SYDNEY: Commonwealth Bank of Australia shares slump the most in six years after its chief executive officer Matt Comyn says there is elevated uncertainty in the nation’s economy and the bank increased its credit loss provisions.
The shares dropped as much as 9.1%, the most since March 2020, wiping around A$24bil in market value from Australia’s largest listed company. The bank unveiled a A$200mil increase in collective provisions and a statutory net profit after tax of about A$2.6bil in the three months through March, flat on the prior year.
The heavy selling was a sign investors are growing worried a softer economy may impede the bank’s earnings, as higher fuel costs linked to the Iran war hit consumers and businesses.
Should the economy weaken, “the outlook for some of the more troubled sectors becomes worse, the risk weightings go up and that erodes surplus capital”, said Nathan Zaia, an analyst for Morningstar.
“There may be an eye on how much head room they have to support loan growth and dividends,” he said.
The broader Australia S&P/ASX 200 Index dropped 0.5%. — Bloomberg
