from the international herald tribune, page-7

This article is a load of rubbish. Shame on them. It sounds like uncommon nonsense.

It might be worth listening to the CBA webcast from yesterday. If anyone can hear CBA say anything remotely like what has been reported, lunch is on me.

Yesterday, CBA announced that in the prior half they have raised their provision for impaired loans by $930m and this was widely reported in the media. Sentence first - verdict afterwards.

It would be easy to assume that the $930m was because of the 'bad boys' like Allco, ABS and Centro because that's what sells newspapers. I know the IHT did not specifically say this, but they and other publications do draw the linkage. They're nothing but a pack of cards.

Of course we like to look past the headlines.. To ge a handle on the real numbers, we need to begin at the beginning and go on till we come to the end: then stop.

So..

If you look in the Appendix 4E Appendices (an appendix to an appendix - curiouser and curiouser) page 43, there was indeed a $930m provision raised, but this covered all segments. Page 45 breaks this out and as you will see, $331m of the provision was for the Retail Bank to cover those naughty little Dollarmites who don't pay their credit cards and home loans. $43m was for IFS and $19m was for 'other' (the Ralph Norris beer and 'soup of the evening' fund perhaps?). $426m was for Preium Business Services which covers ALL of the CBA commercial loans, of which the bad boys are part as are all of the other commercial entities the CBA has lent to (of which there are many).

Despite the credit crunch and all who sail with her, the year-on-year increase in impairment provision in the commercial book has gone up ~$350m.

I have no doubt CBA do have provisions for potential losses at Centro, they would be prudent to do so. Even then we could reasonably assume there are secured and unsecured portions, which means the provision maybe lower than expected.

We don't know how much CBA have lent to CNP or CER (directly or through club facilities), but the numbers don't seem to be suggesting hundreds of millions or billions of dollars of losses coming down the pipe. We're reasonably sure CNP is covering interest payments, CER too (CER paid a dividend so you'd hope the rest of the bills were up to date). Even the 'past due' loans on p41 don't seen to indicated that anything the size of Centro is overdue.

CBA are also a big shareholder so we'd reasonably expect them to try and preserve their investment for the future should things head south. The credit crunch won't last forever and it's a poor sort of memory that only works backward.

Oh my ears and whiskers, how late it's getting! Dinner time.

(Apologies to Lewis Carroll fans)