[BENGALURU] Commonwealth Bank of Australia kept aside A$1.5 billion (S$1.37 billion) on Wednesday to cover expected loan losses caused by the Covid-19 pandemic and posted a 23.5 per cent drop in third-quarter cash profit.

Australia's banks are facing a new reality of record-low interest rates, rising unemployment and what is likely to be the country's first recession in three decades as the fallout of the health crisis takes a toll on the global economy.

CBA, which follows a different reporting calendar to its peers, said its troublesome and impaired assets stood at A$8.1 billion at the end of March, higher than the A$7.8 billion it had on its books three months ago.

Wednesday's coronavirus-related provision brings CBA's total credit provision to A$6.4 billion.

"Given an unprecedented set of circumstances which are still unfolding and evolving, a definitive assessment of the longer term outcomes of the Covid-19 pandemic and the consequent economic and societal impacts is difficult at this stage," the bank said.

In a separate release, CBA said it was selling a 55 per cent stake in its pension arm Colonial First State to private equity giant KKR & Co for about A$1.7 billion.

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The stake sale would add 30 to 40 basis points to its common equity tier 1, which fell to 10.7 per cent as of March 31, Australia's biggest bank said.

Cash profit from continuing operations fell to A$1.3 billion for the three months ended March from A$1.70 billion a year earlier.

In the last fortnight, three of the so-called 'Big Four' banks have more than quadrupled their bad debt charges as Australia's economy faces its biggest contraction since the Great Depression.

The three - Westpac Banking Corp, National Australia Bank, and Australia and New Zealand Banking Group - reported a near two-thirds drop in their combined profits during the first half due to the charges, totaling around A$5 billion.

REUTERS