THE DISTILLERY: CBA quarrel

Commonwealth Bank of Australia boss Ian Narev delivered what analysts described as a "cracker” set of numbers. Whether this 6 per cent increase in cash earnings was a reflection of price gouging, a relatively modest achievement in previous times, indicative of one of the world's best banks or a sign that competition is too dim are all topics of discussion in this morning's edition of The Distillery.

We'll start with the Herald Sun's Terry McCrann, who describes as ‘stupid' those who argue that Commonwealth Bank's results demonstrate that it's screwing over customers for the benefit of shareholders.

"After all, CBA increased its profit. To a record, no less. Case proved. And for the more sophisticated analyst-agitator, the CBA actually 'fessed up to the screwing by disclosing it had increased its net interest margin (NIM) broadly, the difference between what it pays depositors and what it gets from its loans. The NIM was up from 206 points (2.06 per cent) in the June half of last year to 210 points in the December half. Thanks to those nasty decisions not to ‘pass on in full' the Reserve Bank official rate cuts. But that still left it just below the 212 point NIM of the previous equivalent December half and significantly below the 217 NIM of the June 2011 half. There is no ‘right' NIM. It has to be left up to the individual bank, to decide that on a whole multiplicity of factors.”

Without further ado, let's cross now to Fairfax's Elizabeth Knight who believes that Commonwealth's results do in fact suggest that the cost of borrowing has come down, but the benefits haven't been passed on to customers.

"For bank shareholders it's pretty clear. The stellar profit lifts the share price and this is a positive. It's even more obvious for the bank's board and management whose job it is to maximise returns for shareholders. To the extent their mandate involves looking after customers it is in order to retain or grow them – thus improving profits … If retailers could double what they charge for goods they would as long as the customers would wear it – so would insurance companies and airlines, car makers and communications companies. It's just that the public expects banks to be different – in part because interest costs are such a big part of living expenses for such a large proportion of the community.”

Business Spectator's Stephen Bartholomeusz makes the most pointed observation about Commonwealth Bank's results by putting them into the broader context of bank profits over the last decade or so.

"It is an interesting reflection on the times, and on expectations, when a 6 per cent increase in a bank's cash earnings causes analysts to describe the result as a ‘cracker' and the sharemarket to lift. However, in the context of the very subdued demand for credit and continuing pressures on average (as opposed to marginal) funding costs and on margins, Commonwealth Bank's December half result is, if not quite a ‘cracker', then certainly a very solid performance built around some very clean numbers.”

The Australian Financial Review's Chanticleer columnist Tony Boyd believes that Commonwealth is Australia's best managed banks and suggests that it could be one of the best managed financial institutions on the planet.

"Mind you, in recent years, the competition has not been great. But the failure of other, bigger banks in the Group of Seven largest industrialised nations to perform in good times and bad can be blamed as much on bad management as on geography. CBA's chief executive, Ian Narev, leads a team that includes the right mix of wise heads and youthful exuberance. There is a diversity of age, backgrounds and gender. Some say there are too many New Zealanders in the top team as a precursor to saying there is a danger of group think. But there is little evidence to support that accusation.”

On the New Zealander front, The Australian Financial Review's Andrew Cornell reminds readers that, like Narev, predecessor Ralph Norris is a New Zealander – though Norris was never a child television star.

That's right. Here's his IMDB profile. One of his co-stars went on to feature in Peter Jackson's The Hobbit and King Kong. Aside from that, it's safe to say that Narev wasn't working with a troupe of Stanislavski students.

Meanwhile, The Australian's Richard Gluyas also shares some insights into the Commonwealth Bank boss.

"A banker who knows the high-achieving Narev says: ‘I'd be saying to the (CBA) board that this is a point in history – and it's not going to last forever – where CBA can become more than just a domestic bank, so I'd want to know all the options. But the bank's in a bit of a bind at the moment. The market cap is feeding on itself and the momentum can get a bit out of control. The danger is it can create a belief system that you can do anything you like, but Ian is very business-wise and amazingly agile intellectually. I don't think he'll do anything stupid.' Narev, for his part, is calm and considered – the least likely person in the room to fall victim to hubris, it would seem.”

Like Bartholomeusz, The Australian's John Durie makes an astute observation about the broader implications of Commonwealth's results.

"The Australian Competition and Consumer Commission has delayed its decision on whether to let CBA increase its market power even further by buying out the balance of Aussie Home Loans. On the evidence of yesterday's results it would be a brave call by the ACCC to accept the CBA argument that the purchase helps competition by backing independent distribution channels. The issue for the ACCC will be just how independent a wholly owned mortgage broker can be when it is owned by the nation's biggest home lender.”

That's a great point.

The Australian Financial Review's Philip Baker and Fairfax's Malcolm Maiden both report on the pointless 5000-point milestone that the sharemarket has just surged through.

Still on the markets, The Australian's Robin Bromby looks at the potential for soft commodities to come to Australia's rescue as the price of hard commodities, and the accompanying investment boom, return to something more normal.

In company news, The Australian's Damon Kitney writes that Marcelino Fernandez Verdes, the boss of German construction giant Hochtief, must be breathing a little easier now that the worst appears to be over for Leighton Holdings, which his company owns a majority stake in.

And finally, The Australian's Asia Pacific editor Rowan Callick tells the story of a minibus driver in Hong Kong that was ferrying him to his office that slammed on the brakes.

He was almost launched from his chair, presumably to avoid hitting a small child. No? Well, probably about a road accident. No?

It was a gold-plated Rolls Royce. He didn't need to give way, but the devotion to capitalism in Hong Kong is so great that going out of your way to give way to the wealthy is relatively normal.