It wasn’t all good news as CBA announced its full-year results, with the bank setting aside a billion dollars for loan impairment expenses – bringing the total to $2.5 billion – and slashing its final dividend to 98 cents.
But Australia’s biggest bank is well equipped to weather the storm – and is doing just that. Its total mortgage deferrals have dropped to 135,000 from a high of 154,000, while its business loans now sit at 59,000, down from 86,000 at the peak. And while it did slash its dividend, that dividend represented 49.95 per cent of second-half statutory profit – right up against APRA’s recommendation of 50 per cent.
Statutory profit was up 12 per cent off the back of several divestments, and the bank is making steady progress on its remediation program, which has received a tick of approval from the independent auditor. There are plenty of reasons for CEO Matt Comyn to be happy right now.
“We are prepared for a range of economic scenarios… and will monitor our lending portfolios closely as the situation evolves,” Mr Comyn said. “We anticipate that lower credit growth and [low-interest] rates will continue to put pressure on revenue, requiring increased focus on performance, efficiency and capital allocation.
“Even in this challenging environment, operational performance in the business has remained strong.”
But the result also demonstrates the shocking impacts of the COVID-19 crisis. CBA more or less had all its ducks in a row and still saw profits plummet by 11.3 per cent. The other banks aren’t as prepared.
Westpac’s update, due 18 August, could see it revise its provisioning for the AUSTRAC matter materially higher in the wake of new breaches of anti-money laundering/counter-terrorism finance, while the departure of several key executives since CEO Peter King took the wheel will hamper his efforts to turn the bank’s rep – and its share price – around.
NAB is also undergoing sweeping cultural change, as new CEO Ross McEwan streamlines the business and key executives cash out. But aside from an educational program for the bank’s 35,000-odd employees, Mr McEwan has yet to provide substantial detail on new technology strategies and potential cost-saving measures.
If CBA’s result proves anything, it’s that the big four are in for a lot more pain. And with the lifting of Victoria’s lockdown measures now slated for mid-September, it’s going to be a long road to recovery.
