Money CBA profit slips 5 per cent to $9.2b on penalties, slowing loan growth

09:31  08 august  2018
09:31  08 august  2018 Source:   smh.com.au

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Loan impairment expenses fell 1. 5 per cent from a year ago, which the bank attributed to a “benign credit CBA declared a final dividend of A.30 per share for a full-year dividend of A.29, up 0. 5 per cent from a year ago and slowing from 2 per cent growth notched during the 2017 financial year.

Revenue rose in each of the bank's segments with the exception of global banking, where lower investment banking fees dragged revenue down 2 percent . During his near-decade long tenure, Chief Executive Brian Moynihan has focused on making the bank's sprawling operations more efficient.

Commonwealth Bank (CBA) in Sydney© AAP Image/Joel Carrett Commonwealth Bank (CBA) in Sydney Commonwealth Bank's earnings have dropped as the lender's bottom line was hit by hefty regulatory and compliance costs, alongside slower loan growth and a squeeze on profit margins.

The country's biggest bank on Wednesday said full-year cash profit from its continuing operations was $9.2 billion, down from $9.7 billion last year.

The drop comes after a year in which CBA agreed to pay a $700 million fine to settle a blockbuster anti-money laundering case against it, as well as incurring one-off regulatory costs of $155 million.

Excluding those one-offs, CBA said its cash profit rose 3.7 per cent to $10 billion, and it was still able to lift its dividend by 1c.

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Wells Fargo & Co, which relies more on traditional lending and less on markets-related businesses, reported a slight dip in profit due to a slowdown in mortgage banking. Wells Fargo’s annual loan growth rate of 4 percent has also been slowing over the past year.

Slow bank loan growth concerns Kate Warne. Wells Fargo & Co ( WFC.N ), which relies more on traditional lending and less on markets-related businesses, reported a slight dip in profit due to a slowdown in mortgage banking.

It is the first financial result to be delivered by chief executive Matt Comyn, who took over from Ian Narev earlier this year.

Commonwealth Bank chief executive Matt Comyn.© Peter Braig Commonwealth Bank chief executive Matt Comyn. Risk and regulatory costs

In a sign of the many challenges facing CBA and Mr Comyn, the result included $389 million in provisions for "risk, compliance and regulatory costs," of which CBA said $155 million were non-recurring.

The one-off compliance costs related to the royal commission, the scathing inquiry into its governance and culture from the regulator, an investigation into alleged interest rate rigging, and financial crimes compliance.

Mr Comyn said that despite the "challenges" facing the bank over the year, its "fundamentals" were still strong.

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The bank, like its other Wall Street peers, is getting a boost from recent moves by regulators and politicians to lower tax rates and raise interest rates. BofA's total loans increased 2 percent in the quarter

Bank of America said loans in its business segments grew by 5 percent to 4 billion on a year-over-year basis. "Our responsible growth model continues to deliver consistent results," CEO Brian Moynihan said in a statement.

"Operating momentum was driven by our core franchise which delivered good volume margin management in home and business lending, ongoing growth in transaction accounts and deposits, and continued uptake of our technology offering," Mr Comyn said.

A Commonwealth Bank ATM.© AAP Image/Tracey Nearmy A Commonwealth Bank ATM. Clampdown on risky home loans

In the crucial mortgage market, CBA's loan growth was 3.7 per cent, below the 5.6 per cent growth rate across the industry, as the bank responded to the regulator's clampdown on riskier loans. Deposits were up 4.1 per cent.

CBA's net interest margins  - which measures what it charges for loans compared with its funding costs -dipped by 0.2 percentage points to 2.14 per cent over the full year, which CBA said was because of factors including discounting on home loans and higher funding costs.

The bank continued to benefit from that fact that very few borrowers defaulted on loans, with its loan impairment expense remaining at 15 basis points of total loans.

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Loans rose 10.1 percent to a record $ 9 .57 billion while deposits increased 9 percent to an all-time high of .05 billion and assets gained 7.8 percent to a record .27 billion. I thought that expenses’ growth was very well controlled.”

Citigroup Inc’s total loans rose 5 percent . Loan growth combined with higher interest rates helped push net interest income up during the quarter, but rising interest rates also increased the price the bank pays for its deposits.

'Pockets of stress'

But in a sign of the risk of very low wage growth, the bank said there were some "pockets of stress" in its home loan book, with a small increase in home loan arrears.

The results are messy and complex to compare with previous years as they come amid a complex series of transactions, as the bank responds to changing financial and political conditions.

CBA has this year revealed plans to offload its wealth management businesses and broker Aussie Home Loans in a sharemarket float, sold out of life insurance in Australia and Indonesia, and revealed it had sold the South African business TymeDigital, acquired under Mr Narev.

Mr Comyn said he planned to make CBA a "simpler, better bank," more focused on managing risk and more efficient.

"We are simplifying our portfolio, operating model and processes to deliver better customer, efficiency, and risk outcomes," Mr Comyn said.

"This will be underpinned by stronger capabilities in operational risk and compliance management, cost reduction, data and analytics and a continuing commitment to innovation and customer service," he said.

CBA will pay shareholders a final divined of $2.31 a share, a 1¢ increase compared on last year, which will be fully franked and paid on September 28.

More to come

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