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Analyst applauds CBA financial results

by Staff Reporter8 minute read
The Adviser

Staff Reporter

The Commonwealth Bank of Australia’s excellent financial results can be largely attributed to the lender’s home loan book, Fat Prophets’ Greg Fraser has claimed.

Mr Fraser said critics of the Commonwealth Bank’s record $7.1 billion cash profit in 2012 should stop looking down the turret for evidence of skulduggery.

According to Mr Fraser, CBA has fortified its business through excellent balance sheet management, astute lending practices and an unrelenting pursuit of operational improvement.

Some of those astute lending practices involve the lender’s home loan book, which CBA has looked after diligently.

“With $343 billion in residential loans, representing about 55 per cent of the total average interest earnings assets of $630 billion, the bank’s exposure to residential housing is large, but prudent,” Mr Fraser said.

“Approximately 68 per cent of all home loans are paying in advance of their requirements and the average loan to value ratio is a cushy 44 per cent.

“Unemployment in Australia remains encouragingly low around 5.2%. This is a key factor in home loan defaults implying the probability of a big blowout is very low. Median house prices have levelled out in most states but demand, affordability and supply factors continue to work in favour of a solid housing market.”

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