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Commonwealth Bank cuts dividend -

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Reporter: Peter Ryan

PETER CAVE: Australia's biggest home lender, the Commonwealth Bank, has posted healthy quarterly
profit in the face of a worsening global outlooks and more bad debts.

The Commonwealth cleared just over a billion dollars in the first three months of this year but it
has slashed its dividend to keep more cash on its balance sheet to deal with the tighter times.

I have been joined in the studio by our business editor Peter Ryan.

Peter, are there any surprises in the CBA's results given the tough environment for banks?

PETER RYAN: Peter, the main development today was the dividend cut for the CBA - down 25 per cent
to $1.15 a share and that is falling in line with the rest of the big four banks. It is the first
dividend cut for the CBA since it was listed on the share market back in 1991.

But this is all about protecting shareholder value - and while all Australian banks have been doing
it tough, they're still making a lot of money, and the Commonwealth is no exception with a
quarterly cash earnings result of $1.15-billion.

The banks margins have also improved but they're still well below pre-financial crisis levels.

The CBA's bill for impaired loans was $630-million in the quarter compared to $179-million in the
previous corresponding quarter and like other banks it expects there's more to come as unemployment
rises.

The CBA's chief executive Ralph Norris says conditions remain challenging despite signs of
improvement overseas.

RALPH NORRIS: I think it's fair to say that we are obviously seeing some green shoots
internationally in regard to financial markets but there is no doubt the blow into the real economy
is yet to occur. We have seen the budget predicated on an unemployment rate of 8.5 per cent so I
think at this point, it's very difficult to make forecasts at the best of times and particularly in
an environment where, obviously, there are going to be bumps along the way.

PETER CAVE: The chief executive of the Commonwealth Bank, Ralph Norris - more green shoots I
notice.

Given the rising bad debts that it has to deal with, is the Commonwealth Bank losing its nerve
about lending?

PETER RYAN: Well, the lending to corporates and consumers is up by $30-billion in the quarter but
yes, the CBA is scrutinising who gets a loan these days and they're casting a cautious eye on loan
applicants using the first home owner grants as collateral.

The CBA's chief financial officer David Craig says those customers are being asked to demonstrate a
record of saving.

DAVID CRAIG: We've tightened our criteria on lending to this segment requiring five cent genuine
savings, amaximum loan to value ratio of 90 per cent for new customers, a serviceability rate of
7.24 per cent and of course, as has always been our practice, we mortgage insure all loans that
have more than an 80 per cent loan to value ratio.

PETER CAVE: The CBA's chief financial officer David Craig.

Peter, finally, Ralph Norris had some fairly strong views on the wholesale funding guarantees that
banks have been using, hasn't he?

PETER RYAN: That is right. Banks have been given access to the Federal Government's AAA credit
rating to raise money overseas but recently they have been raising money on their own and Ralph
Norris thinks it is time is coming for banks to be weaned off the funding guarantee, and he also
has a similar view about the Government's deposit guarantee that was been in use since the collapse
of Lehman Brothers last year.

PETER CAVE: Our business editor, Peter Ryan.