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CBA Wealth Management Unit Freezes Mortgage Fund
Australian banking major Commonwealth Bank of Australia (CBA) has had to freeze redemptions from one its mortgage income funds, after the $850 million fund suffered a number of lending losses.
According to a report in The Age, CBA’s wealth management unit Colonial First State was forced to freeze redemptions, which could be seen by some as an indication that problems in the mortgage fund industry remain.
Last year as a result of the global financial crisis, and the federal government deposit guarantee, the mortgage fund industry faced a spate of redemption requests, as investors began a flight to perceived quality, forcing may funds to freeze redemptions.
CBA’s wealth management unit says that a rise in bad debts has forced it to freeze redemptions at one of its mortgage income funds, which had only a month ago re-opened for business again, after freezing redemptions for more than a year.
Colonial says it will next month update its investors, and has initiated a full review of the fund and its loans, which will determine the full extent of the losses on the fund and its investors.
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I’ve heard that the Commonwealth Bank Business Sales Indicator rose by 0.6 per cent in trend terms in November after rising by 0.5 per cent the previous month.