Analysts have attributed a decision by the Commonwealth Bank to scrap its traditional peer guidance to the bank’s higher than expected credit impairment expense.
An analysis issued by Citigroup to its clients last week suggests that the Commonwealth Bank “looks light on credit provisioning, particularly when compared to either the ANZ Banking Group or Westpac”.
The analysis said Commonwealth Bank management appeared to have underestimated the severity of the credit cycle and that as impairment charges had risen above expectations, management needed to revise earnings guidance downwards.
However, dealing with the Commonwealth’s wealth management and insurance divisions, the analysis noted that the ColonialFirstState business had performed better than its peers and that CommInsure’s in force premiums had continued to grow strongly.
However, it said that the bank’s life business included a guaranteed annuities portfolio and that widening credit spreads during the half had resulted in a mark-to-market write-down of $34 million on the portfolio.
