Commonwealth Bank Foresees Slower Global Economy due to Debt Crisis
Australia's top mortgage lender, Commonwealth Bank, forecast Tuesday that the global economy would slow down due to the European debt crisis. As a result, the bank's funding cost could go up.
Given that scenario, CBA Chairman David Turner said market conditions make it vital for the bank to keep a strong balance sheet to ensure it has access to funding at optimal cost.
"We are not immune to vagaries elsewhere in the world. Wholesale funding markets will become more challenging," Turner said.
CBA's competitors - National Australia Bank, Westpac and ANZ - have aired similar views on rising funding costs which necessitated their building up liquidity to avoid the small crisis that Australian banks faced in 2008 at the height of the global financial crisis.
Turner said at the bank's meeting that there are no indicators that the subdued credit growth in 2011 would improve in 2012.
"Fundamentally, it comes down to confidence, and it's confidence that will encourage both individuals and corporations to invest for growth," he told The Australian.
Turner added the CBA will continue to run on a disciplined and prudent manner, while it keeps focus on driving productivity initiatives and delivery of sustainable improvements in business performance to provide superior returns to stockholders.
