Commonwealth Bank attacked after posting $6.1 billion profit: Economy Roundup

The Commonwealth Bank recorded a 42% increase in full-year cash profit to $6.1 billion this morning, and said it remains cautious about prospects for the next year as economic conditions remain uncertain.

But the bank, and the financial industry altogether, has been accused of being run by a group of “greedy thieves” by Family First senator Steve Fielding, who says the Government and Opposition should be questioning the size of the banking sector’s profit.

Commonwealth Bank said impairment expenses for the year to June 30 fell to $2.08 billion, with statutory net profit after tax up 20% to $5.66 billion. Net interest income grew by 11% to $11.87 billion.

However, the company shares fell over 2.5% to $51.37 after the market opened this morning. Shares were trading down 2.4% to $51.51 at 12.10 AEST.

This was because chief executive Ralph Norris said in a statement that despite the solid result, the economic outlook is still uncertain overseas and as such, it will maintain a conservative capital position.

“This fragility manifested itself in a slowing in the underlying momentum in our business at the end of the 2010 financial year.”

“As a result it is appropriate to maintain a degree of caution about the prospects for our business for the coming year. We intend to retain conservative capital and liquidity settings for the foreseeable future so that we are able to provide support to our customers in these uncertain times.”

But the bank has come under attack. Fielding says the Commonwealth Bank’s profit is inappropriate given so many Australians are suffering under higher interest rates.

“The banks are a bunch of greedy thieves, ripping off Australians trying to live the dream of owning their home,” he said. ”The Commonwealth Bank’s profit could feed a third world country for a year yet we let them get away with sending Australians into mortgage stress because of their unrelenting greed.”

Greens leader Bob Brown echoed Fielding’s sentiments, saying that “While many Australians are pulling their belts in, the Commonwealth Bank is raking in this huge profit”.

Meanwhile, new figures from the Australian Bureau of Statistics reveal personal finance commitments have continued to fall, with commitments for owner occupation dropping by a seasonally adjusted 1% to $13.38 billion.

However, personal finance commitments actually increased by 1.2% to $6.8 billion, while commercial finance and leasing finance commitments dropped by 8.9% and 6% respectively.

Sharemarket opens lower after weak Wall Street result

The Australian sharemarket has opened lower this morning, following a weak night on Wall Street where investors were disappointed after the Federal Reserve announced more measures to shore up troubled mortgages.

The benchmark S&P/ASX200 index was down 39 points or 0.86% to 4501.7 at 12.25 AEST, while the Australian dollar edged closer to US91c after the Fed announced its plans.

ANZ shares lost 1.6% to $5.43, while NAB shares also fell 1.5% to $24.13. Westpac declined 2.7% to $22.65 as Woolworths lost 0.7% to $26.50.

Share registry group Computershare has recorded a net profit after tax of $294.76 million, an increase of 15.3%, with revenue also increasing by 6.9% to $1.6 billion.

“The increase in revenue was largely due to contributions from acquisitions made through financial years 2009 and 2010, significant US Mutual Fund proxy solicitation and higher corporate action activity in Australia, Hong Kong and India,” the company said in a statement.

“This was partially offset by weaker corporate action and register maintenance revenue in the UK and lower margin income globally.”

Chief executive Stuart Crosby also said the outlook over the next year will be tough, as “client attrition through insolvency, bail-out and takeover will also continue to drag on annuity revenue”.

Property developer Stockland has recorded a statutory net profit of $478 million for the 2010 financial year, up from the $1.8 billion loss it recorded in 2009.

Underlying net profit excluding significant items was up 10% to $692.3 million, while total revenue also grew to $2.06 billion.

Supermarket giant Woolworths has now appointed Jayne Hrdlicka as a new company director. She previously worked at Qantas and at Bain & Company as an advisor.

“Her extensive and valuable experience will be an excellent addition to the skills and experience of the board,” chairman James Strong said in a statement.

Fed steps in to save troubled mortgage debt

The Federal Reserve in the United States has moved to strengthen the country’s economic recovery by saying it will use cash from maturing bonds to buy more Government mortgage-linked debt.

The decision comes after a number of comments from Fed officials, who have said the economy is struggling to take hold. “The pace of recovery in output and employment has slowed in recent months,” the Fed said after a one-day policy meeting overnight.

Investors were upset by the move on Wall Street, with it being a sign the domestic economy is still struggling to recover. The Dow Jones Industrial Average fell 54 points or 0.51% to 10,644.25.