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CBA's bad loan charges are now over half a billion dollars

Mark Kolbe/Getty Images

The cost to the Commonwealth Bank of bad loans is rising.

Its loan impairment expenses of $564 million for the six months to December are 28% higher than a year ago.

And the biggest part of those expenses, about $305 million in retail banking, was mostly due to higher home loan arrears and losses in Western Australia and Queensland.

The bank says this was driven by deterioration in mining towns and arrears in the personal loans portfolio.

The good news is that overall, the loan loss ratio at CBA was steady at 17 basis points compared to the June half year but that’s still up from 14 basis points 12 months ago.

Loan impairments are watched closely because they are an indicator of economic health and business activity. And analysts have been predicting a slowdown in Australia’s banking industry.

The latest numbers show how the end of the investment boom in mining and steep falls in commodity prices are flowing to small regional communities in Western Australia and Queensland.

The big end of town also caused a few headaches.

Loan impairment expenses in the Institutional Banking and Markets hit $140 million, a rise of 44% on a year ago.

Here’s the detail on loan impairments at the Commonwealth:

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