• Follow us

Economy

CBA profit slides 8pc to $8.6b as sales fall and costs rise; bank to exit coal

The Commonwealth Bank has reported an 8 per cent fall in it full year profit as the impact of a slowing economy, falling interest rates and remediation of misconduct took their toll.

Key points:Customer remediation costs increasing by $1b helped drag down CBA's profit and keep a lid on dividendsThe bank says it will exit thermal coal and coal-fired power generation investments by 2030 as it aims to be a zero emissions businessBad debts rose by more than $1b on growing problems in retail, farming and construction sectors

Net profit came in at $8.6 billion compared to $9.4 billion last year.

Underlying cash profit — the bank's preferred measure, which strips out one off gains and losses — was $8.5 billion, slightly below market expectations.

The full year dividend was flat at $4.31 a share.

The lack of a special dividend after the sale of a number of businesses, including the recent $4 billion disposal of Colonial First State Global Asset Management, might also disappoint investors, although the bank chose to bolster its top tier capital buffer with the proceeds.

Chief executive Matt Comyn said CBA had made progress on becoming simpler and better, and still had work to do with its planned exit from aligned financial advice.

"We have removed a number of fees and have taken action on remediation," he said

"The work is underway to implement the recommendations from the royal commission and APRA prudential inquiry will also deliver better customer, risk and business outcomes.

"While this year's results were impacted by customer remediation costs, revenue forgone for the benefit of customers and elevated risk and compliance expenses, our core business continued to do well — underpinned by growth in home lending, business lending and deposits."

CBA chief executive Matt Comyn talks to Elysse Morgan on The Business

Remediation costs increased by $1 billion to $2.2 billion over the year.

Economy slowing

Impacts of a slowing economy showed up in a $1.1 billion jump in troublesome and impaired assets.

Loan impairment expenses rose 11 per cent to $1.2 billion.

The bank said this reflected exposures and emerging signs of weakness in sectors impacted by retailing, agriculture and construction.

Total troubled and impaired exposures now stood at $7.8 billion, or around 0.72 per cent of total exposures.

"Collective provisions increased by $90 million during the second half, mainly due to an increase in consumer arrears and a softening economic outlook," the bank noted.

The number of mortgages and personal loans in arrears by 90 days or more was also higher than a year ago, with CBA noting that, while economic conditions remained "broadly supportive", "pockets of stress" were emerging.

There was another uptick in borrowers with negative equity, where the outstanding mortgage is higher than the value of the property.

"Based on June 2019 valuations, approximately 3.5 per cent of Australian home loan accounts and 4.5 per cent of balances are in negative equity," the bank said.

"72 per cent of negative equity relates to Queensland and Western Australia."

CBA also reported elevated personal loan arrears in pockets of stress in Western Sydney and Melbourne.

Not banking on coal

CBA also made a commitment to exit thermal coal and coal-fired power generation investments by 2030, in line with its support of embracing a "zero emission policy".

Chair Catherine Livingstone said the exit from coal was subject to Australia having a "secure energy platform."

CBA's announcement follows similar recent commitments by insurers QBE and Suncorp to exit the thermal coal sector by 2030 and 2025, respectively.

Market Forces, an environmental lobby group, said CBA's move was a stark warning to industry and policymakers about coal's future in power generation.

"Anyone planning to run a thermal coal mine or coal power station in Australia beyond 2030 must now contend with not being able to get finance from Australia's largest financial institution, or insurance from our two main underwriters," Market Forces executive director Julien Vincent said.

Fintech investment to take on Afterpay

As CBA exits traditional wealth products, it signalled an expansion into the digital world by making a $US100 million ($150 million) investment into the 'buy now, pay later' sector.

The deal with Swedish online bank Klarna will allow CBA to compete directly with the likes of Australian fintech darling Afterpay.

Klarna, while relatively small with a market capitalisation of around $8 billion, is looking to expand its global presence and its 60 million customers.

Mr Comyn said CBA will become Klarna's exclusive partner in Australia and New Zealand and intends to build on the initial investment to grow the business.

'Stretching for positives'

CBA shares fell 2.6 per cent to $77.70 on opening, the worst performance among the big banks in an overall better day on the ASX.

JP Morgan bank analyst Andrew Triggs said the key weaknesses in the results were higher than expected costs and deteriorating asset quality.

"Overall, a slightly disappointing result and the valuation continues to look stretched," Mr Triggs wrote in a note to clients.

"Operating expenses were much higher than expected, driven by further build of staff to meet regulatory and compliance uplift."

In all, the CBA added more than 1,000 full time staff to deal the regulatory demands of the post-royal commission work — with 600 of these becoming permanent.

Risk and compliance costs accounted for roughly two-thirds of CBA's total investment over the year, up from 50 per cent in 2018.

