the year to A$9.04 billion, with BankWest operations pushing this figure to A$9.32 billion.
The retail banking services unit of CBA continues to be the main profit winner, with A$2.1 billion of cash profit for the year, a ten percent increase on last year.
The Institutional Banking and Market’s division had a much tougher time over the year, with impairments of A$1.703 billion nearly wiping out the operating performance, which was just A$15 million more. Cash profit dropped by 78 percent, to just A$166 million.
The only other division of the bank to grow in cash profit was the bank’s second biggest profit-making unit, the business and private banking division, which saw two percent profit growth to A$736 million.
Chief financial officer, David Craig, said that trouble was still being experienced by households, where arrears are still gradually increasing and by medium sized businesses of between $20 million and $100 million.
Craig also noted that impairments are still well below levels seen in the last recession.
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