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CBA lifts profit but bad debts rise


Commonwealth Bank of Australia has lifted third-quarter profit by 4.5 per cent to $2.3 billion but it also followed its rivals by reporting a rise in bad debts.

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Australia’s biggest bank on Monday said the unaudited cash earnings result for the three months to March 31 was up from $2.2 billion in the prior corresponding period.

Statutory profit was up about nine per cent at $2.4 billion.

CBA said troublesome and impaired assets rose in the quarter to $6.3 billion, which chimes with reports from the other big four banks in their first-half earnings updates last week.

“The increase is largely due to a small number of exposures in the group’s institutional lending portfolio, which became impaired or exhibited heightened signs of stress, including a single, relatively large, domestic exposure with a syndicate of lenders including other Australian major banks,” CBA said in a trading update.

UBS analysts have suggested that Commonwealth Bank’s two major exposures are to steelmaker Arrium and the Wiggins Island coal terminal.

CBA’s loan impairment expense rose in the quarter to $427 million and the bank lifted total provisioning to $3.9 billion.

“The credit quality of the group’s lending portfolios remained sound,” the bank said.

“However, … pockets of weakness remain and warrant caution, particularly as global volatility continues.”

Even so, CBA was positive about the state of the economy.

“The Australian economy continues to perform relatively well, with the steady transition from a mining-dependent to a more broad-based economy evident in GDP (gross domestic product) and unemployment trends, and supported by low interest rates and the decline in the AUD (Australian dollar) over the past 18 months,” CBA said.


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