THE fallout from the row between Commonwealth Bank and its abortive capital raising undertaken by investment bank Merrill Lynch reverberated around the group’s share price yesterday despite the success in finally getting away its replacement $1.65 billion offer.
The focus has now switched back to the original disclosures†and bad debt†likely to rise to $2.5 billion next year.
Having set aside about $1 billion at the end of its 2008 full year at June 30, Commbank yesterday provided further detail to the market that an additional $1.5 billion would almost certainly be needed to make up for loans that have gone sour over the past six months.
Details of the higher bad debt charge have led analysts to downgrade the bank’s forthcoming earnings after what ABN Amro said was an effective profit warning.
JP Morgan also overturned its day-old “buy” recommendation on Commbank’s shares, saying investors should sell based on its forecasts that the group’s earnings next year could fall by nearly a fifth and its annual dividend cut by 17 per cent.
This story indicates that the economy is struggling with all banks revising their bad debt provisions.
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article excerpts SMH
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