CBA expects to report $9.5 billion profit amid public anger over not passing in full RBA rate cut

Public rage over Australian banks pocketing about half of the interest rate cut made by the Reserve Bank of Australia (RBA) on Tuesday is expected to increase amid reports that Commonwealth Bank of Australia (CBA) will release this week its financial report. The bank is expected to report a record profit of $9.5 billion.

CBA’s full-year earnings are expected on Wednesday with analysts forecasting a 3.7 percent boost in the profits of Australia's largest bank, reports Sydney Morning Herald. With a forecast profit of $9.48 billion, CBA is also anticipated to declare a dividend of $2.22 a share. The flat divided is due to CBA’s earnings per share growth limited by its $5-billion capital raising launched in mid-2015.

With CBA estimated to earn another $475 million because of pocketing the 0.12 percent of the 25 basis points rate cut made by the Australian reserve bank, analysts believe after 12 months, the bank would report another record $10 billion profit.

Following Prime Minister Malcom Turnbull taking the side of borrowers and hitting the banks for not passing in full the rate reduction, TS Lim, analyst of Bell Potter, sees lenders coming under more scrutiny from politicians. He says banks face a tight balancing act between interest of shareholders and other stakeholders.

TheNewDaily reports that the PM ordered the big banks to explain their interest rate levels to the House of Representatives standing committee on economics. The appearance before legislators would become an annual obligation for major lenders to create a “regular and permanent method of accountability and transparency” for Aussie banks, says Turnbull.

Turnbull said last week, “It’s not my job to manage the banks or tell them how to manage different products because they’ve all got different risk profiles and so forth, but it is absolutely clear that they have made a conscious decision not to pass on the full extent of the rate cut, and they should have done that.”

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Source: CommBank