Commonwealth Bank of Australia (ASX: CBA), Australia’s largest bank, released its third-quarter trading update for its 2019 financial year.
In a public market filing, CBA CEO Matt Comyn said the group’s fundamentals remained strong and helped it achieve a robust result.
“CBA continued to show resilient business performance in the first quarter of FY19,” Comyn said. “The fundamentals of our business remain strong, highlighted in this quarter by continued deposit growth, sound credit quality and balance sheet strength.”
Excluding one-off items, such as its $700m fine from AUSTRAC, other regulatory items and expenses from consolidations and acquisitions; CommBank’s third quarter cash profit rose 3% year over year.
Over the past year, CBA, much like AMP Limited (ASX: AMP) and National Australia Bank Ltd. (ASX: NAB), has found itself in the media and regulatory spotlight.
Each of the big banks (except Macquarie) have been under pressure to divest parts of their businesses which have created conflicts of interest between advisers and their clients. During the quarter CBA announced it would sell the majority of its financial advice and wealth management operations.
Initially, an ASX listing was planned for all of the operations, but Japan’s Mitsubishi UFJ Trust and Banking Corporation approached the bank with a $4 billion offer for its wealth businesses.
“The recently announced sale of our global asset management business, Colonial First State Global Asset Management builds on a number of previously announced divestments and the demerger of our wealth management and mortgage broking businesses, and represents another important milestone in our strategy to focus on our core banking businesses and to create a simpler, better bank.” – Comyn
Arrears Rising
Against a backdrop of recent softness in Aussie property markets, Commonwealth Bank reported a slight uptick in consumer arrears (loans and credit cards 90+ days past due), year over year.
Compared to the September 2017 quarter, total home loans in arrears rose from 0.53% to 0.67%. Credit card arrears rose from 0.92% to 0.97%.
“Whilst there was a moderate improvement in home loan arrears, some households continued to experience difficulties with rising essential costs and limited income growth,” the bank reported.
Total troubled loans rose from $6.1 billion to $6.6 billion.
What Now?
In August, Chief Comyn said, “We are simplifying our portfolio, operating model and processes to deliver better customer, efficiency, and risk outcomes.”
With CBA’s share price getting hit by regulatory and housing market concerns — it’s down from over $81 since January 2018 — investors will be hoping the bank can rebuild its reputation not only with its clients but with the sharemarket at large.
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