The slump is all over, the GFC a memory won by the Commonwealth Bank and its management single handed, without the help of the federal government, the regulators or the interest rate cuts by the Reserve Bank.
That’s the impression from the bank’s CEO, Ralph Norris, yesterday. In his public comments there was little if any recognition of how the authorities helped the CBA and its rivals survive the GFC.
The market didn’t worry, bank’s shares eased then rose yesterday after the results for 2009 were released.
By the close the shares were up almost $1.40 to $45.32.
In earnings terms the slump in share price seen in the financial year seems to have been a gross over reaction by nervous nellie investors and short sellers.
Final dividend was down 25%, as expected by the market, to $1.15 a share.
That knocked the full year down by 14% after the bank had held the interim steady at $1.13 a share.
And that didn’t knock the market off its stride.
Cash earnings (the best measure of banking profit) were down only 5% at $4.498 billion (that’s after taking out the second half contribution from the BankWest buy) and was after a big rise in bad debts charge caused by the credit crunch and the impact of the slowdown on businesses here in Australia.
And second half cash earnings rose 9.6% from the first half when they fell 16%.
The results do show that the CBA did well in the six months to June as the economy slowed and credit conditions got a bit tougher for business and the company’s bad debt provisions rose.
The press release says it all and it’s notable for no word of thanks, or mention of the support the bank (and its rivals) received from Australian taxpayers during the year via the federal government’s deposit guarantees.
Without that guarantee and Australia’s Triple A international credit ratings, the CBA and its rivals would have had a miserable year and one or two of the smaller banks may not have survived.
For a while last October-November Australian banks couldn’t borrow offshore at all and funded themselves domestically.
The spin in the press release is all about the strength of the CBA, without a word of mention about the worst year it and the country’s banking system has faced for decades, certainly since the last recession which saw the CBA created in its modern form and floated under Paul Keating and Bob Hawke’s government.
The way the release is written it was all the CBA’s own work, no mention also of some appalling lending decisions, for Centro and ABC Learning, which was the worst of all and still not adequately explained to the market and shareholders by management.
CEO, Ralph Norris was quoted as saying:
"The Group has performed well in what has clearly been a demanding year for the global banking industry.
"A number of factors contributed to this good result including the strength of our banking franchise, our emphasis on maintaining high credit standards and our determination not to compromise our AA credit rating.
"As a result the Group is emerging from the global financial crisis in a very strong position.
"We are one of only a handful of banks globally which has retained its AA rating and we were recently ranked by Global Finance Magazine as one of the top fifteen safest banks in the world.
"This strength has enabled the Group to continue to support its customers at a time when many need our help.”
But the bank had help in achieving this strong outcome.
From that statement you’d be thinking it was all the bank’s own work and that of its management.
Far from it. The bank didn’t mention that the reason why the bank (and its big Australian rivals) jumped up the rankings was because of banking incompetence offshore in the US, Japan, the UK and Europe; and because of hard-nosed regulation here, especially by APRA.
And then there’s the poor folk stuck in the Storm Financial debacle, which can be directly attributed to predatory and at times reckless decision-making by the CBA and some of its staff.
This has been recognised by the bank in its attempts to make the mess go away by dealing with individual customers and not taking their homes away from them and other acts of banking nastiness.
It might have been belated, but it can be said the CBA is trying hard to repair the damage it caused by its part in allowing the Storm Financial crisis to grow unchecked.
The CBA’s result confirms that it, the NAB, ANZ and Westpac, are in a class of their own in this country and have very strong balance sheets.
But the dividend had to go lower so shareholders could share in some of the pain:
"Having maintained the interim dividend at the same level as the prior year ($1.13 per share), the Board took the view that in the current uncertain environment it would be prudent to reduce the final dividend to $1.15 per share – down 25 percent on last year’s final dividend.
"Total dividend paid for the year was $2.28 per share – down 14 percent on the prior year."
Prudent is an interesting word in the context of those poor Storm Financial victims and the loans to the likes of ABC Learning.
There was that refusal to acknowledge the important roles played by the federal government, APRA and RBA.
The 4.25% in rate cuts by the central bank certainly perked up business in the second half, and the first home
