The Commonwealth Bank warned investors at its annual general meeting yesterday that the bank’s loan losses will increase over the next eight months. The Commonwealth Bank’s chief executive, Ralph Norris, told the meeting that the failures of investment bank Lehman Brothers, Allco Finance Group and ABC Learning Centres will result in “significantly higher first half provisions” for the bank.
Results for the group’s wealth management business had shown it too was not immune from the deterioration of global investment markets, with funds under management for the September quarter at $178 billion, down 3.8 per cent. Retail net flows were also down $266 million.
The situation for the group’s wealth management business didn’t improve in October, with funds under advice (FUA) falling a further 7.7 per cent to $164 billion.
For the four months to October 31, the group’s average FUA declined 8 per cent compared to the previous half, resulting in lower fee revenue and first-half profits for Colonial First State and Colonial First State Global Asset Management.
However, the risk side of the group’s business performed better, with new retail and wholesale business accounting for a 5.2 per cent growth in in-force premiums for the September quarter.
Commonwealth Bank chairman John Schubert said the bank remained “cautious” about the general outlook for the economy for at least the next 18 months.
