THE SQUIZ
The Commonwealth Bank has posted a record $10.2 billion profit off the back of rising interest rates while warning they are starting to bite its customers… Australia’s largest bank released its financial results for the 2022-23 financial year yesterday, showing its profit could have been as much as $15.6 billion if provisions for bad/doubtful debts (aka the money it holds for loans that mortgagees might not be able to service) weren’t counted. CBA boss Matt Comyn – who received a handsome bonus for the result – said higher interest rates were slowing the economy and “we are near the end of the rate-hike cycle”. But when it comes to rates coming down, he said that’s “still some time off for customers who are doing it tough at the moment.”

THAT’S A HUGE PROFIT…
It sure is, which is why the bank was at pains to say that its profit margin decreased between the first and second halves of the financial year as interest rates increased. And given the slowing economy, Comyn said profits could slide further. That’s because of the state of the economy and where consumers find themselves along with steep competition for new customers. The bank released data yesterday showing that at least 3.4% of its variable interest rate owner-occupier mortgage holders are currently spending more than they’re bringing in – with younger Aussies shown to be struggling the most). Comyn said the bank is “closely monitoring the impact of reduced discretionary spend, particularly on our small and medium-sized business customers”.

WHAT ELSE IS HAPPENING IN THE WORLD OF FINANCE?
It’s all happening… The Italian Government has shocked its banks by dealing them a one-off 40% tax on their record profits. It’s “to punish banks’ unfair behaviour” for not passing on higher interest rates to depositors. In the US, bank stocks also took a hit after ratings agency Moody’s downgraded several banks after analysing their credit quality and flagged more might be on the chopping block. Having good quality credit is essential – watch The Big Short about the Global Financial Crisis to discover what happens when things go bad… And in China, consumer prices have fallen for the first time in 2 years thanks to weakened demand for Chinese-made goods at home and abroad. All of that adds up to an economic climate as unsettled as we were when we found out that crocodiles talk to each other…

Reporting season is well and truly heating up – our latest Squiz Shortcut takes you through what it’s all about and why it matters.