FRUGAL CULTURE HELPS COMMONWEALTH BANK PROFITS JUMP

FRUGAL CULTURE HELPS COMMONWEALTH BANK PROFITS JUMP

LEAN spending and conservative funding have paid off for Commonwealth Bank of Australia (CBA), with the ASX-listed company today posting $1.75 billion in cash earnings for the first three months of 2012.

The unaudited result was 2.9 per cent up on the $1.7 billion net profit recorded for the previous corresponding period.

“Consistent with the uncertain outlook that we indicated at the group’s half year results in February, we have retained our conservative business settings including tight expense control, a conservative funding profile and strong provisioning levels,” says CEO Ian Narev (pictured).

Total impairment expenses declined slightly to 18 basis points of total average loans ($232 million), asset growth was largely fuelled by deposit funding and new wholesale funding issuance in the quarter had an average tenor of 4.6 years.

CBA’s tier-one capital ratio remained static at 9.75 per cent despite the bank’s January implementation of international Basel 2.5 capital requirements. The group expects a smooth transition to Basel III requirements.

“The financial strength of the group continues to enable us to take a long term view of the business with focus on enhancing our core capabilities of technology, a customer-focused culture and balance sheet strength to drive customer satisfaction and good returns to our shareholders,” says Narev.

Higher funding costs, subdued credit demand, elevated funding costs and conservative business sentiment were blamed for preventing further revenue growth.

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