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.
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.