Norris defends super profits and rate rises
The Commonwealth bank of Australia reported a $3.34 billion December 2010 half profit yesterday. The bank is on course to post a record $6.6 billion full-year result.
Chief executive officer of the CBA, Ralph Norris said: “Yes we are a profitable organisation, but not excessively so.” Norris said the bank's return on assets – a measure of profitability – which at 1 per cent sits well below companies such as miners, where a return on assets is closer to 7 per cent.
Norris said Australia should investigate a large sovereign fund to save money from the mining boom. Norris said the bank’s decision to raise mortgage interest rates by 45 basis points in November 2010 was “absolutely the right decision” given sustained elevated funding costs.
“There's no doubt during November we did have a softer level of applications on the back of the furore of the 20-basis-point increase in the SVR (standard variable rate).”
The bank's 45-basis-point rise was 20 basis points above the quarter percentage point rise in the RBA’s official cash rate. “Increasing above the (overnight cash rate), which I don't find is particularly popular, is certainly something I would be reluctant to do [in the future],” he told reporters.
CBA reported yesterday that the pace of mortgage growth rebounded during the month of December. Norris said it was the bank's best month for 2010.