article about cba mentioning centro collapse

Norris in the hot seat


John Durie | November 13, 2008
Article from: The Australian

CBA boss Ralph Norris is a glass half full sort of person, but you get the feeling maybe too many glasses have resulted in the bank underestimating the impact of the credit crisis on its position.

At the outset it should be stressed that CBA is in fine shape and it is handling the funding problems well, but in the face of a big hit coming its way via the impending Centro collapse on December 15, Norris was confident indeed to declare there are no systematic credit issues and little sign of material deterioration.

That is a brave call from any one and in particular from Norris, given his poor track record this year in predicting the effects of the credit crisis.

As things stand now with between $1.6 billion and $2 billion of bad debts on his books, Norris is not too much better off than his Melbourne comrades when you consider ANZ’s bad debt charges look like being around $2.1 billion and NAB around $2.2 billion.

Tier One capital of 7.5 per cent is starting to look a little light, even if CBA has a better deposit base than its peers.

NAB, by contrast, has a Tier One ratio of around 8.3 per cent and ANZ at around 8 per cent.

In the 2007 financial year, the CBA bad debt charge was around $434 million and this year it will be four times larger, which suggests there are some issues out there.

The banks bad debt provisions percentage average around the 24-basis-point mark, and now it is heading to 40 basis points or more.

The bank’s stock price is down 5.6 per cent to a multi-year low of $33.17 a share, having fallen more than 21 per cent in the last month, compared to the 9.6 per cent fall in the market, Westpac’s 16 per cent fall and NAB’s 11.7 per cent slide.

Still, it’s better off in market terms than Macquarie which is going into relative free fall, down 8.5 per cent today at $24.65 a share and down some 67 per cent over the last month.

Macquarie reports its results next week and apart from cuts in staff bonuses, as have been well flagged, and a sharp shift away from capital heavy products, the bank is expected to hold the line on its long term mantra of great assets will always produce superior returns.

Separately, Asciano is continuing to trade on very volume this morning with 34 million shares traded, pushing the stock up 34 per cent at $1.53 a share.

Normal trading in the stock is around three million shares a day, but yesterday more than 126 million shares went through.

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