CBA Expected To Post 10% Drop In Full Year Profit

Post by NeilMc on August 11, 2009 · Under Business News, Capital Markets, Company News, Equities, banking · Comment 

Australian banking major Commonwealth Bank of Australia (CBA) may report full year results which show that the growth in debt at the country’s largest mortgage lender is lower than many analysts had previously feared.

The Sydney based lender is expected to post a decline in full year cash earnings of 10 per cent to $4.277 billion. CBA reports on Wednesday and the profit forecast is based on a poll of analysts who cover the lender conducted by Reuters.

Much of the negative impact on CBA’s profit is as a result of credit impairment or bad debt. According to unaudited figures from the lender, in the nine months to March 2009, bad debt stood at around $2.2 billion.

“The share price has been driven by the bad debt expectations of the 2010 financial year and any guidance on that will be the key to the stock’s prospects,” said EL&C Baillieu analyst Stewart Oldfield, who rates CBA a “hold”.

“Investors will be looking to whether stronger than expected economic activity will lead to a better performance on the bad debt line.”

In the March quarter, CBA reported bad debts of $630 million while the proportion of troublesome exposures to total lending rose in the third quarter to 1.55 per cent, from 1.51 per cent as at December 31.

Banks and analysts had previously forecast that bad debts would continue increasing, well into calendar 2010.

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