Powered by MOMENTUM MEDIA
subscribe to our newsletter
Loan impairment hits five-year high for CBA

Loan impairment hits five-year high for CBA

Australia’s largest lender has posted a $2.3 billion cash profit for the three months to 31 March, despite a significant increase in loan impairment.

CBA’s quarterly profit results, released yesterday, found that the bank’s loan impairment expense was higher in the quarter, at $427 million.

“This equates to 25 basis points of gross loans and acceptances, or 23 basis points over the six months to 31 March 2016,” the bank said in a trading update.

Advertisement
Advertisement

The last time CBA had a loan impairment expense of 25 basis points was in the 2011 financial year. In 1H16 the bank recorded a loan impairment expense of 17 basis points.

“The increase is largely due to a small number of exposures in the group’s institutional lending portfolio, which became impaired or exhibited heightened signs of stress, including a single relatively large domestic exposure with a syndicate of lenders including other Australian major banks,” the group said.

“As a result, CBA’s group troublesome and impaired assets were also slightly higher in the quarter, at $6.3 billion.”

On the consumer side of the business, CBA noted that arrears rates were in line with expectations in the quarter.

“Portfolio home loan arrears remained low, notwithstanding areas of WA and Qld that continued to be impacted by the mining downturn,” it said.

“Personal loan arrears remained elevated, with seasonal factors also evident in the quarter.”

The bank also provided an economic overview, stating that the Australian economy continues to perform “relatively well”, with the steady transition from a mining-dependent to a more broad-based economy evident in GDP and unemployment trends, and supported by low interest rates and the decline in the AUD over the past 18 months.

“Reflecting this transition, the credit quality of the group’s lending portfolios remained sound,” it said.

“However, as indicated at the group’s 1H16 profit result, pockets of weakness remain and warrant caution, particularly as global volatility continues.”

CBA was one of three major banks to pass on the RBA’s 25 basis point cash rate cut in full. Effective 20 May, the bank will offer an SVR of 5.35 per cent.

[Related: ANZ results show continued pressure on credit quality]

Loan impairment hits five-year high for CBA
mortgagebusiness

 

Latest News

The embattled wealth giant has confirmed that its statutory net profit fell by $820 million in 2018, due to costs associated with the royal ...

The non-major bank’s net profit after tax has dropped by 4.7 per cent, coinciding with weaker home lending performance. ...

Regulatory sandboxes may not be the answer for regulating cross-border fintechs, a new report has suggested. ...

FROM THE WEB

POST RC PANEL DISCUSSION ADDED

podcast

LATEST PODCAST: The aftermath of the final royal commission report

Is enough being done to ensure responsible lending?