REUTERS

Australia's largest lender Commonwealth Bank booked a Aus$3.62 billion (US$3.87 billion) first-half profit Wednesday but revenues slowed as global ructions rattled consumers and funding costs rose.

The profit, up 19 percent on the same July-December period last year, due to a steep drop in the cost of bad loans, came off revenues of $Aus23.72 billion, up just three percent, as debt jitters in Europe hit borrowing confidence.

Commonwealth chief Ian Narev said the outlook remained “unpredictable” and the bank planned to retain “conservative” settings but there were no plans for “major redundancy programmes” or sending jobs offshore.

“We welcome some positive signs of economic recovery but recognise that in times of uncertainty banks must remain cautious,” Narev said.

“In the absence of sustained recovery in offshore economies, particularly Europe, businesses and consumers will remain cautious and the current trend of weak credit growth, asset allocation towards cash and volatile markets will continue in Australia.”

Australia's banks outperformed their global peers through the financial crisis, with the country's mining-driven economy buffered by resilient resources exports to Asia.

But the sector has warned of growing global headwinds, with ANZ on Monday slashing 1,000 jobs, Westpac axing 550 positions and 170

places poised to go at the local arm of the Royal Bank of Scotland.

The banks were criticised by the government for hiking interest rates this month despite the central bank leaving the official cash rate on hold at 4.25 percent.

Narev said Commonwealth's wealth management and institutional banking sectors had been hit by financial market volatility and higher wholesale funding costs and deposit competition were squeezing margins.

But he expressed confidence in the bank's future due to Australia's strong economic fundamentals.

“Our strength enables us to take a long-term view of the business,” he said.

“We have no plans to send jobs offshore. And we have no plans for major redundancy programmes.” - Sapa-AFP