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30 Per Cent Jump In CBA Profits Fails To Impress Markets
Australian banking major posted a 30 per cent jump in third quarter cash earnings. Earnings rose to $1.5 billion driven by lower credit impairment charges, cost control measures, and larger volumes growth.
Despite the jump in profits, CBA said it remained cautious, highlighting a number potential headwinds during the second half, and whilst it has emerged recently that the business loan market has begun to thaw, CBA said that credit growth is still muted.
Analysts, who follow the stock, said they were not impressed with the result, because the underlying profit has trended downward during the quarter.
However the unaudited results were in line with estimates, and confirm the trend demonstrated by CBA’s rivals, some of whom have reported outstanding half yearly results recently.
The entire banking sector has benefited from a decline in credit impairment charges, as the Australian economy continues to show signs of recovery. However many executives at banks have expressed caution over the outlook for margins, and re-iterate the point that funding costs remain high.
Banking analysts are concerned about the prospects for significant loan growth.
CBA chief executive Ralph Norris said: “Whilst the economic outlook has progressively improved over the past 12 months or so, operating conditions remain challenging.
“Credit growth remains muted and margins continue to come under pressure from higher average funding costs and strong price competition. Whilst we have clearly passed the peak in the bad-debt cycle, key credit quality indicators remain at elevated levels and we continue to expect gradual, rather than dramatic, improvement.”
“Whilst the economic outlook is improving, short-term risks and uncertainties remain,” Mr Norris said. “Recovery from the global financial crisis will take time and there will be challenges along the way, evidenced by the current sovereign debt issues in the European Union,” he said.
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