KEY POINTS:
Commonwealth Bank of Australia (CBA), the country's third-biggest lender, warned investors today it might have to cut future dividends as it posted a 16 per cent fall in half-year profit.
CBA's half-yearly cash profit was in line with a market update it issued only last week and was dented by a global crisis that slowed credit growth and sent bad debts soaring.
CBA, the owner of ASB Bank here in New Zealand, kept its interim dividend unchanged at A$1.13 ($1.43), the first time in 16 years it has not raised the half-year payout, and warned over future dividends in a comment likely to worry many shareholders who buy the stock because of its income.
"In the current uncertain economic environment we cannot guarantee to maintain future dividends at past levels," Chairman John Schubert said in the results statement.
Australian banks are battling tough global credit markets, a slowing domestic economy and rising risk of defaults among corporate borrowers, but have not been hit as hard as some US and European counterparts.
The banks have been on an equity capital raising spree to strengthen their balance sheets as provisions rise.
CBA's July-December cash profit fell to A$2.01 billion from A$2.39 billion a year earlier. The bank had flagged last week it expected six-month cash profit of about A$2 billion.
Cash earnings, widely used by analysts as an indicator of core profit, exclude one-off items and non-cash accounting items and form the basis for dividends.
As it already forecast, CBA's impairment charges soared to A$1.6 billion from A$333 million.
The bank said there was no evidence of a broad deterioration in credit quality, although its commercial customers were being affected by the economic downturn. But arrears in consumer lending had begun to increase, while still remaining low.
"As economic activity slows and unemployment rises, pressure to retain customers is expected to grow," the bank said.
