CBA draws line under recovery

The CBA has reinforced hopes that the bad debt charges that have played havoc with bank profits over the past 18 months have finally peaked, paving the way for economic recovery.

Ballooning charges for lending losses wiped more than $13 billion from bank earnings in the past year, reported BusinessDay.

However, come banks including the CBA and ANZ have recently said they may have seen the worst of bad debts.

The CBA said last week a drop in impairment charges, solid income growth in banking, tight cost control and improving equity markets would result in a better than expected $2.9 billion first-half profit.

This time last year the bank recorded about a $2 billion profit.

Macquarie Securities analyst Tom Quarmby said: "We believe this outcome demonstrates that CBA's bad debt charge had indeed peaked in the second half of 2009."

He added that this was likely to have a "stronger read-through" for other banks - like NAB and ANZ - which generated a lower proportion of earnings from retail operations. 

Related Story 

Earnings strained despite recovery - The strong dollar and the earnings dilution caused by a record run of capital raisings are set to dampen the impact of rebounding business activity, delivering only flat to modest EPS growth in the December half year.