Commonwealth Bank starts slashing costs

Through Project 35, the lender joins major banks in adjusting to a new, post-financial crisis environment.

The Commonwealth Bank is unleashing a cost-cutting program dubbed Project 35 as it and the nation's other major banks look to take the razor to cost bases inflated by a decade-long credit and housing boom.

Project 35 is the code name for CBA's program to achieve a 35 per cent cost-to-income ratio for its retail banking unit by 2013, down from 38.7 per cent at June 30.

Staff expenses generally accounted for 60 per cent of industry costs, a CBA spokesman said yesterday, but denied there were any job reduction targets for Project 35, which is being run by senior bank executive Rob de Luca. "It's all about doing things more efficiently and more effectively," he said.

All the major banks are under intensifying pressure to adjust to a new, post-financial crisis environment, which is characterised by weak economic growth, a reduced appetite for credit, corporate deleveraging and the rising cost of regulation.

Analysts say the heat is on banks to sustain earnings growth and cost-cutting could be the only avenue in a weakening environment to satisfy investors. Earnings and cost forecasts will be closely watched by the market when ANZ, Westpac and NAB report their annual results in the next few weeks.

Word of Project 35 at CBA is already prompting some disquiet with staff representatives.

View the full story in The Australian.