But slower-than-expected earnings growth over the second half and rising bad debts raised concerns, sending CBA’s shares down 0. 89 per cent to $80. 96. “They’ve had a track record of consistently meeting expectations and they didn’t beat expectations, but I don’t think it’s anything to get too worried about,” Merlon Capital Partners principal Neil Margolis said.
The inquiry’s interim report released last month flagged a raft of potential headwinds for the major banks, including the prospect that the big four lenders may have to hold more capital on their balance sheets. “I don’t think we came into the inquiry thinking we’re going to get a whole lot of free kicks,” Mr Narev conceded to The Australian.
The financial inquiry, the first in 17 years, is being led by former CBA chief David Murray, with several analysts believing the one-time banking boss wants to “leave his mark” through higher capital levels to better protect against the big banks being “too big to fail”.
Commonwealth Bank has pushed back against the initial findings of the Murray financial system inquiry, arguing “further confusion” was being created about the banking sector’s strength while labelling it critical that firm rules were in place surrounding how much capital banks were required to hold.
Last month’s interim Murray report noted that Australian banks’ capital ratios were the “middle of the pack” globally and questioned the banks’ long held claims that stricter implementation of global rules surrounding capital may stifle lending.
Mr Narev zeroed in on its rising organic capital and return on equity — to 18. 7 per cent — amid soft overall demand for loans, saying strong profitability put it in good stead to fund any rebound in demand from corporate Australia.
CBA again highlighted that the ratio — widely seen as a barometer of balance-sheet strength — was a higher 12. 1 per cent on an “internationally harmonised” basis, the fourth-highest globally of banks with more than $700bn worth of assets.
Read more here: Business Spectator