Cba Lifts Despite Rates Bite
The Age
Thursday February 15, 2007
HIGHER interest rates are causing some to fall behind in their mortgage repayments but not enough to sully a record first-half result from Australia's largest retail bank.
Commonwealth Bank reported a $2.3 billion profit after tax for the six months to December 31, 19 per cent better than at this time last year.Investors holding CBA shares on February 23 will get a record interim dividend of $1.07 a share on April 5.Daiwa Securities analyst Johan Vanderlugt said some investors had started to wonder whether CBA would be able to build on its reputation for paying high dividends, but this result had put those concerns to rest."The question remains whether they can repeat this level of result in the future," he said.CBA chief executive Ralph Norris told analysts the bank had begun to see higher interest rates affect home loans."There have been some early signs of some deterioration in the home loans portfolio as far as arrears go, but that is very much at the margin," he said.The bank had $167 million in "net impaired assets" - loans not being repaid - an 8 per cent increase on the $155 million for the six months to June 30.Chief financial officer David Craig called the increase a "very slight uptick". He said a better performance in credit cards and personal loans had mitigated the damage to the bank.Housing loans overdue by 90 days or more increased 4 per cent, from $155 million in the six months to June 30 to $161 million. "Other" overdue loans - mostly from personal loans and credit cards - fell by 3 per cent to $133 million.Mr Craig said the decision not to follow competitors into riskier lending (by refusing to offer no-interest transfers on credit card balances, for example) had cost CBA market share, but had led to a better credit profile. CBA's share of the credit card market fell from 21.4 per cent to 19.4 over the 2006 calendar year.The stronger risk profile meant the bank had less to pay for protection against bad debts. The so-called "loan impairments" payment decreased from $198 million in the six months to June 30 to $164 million. The bank's net interest margin, which measures the profitability of loans, fell by 0.07 percentage points to 2.22 per cent. Competition in home loans forced the interest margin for mortgages to fall by 0.025 percentage points.Australia's biggest banks have struggled to improve their images to fight competition from smaller banks. CBA's result coincided with the release of customer satisfaction figures for the December quarter from polling house Nielsen.Of the Big Four, ANZ was most favoured, followed by National Australia Bank, Westpac and CBA. ANZ and CBA were similarly placed first and fourth in the December quarter of 2005. CBA shares closed down 25? at $51.35. In the past 12 months, the shares have gained 17.2 per cent, underperforming the bank's peers in the S&P/ASX 200 Financials Index, which has gained 22.9 per cent.CBA FIRST HALF RESULTS? Record $1.07 interim dividend? Earnings per share up 17%? Net profit of $2.271bn, up 19%? Return on equity-cash 22.3% - up 60 basis points? Strong business lending? Net interest margin at 2.22%LINK? geobay.com/760e98
© 2007 The Age
