SYDNEY: Commonwealth Bank of Australia (CBA), the country’s second largest lender, reported yesterday a doubling of first-half net profit on strong lending to a hot housing market and a turnaround in its fund business.
The bank’s closely watched cash earnings figure, which takes into account big write-downs that depressed its results a year earlier, grew about 3% in the latest half. This met expectations, but the bank warned that earnings growth could slow in 2004 as home lending eased.
CBA's shares rose more than 2% to a 17-month high of A$31.69 yesterday, as fears of a slowing housing market were overshadowed by news that the bank’s restructuring plan was on track and it planned a major share buyback and a record interim dividend payout.
CBA chief executive David Murray repeated that the bank expected underlying earnings growth for the full year, but said the rate of growth may moderate in the second half as Australia’s red-hot housing market cooled.
“It (home lending) was stronger in December than normal, but it came off in January, more so than it usually does in January. So I still expect slowing in the home loan market,” he told reporters.
CBA reported a net profit of A$1.24bil for its first half, compared with A$622mil a year earlier. Cash earnings were A$1.24bil, up from A$1.21bil previously.
The result was affected by A$346mil in restructuring charges, which offset improved fund management profits as equity markets and loan growth picked up.
However, that was more than half the flagged charges tipped for the full year, with the bank now only due to account for a further A$154mil later this year.
The bank, which plans to cut 3,700 of its staff by 2006 and spend A$880mil to bring costs into line with competitors, has flagged A$500mil for restructuring costs this year. – Reuters
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