BankWest at a loss over bad debts
(1 May 2009 – Australia) BankWest, now under the ownership of CBA, has recorded a 2008 full year loss of A$139 million on the back of massively increased bad debts.
CBA has said, however, that the losses relate primarily to the period prior to the takeover on 19 December 2008, and that the bank is now operating profitably.
BankWest said that there were two primary reasons for the increase in bad debt provisions over the past year. These were the deteriorating external operating environment, and the need to be fully and appropriately provisioned in these difficult and uncertain times.
CBA had agreed that upon purchasing BankWest, it would appropriately provision the bad debts, resulting in the year end increase seen here. Loan impairment expense, including specific and collective provisions, increased almost ten fold, reaching A$825.3 million, up from A$87.8 million in 2007.
The bank said that the increase in specific provisions was driven by a small number of large property exposures in New South Wales and Queensland, together with a number of small exposures across business lending.
Interestingly, it was an east-coast push that BankWest was focussing on in the lead up to their takeover.
BankWest managing director, Jon Sutton, said that BankWest had previously been focussed on market share growth. Since the acquisition, however, credit underwriting standards in business and retail banking have been tightened and the bank now has a strong focus on prudent and responsible lending, Sutton added.
Without the bad debts, BankWest did see growth. Operating profit before loan impairments and tax was A$597.0 million, up 62.1 percent from A$368.3 million for the corresponding 2007 period.
Sutton also said that since the CBA acquisition and the security that came with it for customers, BankWest has managed to increase its customer base by 38,000.
BankWest said that there were two primary reasons for the increase in bad debt provisions over the past year. These were the deteriorating external operating environment, and the need to be fully and appropriately provisioned in these difficult and uncertain times.
CBA had agreed that upon purchasing BankWest, it would appropriately provision the bad debts, resulting in the year end increase seen here. Loan impairment expense, including specific and collective provisions, increased almost ten fold, reaching A$825.3 million, up from A$87.8 million in 2007.
The bank said that the increase in specific provisions was driven by a small number of large property exposures in New South Wales and Queensland, together with a number of small exposures across business lending.
Interestingly, it was an east-coast push that BankWest was focussing on in the lead up to their takeover.
BankWest managing director, Jon Sutton, said that BankWest had previously been focussed on market share growth. Since the acquisition, however, credit underwriting standards in business and retail banking have been tightened and the bank now has a strong focus on prudent and responsible lending, Sutton added.
Without the bad debts, BankWest did see growth. Operating profit before loan impairments and tax was A$597.0 million, up 62.1 percent from A$368.3 million for the corresponding 2007 period.
Sutton also said that since the CBA acquisition and the security that came with it for customers, BankWest has managed to increase its customer base by 38,000.
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