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Commonwealth Bank Posts Record Profit as Bad Debt Charges Fall

Commonwealth Bank of Australia, the nation’s biggest bank by market value, reported record full-year profit as lending income rose and charges for soured loans fell.

Net income in the 12 months ended June 30 surged 11 percent to A$7.09 billion ($7.4 billion), the Sydney-based bank said in a statement today. Commonwealth Bank was expected to report profit of A$7.15 billion, according to the average of 10 analysts’ estimates compiled by Bloomberg.

Commonwealth Bank Chief Executive Officer Ian Narev, who took over in December, and his local rivals are trimming expenses as higher funding costs squeeze profit margins and fragile consumer and business confidence weigh on loan demand.

“Revenue growth was subdued reflecting ongoing caution from both our retail and corporate customers,” Narev said in the statement. “It is difficult to see the catalyst for alleviating the uncertainty which will continue to affect consumer and corporate confidence. So, in the near term, we expect current revenue trends to continue.”

Commonwealth Bank stock has climbed 13 percent this year, trailing the 18 percent advance by Westpac Banking Corp. (WBC) and the 16 percent gain by Australia & New Zealand Banking Group Ltd. (ANZ) National Australia Bank Ltd. (NAB), the smallest of the country’s four biggest lenders by market value, has risen 5.7 percent.

Commonwealth Bank’s net interest margin, a measure of the profitability of the lending business, declined 3 basis points over the year to 2.09 percent, the company said. Net interest income grew 4 percent to A$13.2 billion, while operating expenses rose 3 percent to A$9.2 billion, the bank said.

Loan impairment expenses fell 15 percent to A$1.09 billion, according to the statement.

National Australia Bank yesterday said third-quarter profit was unchanged at A$1.4 billion as lower revenue was offset by a decline in bad debts. CEO Cameron Clyne said business and consumer confidence was “subdued” and affecting the domestic economy.

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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