CBA Joins Rivals And Cuts Dividend By 25 %

Post by Sharat on May 14, 2009 · Under Australian Economy, Company News, Equities, banking · Comment 

Australian banking major Commonwealth Bank of Australia, has joined its rivals and become the last of the big four to cut its dividend joining NAB, ANZ and Westpac by cutting its dividend by 25 per cent in a bid to provide a cushion against rising bad debt in an economy which is softening.

CBA said its unaudited cash earnings for the quarter ending March 31st were $1.15 billion which included a $630 million impairment charge for the quarter. CBA failed to provide year on year data, but did report its first half profits back in February which fell 16 per cent compared with the same period a year earlier.

CBA said it intends to pay a final dividend of $1.15 a share.

“Operating conditions remain challenging, with a continuing slowdown in the domestic economy. Rising unemployment and slowing credit demand will have negative implications for the Australian banking sector, particularly for volume growth and loan impairment charges. Whilst credit quality trends remain within expectations at this stage, we are continuing to increase provisions given the likelihood of further deterioration.” CBA chief executive Ralph Norris said.

CBA went on to add that it was positioned well, through a large market share with margins improving despite being softer than they were prior to the banking crisis, and as a result group revenue growth would be maintained.

The lender said that consumer delinquencies in the last quarter had increased in line with a softening economy. CBA went on to add that its commercial credit portfolio “remains sound” though some sectors including SME, mining services and tourism had shown signs of weakness.

“Inevitably there will be bumps in the road, but we feel that global markets are no longer in free fall and that some of the measures taken internationally and domestically have been effective in mitigating an otherwise more ominous set of scenarios,” Mr. Norris said.

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