August 10, 2016 – Australia’s biggest bank, the Commonwealth, posted a two per cent rise in annual net profit to a record Aus$9.23 billion (US$7.08 billion) as it sounded a cautious note about the country’s economic outlook.
As the nation’s top lender, the Commonwealth Bank’s profits are closely watched to provide guidance on the health of the Australian economy amid a low interest-rate environment.
CBA chief executive Ian Narev said the company remained positive about Australia’s economic prospects but warned that nominal growth, which is not adjusted for inflation, needed to strengthen.
“Income growth inside and outside Australia remains weak, so people are not feeling better off,” Narev said in a statement.
“When combined with on-going global economic and political uncertainty this makes households and businesses cautious, and hesitant to respond to monetary stimulus.”
Cash profit, the bank’s preferred measure of earnings that strips out one-off costs, rose three percent to Aus$9.45 billion, broadly matching analyst expectations.
But bad debts jumped 27 per cent, weighing on profits, while the bank announced a final dividend of Aus$2.22 per share.
“It’s a strong, solid result, but there’s not a lot in this result that would want to make me buy this company on open,” IG Markets’ strategist Chris Weston said.
“The outlook that we’ve seen is fairly benign, there’s downside risks to Australian economics and Ian Narev said there’s going to be more of the same coming through.”
Australia’s economy is charting a rocky path away from mining-dependent growth, with the Reserve Bank of Australia last week cutting interest rates to a new record low of 1.5 per cent to boost non-resources sectors.