Commonwealth's result impacted by wealth management

wealth-management/wealth-management-business/commonwealth-bank/chief-executive/

11 February 2009
| By Mike Taylor |

The Commonwealth Bank has reported a 16 per cent decline in net profit after tax to $2.013 billion for the six months to December 31 in what it described as a solid result achieved in a difficult environment.

The group also reported a significant increase in impairment expenses to more than $1.6 billion.

At the same time, the banking group has moved to support its balance sheet by announcing a share purchase plan set at a floor of $26.

Significantly, the bank attributed a decline in funds under management within its wealth management business as being one of the key components affecting the result.

It said wealth management's underlying profit after tax had fallen by 16 per cent to $328 million, with funds under administration down 21 per cent to $158 billion.

However, this had been offset by the strong performance of CommInsure, where total in-force premiums had risen by 26 per cent to $1.4 billion.

The announcement said net profit after tax for the wealth management business was down 56 per cent on the prior competitive period to $175 million, primarily due to unrealised negative mark-to-market movements of $189 million in the annuities portfolio of CommInsure.

Commenting on the result, Commonwealth chief executive Ralph Norris said impairment expenses increased significantly, with much of the increase driven by exposure "to a limited number of high profile corporate customers whose business models had been under pressure for some time".

"While there has been no evidence of a systemic deterioration in credit quality in the commercial portfolio, it is clear that customers are being increasingly impacted by the slowing in the real economy," he said.

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