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Banking and finance briefs: CBA hoses down profit expectations, Soho Square sells

Banking and finance briefs: CBA hoses down profit expectations, Soho Square sells

1. CBA cautious on expectations of record profit - ASB's parent, the Commonwealth Bank of Australia, is dampening expectations that it is on course to produce record annual earnings of A$6 billion, The Sydney Morning Herald reports. Adding the A$1.5 billion third quarter cash earnings revealed on Wednesday to the half-year net earnings of A$2.94 billion, CBA's profit for the year-to-date is almost A$4.5 billion, with analysts' expecting another A$1.5 billion in the fourth quarter.

CBA's finance director, David Craig, cautioned investors not to extrapolate the most recent figure to forecast a full-year result given that the bank was experiencing various ''headwinds'' in the second half. He said a $50 million to $60 million drop in revenue caused by slashing account fees, wage increases of 2 per cent for the group's 38,000 employees and fewer trading days would squeeze margins over the next two months. This had also contributed to the fall in underlying earnings since January. ''It's a blend of all of those things that add up to a slight downtick,'' Mr Craig said.
Chief executive Ralph Norris cited the example of Greek debt crisis to illustrate the uncertainties afflicting global economies.
''Recovery from the GFC will take time and there will be challenges along the way,'' he said.
2. Norris mulling offshore wholesale funding tax cuts - Meanwhile according to The Australian, CBA boss Ralph Norris is assessing the impacts of tax cuts for banks raising funds offshore announced in this week's Australian federal budget.
"The intention is to try to improve the funding positions of the Australian and offshore banks," Mr Norris said. "If there is some advantage through a lower level of withholding tax, then for the system that is a good thing. "I think you have to look at this from a macroeconomic viewpoint, and I think it's fair to say that the Australian banks can't source all of the funding that is required for investment, particularly from resource companies, so it makes sense to make Australia more attractive to source offshore capital."
The federal government plans to phase down the interest withholding tax paid by Australian banks and financial institutions when they access international wholesale funding markets and offshore retail deposits. The tax cut will also apply to foreign banks operating in Australia. The tax rate will be cut from 10% to 7.5% in 2013-14 and to 5%  in 2014-15 and could ultimately be abolished altogether. 3. Conditional Soho Square sale - Richard Stilwell's Innovus Ltd has signed a conditional contract to buy the Soho Square development site in Ponsonby from its receivers, according to the Bob Dey Property Report. According to Dey, the price remains confidential and Innovus has about a month to undertake due diligence. Fortress Credit Corp appointed Grant Thornton's Tim Downes and Richard Simpson receivers last November. Strategic Finance, put into receivership in March by Perpetual Trust owing about NZ$417 million to 13,000 investors, holds a second mortgage on the  Soho Square development. 4. Kiwi angle to massive Aussie class action lawsuit? The company behind the A$5 billion class action lawsuit against 12 Australian banks would consider launching a suit in New Zealand if the laws permitted and there was enough interest from aggrieved banking customers. However Tamsyn Parker in the NZ Herald reports New Zealand isn't really open to such class actions with it really up to the Commerce Commission to take action if it believed there was a case. 5. MFS CFO has stake in Sydney IPO - David Anderson, the chief financial officer of the collapsed MFS group, is the sole shareholder and director of MFS Alternative Asset Ltd which is a shareholder in the Sydney investment firm Aurora Funds Ltd due to open an initial public offering on Thursday. Aurora is looking to raise A$5 million and MFS AAL is expected to hold a 6%  stake worth A$1.3 million once Aurora lists. As The Sydney Morning Herald notes, Anderson will appear before a liquidators' examination in the NSW Supreme Court on his role in MFS, which collapsed in 2008 owing creditors A$2.5 billion. The receivers of MFS's New Zealand offshoot, OPI Pacific Finance, have told secured debenture holders to expect a significant shortfall on the money they're owed. 6. AMP still attracted to AXA - Asset manager AMP has reiterated its interest in AXA Asia Pacific at its annual general meeting without indicating when or how it will come back with a bid. 7. Swan hints at watering down of global banking rules in Australia - Melbourne's The Age reports Federal Treasurer Wayne Swan has given his strongest hint yet that tough new global banking rules on liquidity and capital may be watered down to suit Australia's financial markets.
Mr Swan said regulators including the Australian Prudential Regulation Authority had been working with the banks on modelling the impact of the new rules, which include requirements for banks to vastly increase their holdings of government bonds. Australian banks have consistently argued they should not be hit with the tough rules on capital given that they did not get involved in the same behaviour that caused banks in Europe and the US to stumble. ''Countries like Australia understand that supervision was just as important as changes to regulations, and changes have to take account of different circumstances in different nations,'' Mr Swan told the National Press Club yesterday. ''I think that message has been taken into account and that's why the modelling has been done.''

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