Despite an increase in home and business lending, revenues fell as margins remained tight. The net interest margin is likely to squeezed more when the full impact of the two rate cuts in June and July pass through.

Citi's bank analyst team described it as, "a soft result with difficult headwinds on both revenues and costs."

"With little further detail on the longer term cost base or potential capital management, this result will leave the market stretching for positives."

External Link: CBA results Read More



Leave A Comment

More News

<none>

ASX gains after NZ cuts interest rates 2019-08-07 03:36:24The Australian share market has closed higher following two days of monster losses after being thrown a lifeline by central bankers across the Tasman.

Galaxy flags Mt Cattlin write-down of up to 2019-08-07 03:28:55Galaxy Resources said it expects to record a non-cash impairment charge of between $US150 million ($222 million) and $US185 million ($274 million) for

Western Power seeking millions in class action court 2019-08-07 03:23:10Western Power is seeking an order in the Supreme Court of Western Australia to recover its costs from a class action following the Parkerville bushfir

Serpentine to raise $7m 2019-08-07 03:10:38West Perth-based Serpentine Technologies is seeking to raise $7 million to fund its acquisition of K-TIG and enable growth of the company’s weld

Chaney says corporate sector has lessons for school 2019-08-07 02:49:57The attributes needed to build a good working relationship are the same in school settings as they are in business, says Wesfarmers chairman Michael C

Australian CFOs report decreased market optimism 2019-08-07 02:31:12Australia’s chief financial officers have become less optimistic about the Australian economy in the past year, citing concerns about global and

Size matters when it comes to burnout 2019-08-07 00:58:05OPINION: Determining the ideal classroom size is arguably the number one topic on the long list of thorny education issues to have divided policymaker

ASX up slightly as CBA slides on results 2019-08-07 00:47:00The Australian share market has moved modestly higher, led by consumer stocks, following two days of monster losses.

Aussie dollar hits 10-year low against USD 2019-08-07 00:46:05The Australian dollar has hit a 10-year low against the US dollar after New Zealand's central bank cut the country's cash rate by a larger than expe

Two WA universities in Australian top 10 2019-08-06 23:19:59Curtin University and the University of Western Australia rank in the top ten universities in Australia, with Curtin jumping from 16th position to nin

HBF sells Friendlies to Pharmacy 777 2019-08-06 05:13:14HBF has sold the Friendlies Pharmacy master franchise, under which 31 Western Australian pharmacies currently operate, to Pharmacy 777 and agreed to p

ASX suffers worst loss since October 2019-08-06 03:38:29Australia's share market has been hammered for a second straight day as it emerges as one of the biggest losers from the intensifying US-China trade

Business

'It's about control': Intellectual property is power. Here's 2019-08-06 19:00:00They are laws that touch pretty much everything we do — but while intellectual property can be a fierce protector, it doesn't always work for g

Energy regulator launches legal action over 2016 statewide 2019-08-06 18:50:37The Australian Energy Regulator alleges four wind farm operators, including a subsidiary of AGL, failed to comply with performance requirements to rid

Meet the gold squad — the bounty hunters 2019-08-06 18:46:08The price of gold has never been higher, and neither has the temptation to steal it. So much so, the mining companies have hired a gold squad of polic

Iconic Old Burleigh Theatre seaside arcade sells, likely 2019-08-06 18:38:35It has been the beating heart of the Gold Coast for 90 years, now locals fear the Old Burleigh Theatre Arcade will be transformed into a 14-storey apa

CBA profit slides 8pc to $8.6b as sales 2019-08-06 18:14:12A more than $2 billion bill for remediating customers hurt CBA's bottom line, but so too did rising bad debts. It also confirmed it would exit invest

The city where the Golden goose of tourism 2019-08-06 17:00:31They often clog up footpaths taking selfies, but as frustrating as tourists can be, they're the lifeblood of Australia's Glitter Strip.

Water market set for shake-up as ACCC ordered 2019-08-06 16:26:42The Australian Competition and Consumer Commission will investigate who actually owns Australia's water, in particular the Murray-Darling Basin's $2

LGBTI Awards in doubt after operator goes into 2019-08-06 16:26:42The future of the nation's premier gay and lesbian awards is up in the air after the company that operates the event is placed into liquidation amid

Australian dollar decline holds best hope for economy 2019-08-06 15:18:22Market watchers are growing increasingly worried about the escalating trade war between the United States and China, but hope the falling Australian d

Mining research group to launch ad blitz to 2019-08-06 14:16:38An organisation set up to research low-emission coal technologies is funding a multi-million-dollar media campaign aimed at making Australians feel "

US stocks claw back lost ground as China 2019-08-06 13:19:37Stocks edge higher on Wall Street, a day after their worst losses of the year, as China eases pressure in the trade war with the US by stabilising its

