The Commonwealth posted an unaudited cash profit of $2.3 billion for the March quarter, below expectations, as bad loans increased at Australia’s biggest bank.
The result is ahead of the $2.2 billion of the same three months last year but below analyst forecasts and the trend of the first half this year.
Statutory net profit was approximately $2.4 billion.
The Commonwealth Bank in February posted a record half year cash profit of $4.804 billion, a 4% rise.
The bank, in its quarterly trading update, says operating income growth was similar to the first half which was up 6% to $12.362 billion.
The loan impairment expense was higher at $427 million, or 25 basis points of gross loans, up from 17 basis points in the first half.
Australia’s big four banks have an exposure of more than $3 billion from a handful of recent high profile corporate collapses.
The Commonwealth is exposed to troubled steel maker Arrium and a number of others.
“The increase is largely due to a small number of exposures in the group’s institutional lending portfolio which became impaired or exhibited heightened signs of stress, including a single relatively large domestic exposure with a syndicate of lenders including other Australian major banks,” the Commonwealth said.
Troublesome and impaired assets were at $6.3 billion, up from $5.9 billion.
The net interest margin is mostly unchanged, home lending volume growth is consistent with recent trends and business lending growth is at mid-single digit levels.
However, the wealth management business was weaker with assets under management down 1% and funds under administration slipping 2%, reflecting falling investment markets, subdued net flows and exchange rate movements.
The impairments at a glance:
The Commonwealth says the credit quality of the lending portfolios is sound.
However, its says there are pockets of weakness and caution is needed as global volatility continues.
The bank says the Australian economy continues to perform relatively well, with the steady transition from a mining-dependent to a more broad-based economy.