Com­mon­wealth Bank of Aus­tralia sees record profit

The Myanmar Times - - International | Business -

AUS­TRALIA’S big­gest bank, Com­mon­wealth, sounded a cau­tious note about the coun­try’s eco­nomic out­look yes­ter­day even as it posted a record A$9.23 bil­lion (US$7.08 bil­lion) in an­nual profit.

Com­mon­wealth Bank’s per­for­mance is closely watched to pro­vide guid­ance on the health of the Aus­tralian econ­omy in the cur­rent low in­ter­est-rate en­vi­ron­ment.

CBA chief ex­ec­u­tive Ian Narev said the com­pany re­mained pos­i­tive about Aus­tralia’s eco­nomic prospects but warned that the na­tion’s nom­i­nal growth, which is not ad­justed for in­fla­tion, needed to strengthen.

Re­flect­ing soft­ness on the in­come side of the econ­omy, Aus­tralia’s nom­i­nal GDP grew by 0.5 per­cent in Jan­uary-March for an an­nual read­ing of 2.1pc. It was far be­low real GDP of 1.1pc in the quar­ter for a year-on-year fig­ure of 3.1pc.

“In­come growth in­side and out­side Aus­tralia re­mains weak, so peo­ple are not feel­ing bet­ter off,” Mr Narev said in a state­ment.

“When com­bined with on­go­ing global eco­nomic and po­lit­i­cal uncer­tainty, this makes house­holds and busi­nesses cau­tious, and hes­i­tant to re­spond to mone­tary stim­u­lus.”

Cash profit, the bank’s pre­ferred mea­sure of earn­ings that strips out one-off costs, rose 3pc to A$9.45 bil­lion for the year to June 30 com­pared to the pre­vi­ous 12 months, match­ing an­a­lyst ex­pec­ta­tions.

Net profit was up 2pc at A$9.23 bil­lion while cash earn­ings for the six months to June 30 slipped 3pc com­pared to the pre­vi­ous Ju­lyDe­cem­ber pe­riod.

Earn­ings from its re­tail bank­ing divi­sion - the largest in the bank - rose 11pc to A$4.44 bil­lion, while busi­ness and pri­vate bank­ing grew by 5pc for the pe­riod.

But CBA’s bad debts jumped 27pc, weigh­ing on prof­its, on higher pro­vi­sions for re­source, com­mod­ity and dairy ex­po­sures.

The bank an­nounced a fi­nal div­i­dend of A$2.22 per share, leav­ing the fi­nal pay­out to share­hold­ers at A$4.20, which was un­changed from the pre­vi­ous year.

“It’s a strong, solid re­sult, but there’s not a lot in this re­sult that would want to make me buy this com­pany on open,” IG Mar­kets’ strate­gist Chris We­ston told AFP.

“The out­look that we’ve seen is fairly be­nign. There’s down­side risks to Aus­tralian eco­nom­ics and Ian Narev said there’s go­ing to be more of the same com­ing through.”

Aus­tralia’s econ­omy is chart­ing a rocky path away from min­ingde­pen­dent growth, with the cen­tral Re­serve Bank of Aus­tralia last week cut­ting in­ter­est rates to a new record low of 1.5pc to boost non-re­sources sec­tors.

Banks’ prof­its have been un­der pres­sure in re­cent months amid un­cer­tain­ties in fi­nan­cial mar­kets and the econ­omy, and over fears of ris­ing bad loans.

Fi­nan­cial in­sti­tu­tions are also meet­ing new re­quire­ments to hold more re­serves as a buf­fer against mort­gages, and tougher reg­u­la­tions to dampen the hous­ing mar­ket amid con­cerns the sec­tor could over­heat.

CBA said its com­mon eq­uity Tier 1 ra­tio – a mea­sure of the cap­i­tal it has avail­able to ab­sorb losses – rose 10.6pc com­pared to 9.1pc in the pre­vi­ous year.

The bank last year an­nounced a plan to raise A$5 bil­lion to meet the cap­i­tal buf­fer re­quire­ments, which are part of a global ef­fort to make the fi­nan­cial sec­tor more re­silient to shocks.

Can­berra has also stepped up pres­sure on the na­tion’s big four banks – CBA, ANZ, Na­tional Aus­tralia Bank and West­pac – to ex­plain why they did not fully cut their home-loan rates when the cen­tral bank slashed the cash rate last week.

Prime Minister Mal­colm Turn­bull has an­nounced that the four large lenders – among the de­vel­oped world’s most prof­itable – will have to face a par­lia­men­tary com­mit­tee for an an­nual grilling to ex­plain their ac­tions. –

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