Norris says too early to write back provisions

Responding to recent commentaries saying that banks have raised too much capital and provisioned too much for a downturn that has proved to be much milder than expected, Commonwealth Bank chief executive Ralph Norris said it was too early to be writing back provisions.

Speaking at a Trans-Tasman Business Circle lunch in Sydney yesterday, Norris said it would be at least six months before he would consider taking such action.

He said: "There is evidence of a recovery but conditions will be challenging for some time.

"There may be a few bumps before this is over. We are still concerned about global issues."

Norris stepped back from his previous position on setting loan rates. He has said that the bank has to take account of its increased cost of funds and not just the movements in the official cash rate when setting home loan and other rates.

In June the Commonwealth put standard variable home loan rates up by 10 basis points.

At the time, CBA group executive retail banking, Ross McEwan, said, "During most of the past 18 months, Commonwealth Bank customers have had the benefit of the lowest standard variable home loan rate on offer from the major banks.  However, given our increasing funding costs, it has become necessary to make this increase.

"At the same time, due to intense competition for retail deposits, the cost of deposits compared to the official cash rate is extremely high."

Yesterday Norris repeated the point that the bank's average cost of funds was still going up but he went on to say: "I would be surprised if households face higher rate increases than official cash rate increases."