CBA preserves capital as debts hit
(15 May 2009 – Australia) CBA, in its quarterly trading update, has announced a cut in dividends to preserve capital in order to cushion against deteriorating conditions.
The bank released unaudited figures in the trading update which included a A$1.15 billion quarterly cash profit as well as impairment expenses for the quarter of approximately A$630 million.
CBA said that the impairments reflect both a progressive, cyclical deterioration in portfolio quality and a continuation of the bank’s prudent and conservative approach to provisioning as the economy slows.
Further, the bank said that credit quality trends were in line with expectations. CBA also said that there was an increase in consumer arrears through the March quarter, consistent with the economic slowdown and rising unemployment.
In the business bank, commercial credit quality remains sound, although the SME portfolio and some sectors such as mining services, inbound tourism and export oriented industries are showing signs of deterioration, CBA added in a statement.
CBA’s cutting the final dividend to $1.15 per share rounds out the Big Four, with all four banks having now announced a cut to their dividend.
The bank is on a further cost cutting exercise, which included the announcement of a number of remuneration initiatives for the 2010 financial year, including a freeze on salary increases for all staff earning in excess of $100,000 per annum.
Regarding the business bank, CBA said that business deposit balances were stable over the quarter, reflecting the bank’s focus on effective margin management.
Demand for business credit has slowed, with system business credit contracting marginally in the quarter. The restructuring of Premium Business Services into two distinct business units servicing the Institutional and Middle Market/SME segments has proceeded smoothly, CBA added.
CBA said that the impairments reflect both a progressive, cyclical deterioration in portfolio quality and a continuation of the bank’s prudent and conservative approach to provisioning as the economy slows.
Further, the bank said that credit quality trends were in line with expectations. CBA also said that there was an increase in consumer arrears through the March quarter, consistent with the economic slowdown and rising unemployment.
In the business bank, commercial credit quality remains sound, although the SME portfolio and some sectors such as mining services, inbound tourism and export oriented industries are showing signs of deterioration, CBA added in a statement.
CBA’s cutting the final dividend to $1.15 per share rounds out the Big Four, with all four banks having now announced a cut to their dividend.
The bank is on a further cost cutting exercise, which included the announcement of a number of remuneration initiatives for the 2010 financial year, including a freeze on salary increases for all staff earning in excess of $100,000 per annum.
Regarding the business bank, CBA said that business deposit balances were stable over the quarter, reflecting the bank’s focus on effective margin management.
Demand for business credit has slowed, with system business credit contracting marginally in the quarter. The restructuring of Premium Business Services into two distinct business units servicing the Institutional and Middle Market/SME segments has proceeded smoothly, CBA added.
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