Spy chief warns foreign intelligence agencies won't trust 2019-08-06 10:14:02One of the nation's top spies says unauthorised disclosure of classified information puts Australia's international relationships at risk, warning t

Sydney Morning Herald RSS

Thousands of medical histories exposed in data breach 2019-08-07 03:31:41Tens of thousands of Australians have had their medical histories and other private information accessed in a data breach of the Neoclinical medical r

Suncorp boosts provisions for extreme weather events 2019-08-07 03:26:08The insurer wants better building standards and incentive programs to help lessen prohibitive costs of natural disasters

ASX closes higher as Aussie dollar sits at 2019-08-07 03:21:36S&P/ASX 200 closes 41 points higher, up 0.6 per cent, at 6519, thanks to gains in gold miners, Telstra, Suncorp, and major supermarkets.

Gold stocks glitter on a rebound day for 2019-08-07 03:13:21The market made back some of its losses from earlier in the week after the New Zealand central bank cut rates.

'Disappointing for our shareholders': Macquarie radio slumps in 2019-08-07 03:07:26Macquarie Media chief executive Adam Lang has acknowledged shareholders will find the company's double-digit profit and earnings drop "disappointing

'Shock and awe, Kiwi style': RBNZ stuns markets 2019-08-07 01:59:14The Reserve Bank of New Zealand (RBNZ) stunned financial markets on Wednesday, slashing official interest rates by 50 basis points to a record low of

Iron ore prices enter a bear market 2019-08-07 01:39:19The spectacular six month rally in iron ore is unravelling

CBA puts $US100m down payment in Afterpay rival 2019-08-07 01:12:41The Commonwealth Bank has made a $US100 million bet on the buy now, pay later market with an investment in one of Afterpay's major US rivals

Woolies' pub landlord eyes rent increases as review 2019-08-07 00:43:24ALE Property, the landlord for the Woolworths-owned ALH business, will undertake rent reviews across its portfolio

News organisations 'under pressure to take sides': Former 2019-08-07 00:05:52Journalists who have picked political sides have come under fire from Alan Sunderland, who says they are fuelling the culture wars by failing to

CBA emerges from a nightmare year relatively unscathed 2019-08-06 23:51:23Commonwealth Bank's core banking franchises have demonstrated resilience despite the costly fallout from the financial services royal commission.

More motorists than forecast opt for Sydney's new 2019-08-06 22:31:45An average of 82,000 trips have been made on weekdays since the tunnels were opened to motorists last month, new figures show.

Business News - Markets

New car with solar panels 'could get 60% 2019-08-07 04:50:00Hyundai has released a hybrid car equipped with solar panels that it claims could provide the battery with up to 60% of its power.

House prices dip for second consecutive month 2019-08-07 04:26:00House prices have fallen for the second consecutive month, according to Halifax.

Competition cancelled for next South Eastern rail franchise 2019-08-07 03:29:00The competition for the next South Eastern rail franchise has been cancelled, the Department for Transport has confirmed.

Hundreds of British Airways flights cancelled or delayed 2019-08-07 02:52:00British Airways travellers are facing cancellations and delays to their flights due to an IT glitch which has crashed online check-ins in the middle o

Energy price cap fall is not enough, consumer 2019-08-07 01:44:00The energy price cap will fall slightly this winter but consumer advocates say households are still not getting a good enough deal.

Disney earnings down ahead of streaming service launch 2019-08-07 01:14:00Walt Disney has reported a bigger fall in third quarter earnings than expected, despite recent blockbusters.

Sports Direct 'definitely not a business in crisis' 2019-08-06 12:51:00One of retail tycoon Mike Ashley's key lieutenants has told Sky News the Sports Direct group is not in crisis, and will continue to buy struggling re

British Steel lenders urge swift end to auction 2019-08-06 10:19:00Lenders to British Steel are urging the government to conclude efforts to find a buyer for the stricken business as they seek to protect their financi

Carlyle picks banks for PA Consulting sale 2019-08-06 07:03:00The private equity backers of PA Consulting Group, one of the world's oldest management consultancies, have hired bankers to help review options for

Luxury retailer Barneys New York files for bankruptcy 2019-08-06 05:57:00Barneys New York is seeking bankruptcy protection and will close 15 of its 22 stores, it has confirmed.

Monzo tells users to change PINs after security 2019-08-06 05:51:00British digital bank Monzo has apologised and urged 480,000 customers to change their PINs after realising that some of them were being stored inappro

Oil enters bear market as US-China trade war 2019-08-06 02:42:00Brent crude oil has entered a so-called bear market in a further volatile day for global stocks linked to the escalation in the US-China trade war.


Disclaimer and Notice:WorldProNews.com is not responsible of these news or any information published on this website.