Well, as mentioned, it doesn't look like the market is going to be too impress with CBA profit upgrade guidance as I said $240M increase is from the market rally and not from bank business improvement.
Any strength on open is a short for me and looking forward to 4700 as my budgie is back in her cage and ready to go back to work. Good luck.
CBA fails to ease bank fears ERIC JOHNSTON January 18, 2010 ANALYSTS have set about hiking earnings forecasts for the Commonwealth Bank, but caution much of its additional earnings come from one-off areas, rather than a supercharged recovery of the banking sector.
CBA late Friday said its first-half cash net profit would be about $2.9 billion. The shock upgrade outstripped analysts' estimates of $2.7 billion and dwarfed the $2.01 billion cash profit posted in the same period a year ago.
CBA said earnings in the fiscal first half were boosted by improved equity markets, which resulted in a $240 million turnaround in investments.
The bank also reported bad debt charges declined from a year ago, when they rose almost five-fold to $1.6 billion after loans to a string of high-profile corporates such as ABC Learning soured.
Investors are looking for signs of a drop in bad debts, which wiped more than $13 billion from bank earnings in the past year.
James Ellis, an analyst at brokerage Credit Suisse warned investors should not see the CBA upgrade as an indicator of what was happening in the broader banking banking sector.
The bulk of the upgrade came from a turnaround in fund management returns. Specifically, these are ''lower quality'' mark-to-market gains within the bank's guaranteed annuities portfolio.
''With CBA, AMP and Challenger the key participants in this market, we see little read through on this point for the banks sector,'' Mr Ellis said.
Challenger, with a 41 per cent share, is the biggest player in the immediate annuities market - investments that provide guaranteed income payments over a set time mostly by investing in fixed income assets.
AMP has 22 per cent of the market, while CBA is third placed with 17 per cent.
Credit Suisse hiked its full-year profit estimates for CBA by 3 per cent, while Deutsche Bank, which described the upgrade as due to ''volatile earnings streams'', boosted its profit outlook for the bank by 6 per cent.
Westpac and ANZ last month said the bad debt cycle had peaked. However, CBA's last update to investors in November said the pace of recovery was ''unclear''.
CBA is scheduled to hand down its first-half profit on February 10.
Ratings agency Fitch last week said Australia's big four banks were in good shape, with few forseeable triggers that could hurt their much-cherished AA-credit rating.
In its semi-annual assessment of the sector, Fitch said many of last year's threats to the banks' balance sheets had receded. One reason was the recovery of corporate Australia, particularly after it raised more than $32 billion in fresh equity to pay down debt.
At the end of only the second week of the year, the four major banks have issued the equivalent of $8.4 billion of bonds, according to figures compiled by credit market tracker ADCM Services.
(20min delay)