During the interviews following the announcement of the Commonwealth Bank’s historic full-year cash profit, its chief executive, Ralph Norris, refused to rule out an out-of-cycle rate rise.

The $6.10 billion profit is a gain of 42% from the $4.31 billion CBA earned in fiscal year 2009. Mr. Norris stated the increased profit resulted from an improvement over the past four years in the bank’s financial products and regained market share, particularly in the commercial banking sector.

But despite the record returns, Mr. Norris spoke cautiously of the medium-term outlook, signalling to investors the remainder of 2010 could be challenging. He specifically mentioned the faltering recovery in the U.S. and Europe, and stated the bank would remain cautious with its capital and liquidity although the previously significant drag from bad debt charges is abating.

Like all the major banks, the CBA continues to roll over its existing debt portfolio into longer-term holdings at a price that continues to rise. Mr. Norris stated that, at the current rate, the bank’s borrowing costs will rise by as much as 40 basis points, or 0.4%, during the next twelve months. As well, the CBA’s 11 million household and commercial depositors are seeking improved returns and shifting their funds into high-yielding accounts.

“At some point we will have to pass on some of that to customers,” he said. However, “a number of factors will come into play” when the time came to make that decision.

The bank, he said, would seek to strike a balance between the competing needs of its depositors, its loan customers, and its shareholders.

“We are a big businesses and I think that’s what people don’t take into account,” said Mr. Norris. “When you look at this profit, it’s less than a 1.0% return after tax on (the CBA’s) asset base.”

Source: http://www.businessspectator.com.au/bs.nsf/Article/Rates-could-rise-says-CBA-chief-pd20100811-8882D?opendocument&src=rss