Australia’s biggest bank, the Commonwealth Bank of Australia has surprised with a better than expected update for first half earnings.
The news will boost banking shares today as its the first positive trading news from the sector for some time.
It told the market last night that it expects first-half cash profit after tax to fall 16% to $2 billion.
The Bank said that "was over 20% more than the market consensus" from analysts as operations produced a larger than forecast rise in fee and other income from its banking businesses.
This would offset a sharp, 12% fall in income from its funds management business which has been hurt by the market downturn. Insurance income is expected to rise 10%.
Also to be offset, and the driver of the lower result, a surge in bad debts, estimated at around $1.6 billion from the likes of ABC Learning.
It said statutory net profit after tax would rise about 9% to $2.5 billion, boosted by a post-tax gain of $550 million on the acquisition of BankWest.
Total operating income for the six months to December 31, was expected to increase 15% to $8 billion.
Income growth was driven by 20% growth in banking income, as demand for deposits and credit remained strong.
"As customers look for stable financial institutions in these uncertain times, growth in deposit and credit demand has been strong,” chief executive Ralph Norris said in the statement.
"The group remains focused on credit management and cost control, improving customer service, and responding to the changing pattern of customer demand.”
Mr Norris said that "although the finalisation of the interim results is incomplete, the Group’s underlying operating performance has been robust given the current trading conditions.
Total operating income for the half is expected to be approximately $8 billion – an increase of around 15% on the first half of the 2008 year.
He said the Group is expecting operating costs for the period to be approximately two percent below the previous six months; and the financial impacts of these improvements in operating performance will be offset by higher impairment expenses – likely to be around $1.6 billion, which is in line with market consensus.
The Group will announce its full results for the half year ended 31 December 2008 on Wednesday 11 February 2009.
This will follow the finalisation of provisions (which includes taking into account the impact of all events up to the reporting date on 11 February), completion of the audit review and consideration by the Board.
Mr Norris said, "I expect economic and operating conditions to become increasingly challenging which makes the outlook extremely difficult to predict".
