CBA announces interim profits of $3.6 billion but highlights drop in loan profit margins

Two days after pushing up interest rates independently of the RBA, the Commonwealth Bank has reported a 19% increase in net profit for the half-year ended December 31, 2011 to $3.6 billion.

Predictably, following its raise rise announcement on Monday, the bank reported on “margin pressure from higher wholesale funding and competition, with a 10-basis-point drop in net interest margins to 2.15%”.

CEO Ian Narev highlighted these increased funding costs in two slides in his presentation:

Commenting on the result, Narev said the bank continued to meet the needs of its 13 million customers as well as “maintain the standard of living” of 800,000 Australians who directly own shares or have money invested in the bank’s super funds and other investment vehicles.

“With the outlook for the global economy remaining unpredictable, the group plans to retain its existing conservative business settings. We welcome some positive signs of economic recovery but recognise that in times of uncertainty, banks must remain cautious.

“The fundamentals of the Australian economy remain strong and we have great confidence in the prospects for this economy.  However, in the absence of sustained recovery in offshore economies, particularly Europe, businesses and consumers will remain cautious, and the current trend of weak credit growth, asset allocation towards cash, and volatile markets will continue in Australia. Until we see clear signs of that sustained recovery, average funding costs will continue to rise,” he says.

Narev says the bank has no plans to send jobs offshore and no plans for a major redundancy program.

 

 

 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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