BANK PROFITS STALL DUE TO LOW INTEREST RATES

Written on the 8 November 2016

BANK PROFITS STALL DUE TO LOW INTEREST RATES

COMMONWEALTH Bank (ASX: CBA) statutory net profit was up 4.26 per cent at $2.4 billion for the quarter ending 30 September, the company announced today.

The bank revealed its income growth was impacted by the low interest rate environment, a strengthening Australian Dollar and higher insurance claims.

Banking income growth was solid, supported by strong trading income, but its group net interest margin was lower in the quarter, due to higher funding costs.

The Commonwealth Bank's report comes the day after Westpac also announced stalling profit growth in its full year results.

A bright spot for CBA was its wealth management business, which increased average assets under management (AUM) by 3 per cent and funds under management (FUM) by 2 per cent, driven by stronger investment markets.

In terms of credit quality, the loan impairment expense (LIE) was $322 million in the quarter, equating to around 0.18 per cent of gross loans and acceptances, compared to 0.19 per cent in FY16.

Consumer LIE was up, driven by stress in areas of WA and Queensland due to the mining downturn.

Group troublesome and impaired assets were higher at $6.8 billion, compared to $5.5 billion in the previous corresponding period, which the company says reflects "ongoing stress in the New Zealand Dairy sector".

Commonwealth Bank is trading down 0.97 per cent at $71.830 per share this morning.


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