Commonwealth Bank of Australia profit rises 13 pct

AP News
Posted: Aug 09, 2011 8:11 PM
Commonwealth Bank of Australia profit rises 13 pct

Commonwealth Bank of Australia Ltd., the nation's largest lender, posted a 13 percent rise in annual profit to 6.4 billion Australian dollars ($6.6 billion) on Wednesday, but warned that economic instability overseas could push up funding costs.

The net profit for the year ending June 30, 2011, was up from AU$5.7 billion the year before.

Cash profit, the bank's preferred measure of profitability because it removes non-cash fluctuations, was AU$6.8 billion, up 12 percent from AU$6.1 billion in 2009-10.

The company's chief executive, Ralph Norris, said the bank continued to be affected by economic turmoil overseas, with a danger that it may force up funding.

"Ongoing offshore instability continues to impact the domestic economy and has the potential to place further upward pressure on wholesale funding costs for domestic banks," Norris said.

The last fiscal year had been characterized by subdued system credit growth and intense competition, he said.

"At this stage, there is nothing to suggest that the 2012 financial year will see any material improvement on this front," Norris said.

The bank's chief financial officer, David Craig, described credit growth as "anemic."

Deposits made up 61 percent of the bank's funding at the end of June, having increased by AU$26 billion to a total of AU$349 billion.

Craig said the bank was well funded.

"We are not raising debt at this time," he said.

He said the fundamentals of the economy were strong, with unemployment at less than 5 percent.

The bank declared a final dividend of AU$1.88 per share, fully franked, up 11 percent from 2009-10, taking total dividends for the year to AU$3.20.

Craig said the bank was well prepared for any market instability, such as that experienced in recent days.

Global markets rallied Tuesday after 10 days of losses over concerns about European and U.S. government debt undermining growth prospects.

"We didn't necessarily expect that, but we are absolutely prepared for it," Craig said. "We are absolutely in a fortress balance sheet position."

The bank's loan impairments declined to AU$1.28 billion for the year, from AU$2.08 billion a year earlier amid the recovery from the global financial crisis.

The decline in bad debts slowed in the second half because of higher interest rates and natural disasters around the country earlier in the calendar year.