The loan loss rate doubled at Commonwealth Bank over FY2020 – to 33 basis points from 16 bps in 2019 – but to a level still less than half the loss ratio of 73 bps in FY2009 in the washup of the GFC.
Over the full year the level of ‘troublesome and impaired assets’ increased to A$8.7 billion from $7.8 billion, surprisingly small given the pandemic.
In the annual report, CBA said this was concentrated on corporate customers in transport and storage, manufacturing, culture and recreation and retail and wholesale trade “as well as continued weakness in sectors impacted by discretionary spending”.
The bank took an additional credit provision of $1.5 billion “for the potential impact of COVID-19 on our lending portfolios”.
Loans written off in FY20 at $763 million were down from $901 million in FY19.
Alan Docherty, the bank’s CFO, told a briefing: “We can already see some signs of emerging stress across the portfolio, although it is early days.”
Within the consumer portfolio both home loan and personal loan 90 day arrears remain below the levels seen last year, with both product categories insulated by the loan deferral arrangements and the income subsidies in place since March.
“Our current level of provisioning is $1.1 billion higher than the level of provisions that we calculate would be required under our base case economic forecasts,” Docherty said.
“That extra level of provisioning provides our earnings and capital levels with a degree of insulation should we experience a more severe, prolonged downturn scenario.”