Commonwealth Bank has lifted third-quarter profit about 4.5 per cent to $2.3 billion in what is seen as a sluggish performance.
Unaudited cash earnings for the three months to March 31 were up from $2.2 billion for the prior corresponding period, with statutory profit up about nine per cent to $2.4 billion.
The bank’s preferred cash measure, stripping out one-off items, was even weaker at $2.3 billion.
Australia’s biggest bank said its loan impairment expense rose to $427 million largely due to exposures in its institutional arm, reflecting similar statements by its big bank rivals in their first-half earnings updates last week.
While the quarter was up a little from $2.2 billion in the same period last year, it was down on the quarterly average of the first half of this financial year considering CBA posted a $4.8 billion half-year cash profit in February.
The bank said operating income growth was similar to the first-half, which equates to around 6 per cent over the past year.
However, that income growth was offset by expense growth, which CBA said is due to business growth and investment, as well as regulatory and compliance costs.
On its different market segments, CBA reported modest growth: home lending “consistent with recent trends”, business lending at mid-single-digit levels, household deposits “above system”, but a small fall in funds under administration in its wealth management division.
CBA bad debts rising
The Commonwealth Bank has joined its big four rivals in reporting an increased loan impairment expense for bad debts, at $427 million for the quarter.
That compares to a loan impairment charge of $564 million for the six months to December 31.
The bad debt charge equals 0.25 per cent of the bank’s total loan book, and CBA said the deterioration was due to corporate lending.
“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 bank’s report noted.
“As a result, group troublesome and impaired assets were also slightly higher in the quarter, at $6.3 billion.”
The single large domestic exposure is almost certain to be Arrium, which is bankrolled by a syndicate involving all four major banks.
Beyond big corporate losses, CBA noted that home loan arrears remain low outside of the mining bust areas of Western Australia and Queensland, but personal loan arrears remained “elevated”.
Total provisions for potential loan losses were set at $3.9 billion.