CBA Says Its Business Lending Has Declined

Post by NeilMc on June 25, 2009 · Under Australian Economy, banking, loans · Comment

Australian banking major Commonwealth Bank of Australia (CBA) has highlighted a dramatic reduction in its business lending and also said there would be further increases in bad debt provisions as the Australian economy continues to slow.

CBA’s chief financial officer David Craig, speaking during an investor conference taking place in Sydney said that business conditions that the bank was operating under continued to remain difficult, but that the Australian economy remained better positioned to recover than its global peers.

CBA’s unaudited cash earnings for the March quarter were $1.15 billion which were the result of a “prudent” increase in provisions of $1.3bn Mr. Craig said. Mr. Craig added that CBA’s credit portfolio was a high quality one, with 69 per cent of its portfolio defined as investment grade.

Australia’s largest mortgage lender said that the value of impaired assets had increased by $785 million during the March quarter and were worth $3.39 billion, Mr. Craig stressed however that the rate at which assets were becoming impaired over the same quarter had slowed from $1.39 billion in the previous quarter.

CBA’s impairment problem largely stems from its recent acquisition of Bankwest, which has forced it to absorb bad debts held on the books of the acquired lender. CBA now believes that 1.55 per cent of its assets were “troublesome exposures” a rate which increased from 1 per cent in the June quarter of 2008.

The average fall in business lending has been 0.7 per cent, but CBA’s loss is at least 2.2 per cent, which the bank blamed on across-the-board lower demand.

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