CBA cuts dividends as bad debts surge

CBA cuts dividends as bad debts surge
14/05/2009

Commonwealth Bank has slashed dividend payments by 25 per cent to preserve its capital and equip it for the financial downturn the chief executive officer Ralph Norris confirmed yesterday.

It is the first time CBA has cut final dividend payments since the bank was privatised in 1991.

CBA is experiencing a spike in bad debt problems. Norris says debt problems are moving from its top tier business borrowers to small and medium sized business borrowers.

Source: The Australian Financial Review

 

I don't think the word "spike" is a good description of bad debt levels. It implies that bad debt levels will be coming down in the very near term, which is exceedingly unlike. The word "increasing" would have been much more appropriate because it also implies that the current levels of bad debt are likely to continue to rising as this recession plays out further.

On the flip side Australian banks have been exceedingly lucky that most have had a wonderful period over the last 12 months of being able make sure they were well capitalised going into this downturn. The only remaining question, "will it be enough?".