Cash profit a Bell of a mess

Commonwealth Bank has stretched credibility concerning its full-year cash profit - said to be A$7.82 billion - by omitting a large A$45 million loss on a loan made to one of its most notorious borrowers from its calculations.

Almost five years after the West Australian Supreme Court delivered its findings in the long running Bell Group litigation, CBA has finally raised what it describes as " an additional provision" (but also described as "Bell Group litigation expenses") for its share of the damages the court ordered the banks to pay to the liquidators of Bell.

The Bell liquidators, Geoff Totterdell and Tony Woodings, and the trustee for a group of bond-holders, alleged malfeasance on the part of Bell's bankers, who refinanced the company in January 1990 when they knew it was broke; wrongly claimed control of the proceeds of certain Bell asset sales during 1990 and 1991; and sold Bell's assets for arguably less than they were worth in 1992 to recover their debts.

At the time of the January 1990 refinancing, Bell owed the banks $278 million. Commonwealth, among a score of banks, has attempted to hang on to the proceeds ever since.

In October 2008, Justice Neville Owen ruled for the liquidators (after a three-year trial) and, in September 2009, ordered the banks to pay $1.6 billion.

In October 2012, the Court of Appeal in Western Australia ruled that the banks owed even more.

Legal costs to the banks have since been estimated at $250 million.

CBA said it reported the belated provision as a non-cash item "due to its historic and one-off nature."