subscribe to our newsletter

COVID-19 to cost CBA an extra $1.5bn

The major bank has earmarked an extra $1.5 billion for forward-looking adjustments in relation to COVID-19, bringing the total provisions to $6.4 billion.

In its March 2020 trading update, the Commonwealth Bank of Australia (CBA) revealed that a new $1.5-billion credit provision had been raised for the potential loan losses due to the impacts of COVID-19 on borrowers.

The forward-looking adjustment means that total provisions now stand at $6.4 billion, representing a coverage ratio of 1.65 per cent to total credit risk weighted assets.

In its update, the bank outlined that given the “unprecedented set of circumstances which are still unfolding and evolving”, a definitive assessment of the longer-term outcomes of the COVID-19 pandemic and the consequent economic and societal impacts is “difficult” at this stage. 

“The forward-looking adjustment has been determined based on a range of plausible economic and industry sector stress factors, taking into account the mitigating impacts of government and industry assistance packages and support, including loan repayment deferral arrangements,” the bank said.


“The bank’s lending portfolios continue to be monitored closely, with detailed portfolio stress testing to form the basis for ongoing reassessments of provisioning levels as the situation evolves.”

According to the update, the loan impairment expense was $1.6 billion in the quarter, or 80 basis points of average gross loans and acceptances, inclusive of the additional COVID-19 provision. 

Consumer arrears were seasonally higher in the quarter, but lower year-on-year. Home loan arrears came in at 0.63 per cent for the quarter ending March 2020, down from 0.71 per cent the year before. Credit card and personal loan arrears also dropped.

However, troublesome and impaired assets were higher at $8.1 billion, reflecting “seasonally higher consumer arrears and continued pockets of stress in certain sectors, including discretionary retail and agriculture”.

Overall, home loan growth remained above system, particularly driven by new business volumes in the quarter, whereas loan application volumes were 10 per cent higher than the same quarter last year, driven by “stronger customer demand for home loan refinancing in a low rate environment”.


CBA noted that weekly application volumes have trended lower in April and May, which the bank attributed partly to “government COVID-19 restrictions impacting open house and auction activity”.

Overall, mortgages still account for around 69 per cent of total lending for the bank (followed by business lending at 16 per cent).

Since launching its COVID-19 financial assistance package, which includes loan repayment holidays for up to six month (capitalised into the loan), the bank has reportedly received repayment deferral requests on approximately 144,000 home loans, 71,000 business loans, and 25,000 personal loans. While the major bank did not reveal how many of these had been granted, it outlined that the total balance of mortgage deferral requests was $50 billion.


The big four bank has also announced that it has entered into the sale agreement for 55 per cent interest in its superannuation and investment business Colonial First State (CFS) with global investment firm KKR.

The transaction implied a total valuation for CFS on a 100 per cent basis of $3.3 billion, which will result in CBA receiving cash proceeds of approximately $1.7 billion, making for a post-tax gain of $1.5 billion. The post-tax gain figure included separation and transaction costs for the bank of around $180 million.

[Related: Deferrals, redraws to offset decline in volumes: RBA]

COVID-19 to cost CBA an extra $1.5bn

If you have ever considered how you could better service your SME clients but lack the knowledge or confidence to do this beyond referring them on, this is a must-attend event for you. Don't miss SME Broker Bootcamp, a jam-packed, free-to-attend, practical workshop. Register today and secure your place at this interactive, flexible, must-attend event.

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

Sales of new detached homes continued to increase for five consecutive months, despite the end of HomeBuilder grants, confirming a strong d...

An economist with Bluestone has responded to predictions that the cash rate will increase in August, calling the notion “nonsensical”. ...

The Real Estate Institute of Australia (REIA) said it’s expecting demand for sustainable homes and living to increase over 2022. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

When do you expect the cash rate to start increasing?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.