Australia Commonwealth Bank posts $7.8 billion annual profit
SYDNEY : Australia’s biggest lender Commonwealth Bank posted a two percent rise in annual net profit to a record $7.08 billion on Wednesday as it sounded a cautious note about the country’s economic outlook.
As the nation’s top lender, the Commonwealth Bank’s profits are closely watched to provide guidance on the health of the Australian economy amid a low interest-rate environment.
Chief Executive CBA 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 2.1 percent. It was far below real GDP of 1.1 percent in the quarter for a year-on-year figure of 3.1 percent.
“Income growth inside and outside Australia remains weak, so people are not feeling better off,” 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 three percent to Aus$9.45 billion for the year to June 30 compared to the previous 12 months, broadly matching analyst expectations. Net profit was up two percent at Aus$9.23 billion while cash earnings for the six months to June 30 slipped three percent compared to the July-December period.
Earnings from its retail banking division rose 11 percent to Aus$4.44 billion while business and private banking grew by five percent for the period. But CBA’s bad debts jumped 27 percent, weighing on profits, on higher provisions for resource, commodity and dairy exposures.
The bank announced a final dividend of Aus$2.22 per share leaving the final payout to shareholders at Aus$4.20, which was unchanged from the previous year. Shares in CBA closed 1.29 percent lower at Aus$77.40.
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.
Last week, The Central Reserve Bank of Australia cutting interest rates to a record low of 1.5 percent 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.
Source : AFP