CBA is out with it quarterly update this morning and although the result is in line it is not glowing. From Credit Suisse:
Cash earnings of circa $1.9bn (Credit Suisse 2H13E run-rate $1.914bn; consensus $1.900bn); Reported Profit circa $1.9bn
- Revenues: 1) CBA stated that trading income 3Q13 “was at a level consistent with the 1H13 run-rate”; and 2) FUA and FUM growth was 4% sequentially; Platform net flows of $1.1bn (with a second consecutive quarter of “strong” net flows to equities); Insurance premium growth was “subdued”, with GI and Direct Life was offset by “weaker” Wholesale Risk and Retail Advice.
- Net interest margin: CBA stated that the Group net interest margins was “higher” in 3Q13 (Credit Suisse 2H13E run-rate +2bp) benefiting from asset re-pricing, but partially offset by higher funding costs. Divisionally, CBA stated Australia retail deposit margins “remained under pressure in a competitive market”
- Bad debt charge of circa $255mn / 19bp (Credit Suisse 2H13E run-rate $286mn / 21bp; consensus $302mn). CBA stated that economic overlay collective provisions had been maintained.
- Asset quality: Impaired asset balances remained stable ($4.3bn) but 90+ day past-due balances declined (from $2.8bn 2Q13 to $2.7bn 3Q13). CBA stated that mortgage arrears were “stable”, but seasonally higher in unsecured personal; corporate asset quality “stable”.
- Capital: APRA Basel III equity Tier 1 ratio: 7.7% (Credit Suisse 2H13E run-rate 8.25%) with CBA attributing the decrease to payment of the 1H13 dividend and the DRP buy-back more than offsetting .
Impact:
An in-line with consensus trading update, but (like WBC before it) supported by a cyclically low bad debt charge and lower in quality to that extent.
