Impairment charges undermine CBA profit

Significant impairment expenses have impacted the Commonwealth Banking Group’s bottom line, seeing it report a 7 per cent decrease in net profit to $4.4 billion.

The impairment charges combined with a 9 per cent fall in funds under management and a 35 per cent decline in the profit generated by its wealth management division to hurt the big banking group’s bottom line.

The bank’s wealth management division posted a 35 per cent fall in underlying profit after tax to $514 million on the previous year, driven partly by a 21 per cent decline in funds management income.

However, insurance income growth grew by 9 per cent on the prior year following a 19 per cent increase in average in-force premiums during the year to June.

Chief executive officer Ralph Norris said the funds management businesses were impacted by sustained pressure on investment markets as well at the timing of asset sales.

He said the overall result had been achieved in a demanding year for the global banking industry, and that the bank had emerged from the global financial crisis in a very strong position.

However, he cautioned that economic conditions were likely to remain challenging for the bank through 2010, with credit growth in Australia expected to continue to slow through the year.

The bank posted a 14 per cent increase in operating income to $17,085 million for the year, while operating expenses were contained to a 4 per cent increase.

Total dividends paid for the year were $2.28 per share, down 14 per cent on the previous year.