Commonwealth Bank of Australia (CBA) is to slash its final dividend by 25 per cent and has declined to forecast future cash earnings, saying operating conditions remain challenging.
CBA, which owns New Zealand's ASB Bank, yesterday posted unaudited cash earnings of A$1.15 billion ($1.46 billion) for its March quarter that
included a positive earnings contribution from newly acquired subsidiary BankWest.
CBA chief executive Ralph Norris said March quarter cash earnings were "slightly lower" when the earnings contribution from BankWest was excluded and a clean period-on-period comparison was made.
The March 2009 update on Wednesday was the first time CBA has released a quarterly cash earnings figure.
Norris said CBA has stopped any further expansion of BankWest on the east coast of Australia because branches in that region were not profitable.
"The business plan for those branches indicated they would be profitable within 36 months," he said.
Norris said he declined to forecast on future cash earnings for CBA because the economic outlook made the task too difficult.
"We're obviously seeing some green shoots internationally with regard to financial markets but there is no doubt that the flow into the real economy has yet to occur," Norris said.
"We've seen the (federal) budget predicated on an unemployment rate of 8.5 per cent, so I think at this point it's very difficult to make forecasts."
CBA said it would cut its final 2009 dividend by 25 per cent, in line with its peers, which reduce its full-year dividend by 14 per cent from the previous fiscal year.
"In this environment capital preservation is a high priority," Norris said.
Norris said CBA had a fixed payout ratio which had been maintained at 73 per cent based on cash profit for several years and currently stands at this level.
Accounting for dividend reinvestment, the payout ratio had dropped to 45 per cent, he said.
"Obviously in this environment we're taking a bit more of a flexible approach to that, but our payout ratio at the moment is around that 73 to 75 per cent (level)."
Chief financial officer David Craig said CBA was monitoring the market and would look at raising capital via a hybrid issue when the time was right.
Impairment expenses for the quarter were about A$630 million and CBA has lifted its collective provisions to A$2.954 billion to March 31, from A$2.703 billion at December 31, 2008.
- AAP
