ID :
89072
Wed, 11/11/2009 - 17:09
Auther :

CBA paints rosier outlook for 2009/10



Commonwealth Bank of Australia Ltd (CBA) has painted a rosier outlook for the year
ahead after a challenging 2008/09.
It also again publicly acknowledged shortcomings in its conduct regarding Storm
Financial customers.

CBA chief executive Ralph Norris said the country's biggest lender was well placed
to improve its performance this financial year.
He said CBA's strategy included using its wholly owned Western Australian regional
bank BankWest to drive growth on the eastern seaboard, but without opening any more
branches.
Mr Norris told the bank's annual general meeting on Wednesday that Commonwealth Bank
would maintain conservative capital settings, given economic uncertainty remains and
had just over $5 billion in total provisions.
"We recognise that we are well placed to continue to strengthen our business
franchise and improve our financial performance and returns," Mr Norris told the
meeting.
The Sydney-based bank reported on Monday that first quarter cash profit increased 27
per cent, with Mr Norris saying the peak of bad debts had probably passed.
Bad debts had been the major reason for the seven per cent slump in earnings in
2008/09.
"It's fair to say we are significantly more optimistic than 12 months ago," Mr
Norris said on Wednesday.
Mr Norris said priorities included becoming the number one ranked bank for customer
service by June 2010, improving business banking and pursuing profitable growth.
Chairman John Schubert, who will step down early next year, described 2008/09 as the
most challenging year he'd seen.
"The continued fallout from the subprime crisis, subsequent events and resultant
negative economic growth in most western economies have placed significant pressure
on the financial performance, and even the survival, of a large number of
international banks," he told shareholders.
Dr Schubert will be replaced by David Turner, a former Brambles Ltd chief executive
who has been a non-executive director with CBA since August 2006.
CBA's strong capital position allowed the bank to buy BankWest and wealth business
St Andrews at the end of last year at a discount to book value, Mr Norris said.
Mr Norris said the bank did not plan to close BankWest branches in WA or on the East
Coast, although branch expansion in the East was on hold.
He said half of BankWest's growth was in WA and half on the East Coast.
Dr Schubert said BankWest had been a very attractive purchase despite needing to
lift the regional bank's provisioning for bad and doubtful debt from about $200
million at the end of June 2008 to about $1.6 billion by June this year.
Dr Schubert said this meant BankWest was "appropriately provisioned".
Chief financial officer David Craig said CBA, which is the country's deposit holder,
had just over $5 billion in provisions in total, "which includes $1.3 billion of
what we call a management overlay".
"We kept that additional buffer because of the uncertainty of our times," he said.
On Storm Financial's collapse, Mr Norris said the bank had publicly acknowledged
that there were some shortcomings in CBA's conduct as it lent money to some clients
of the financial adviser.
"We're going through a process of resolution," he said.
He said a little over 80 per cent of the affected customers were signed up to the
bank's process. CBA was making offers to customers, a number of whom had agreed to
settlements.
"So we're making good progress," he said.
Dr Schubert also said that the bank would decide towards the end of the financial
year whether to keep its salary freeze in place, based on the bank's competitive
position and state of the economy.
Shares in CBA fell 55 cents, or 0.99 per cent, to close at $55.00 on Wednesday.

X