CBA dud profit smashes banks

Commonwealth Bank (CBA) is the next cab off the banking ologopoly rank to report some pretty flat but still fat and taxpayer supported profits this morning.

Following ANZ’s steady but squeezed result and Westpac shores up its increasing expensive capital with an equity raising, the biggest mortgage holder/pusher in the land offered a very flat result that has sent bank stocks plummeting in early trade. Here’s the gist from the quarterly update which is not as comprehensive as the half yearly results from the other majors:

  • net and statutory profit $2.2 billion – down from $2.3 billion in the same period last year
  • net interest margin (NIM) “impacted by competitive pressures”- so probably falling 4-8 basis points like its peers to just above 2%
  • expenses rise due to its financial planning scandal payouts
  • “subdued” revenue growth of 5% with sub-peer growth in its loan book
  • troublesome and impaired assets fell to $6.4 billion, from $6.5 billion in the previous quarter
  •  deposit growth of 10%

Well I guess we now we know why they only passed 20bps of the rate cut on as the squeeze for earnings is real as is the race to improve capital quality. This statement was curious:

“Credit quality remained sound. In the retail portfolios, home loan and credit card arrears were broadly flat, whilst seasonal factors contributed to higher personal loan arrears,” the bank said in a statement.

Interestingly, although the graphs are purposefully obfuscated (a CBA tradition), it seems arrears are rising – especially in WA with Bankwest, even in the face of lower interest rates:

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CBA is now down nearly 4% on the open, although I chalk up half of that to the falls in global markets overnight, although its ‘outperfoming’ its peers across the financials.Watch this space.