Commonwealth Bank of Australia Ltd (CBA) chief executive Ralph Norris says the country’s biggest lender is well placed to improve its financial performance in 2010.

However, he warned that the current financial year would present challenges and in response CBA would maintain its conservative settings.

“We recognise that we are well placed to continue to strengthen our business franchise and improve our financial performance and returns,” Mr Norris told the company’s annual general meeting in Perth, according to a filed transcript.

“However, the 2010 year will present challenges for your group and its customers and the outlook is by no means clear.

“In this environment, we will maintain our conservative approach to capital, funding, liquidity and provisioning.”

Mr Norris said the financial and economic environment of 2009, which had dented the bank’s performance, now looked to be moderating.

“The headwinds which impacted our performance in 2009 have continued into the new financial year although there are signs that they may be moderating,” he said.

Chairman John Schubert described 2008/09 as the most challenging he’d seen.

“The continued fall-out from the subprime crisis, subsequent events and resultant negative economic growth in most western economies have placed significant pressure on the financial performance, and even the survival, of a large number of international banks,” he told shareholders.

In contrast, CBA had performed well by delivering a solid cash profit of $4.415 billion in 2008/09, Mr Schubert said.

That was a seven per cent decline from the year before.

Mr Schubert is stepping down as chairman early next year and will be replaced by David Turner, a former Brambles Ltd CEO, who has been a non-executive director with CBA since August 2006.

Mr Norris said CBA was financially strong with favourable funding positions, conservative provisioning and capital ratios significantly above regulatory target levels.

The strong capital position had allowed CBA to buy BankWest and St Andrews at the end of last year at a discount to book value, increasing the bank’s retail presence in Western Australia and its business banking capability.

“I would like to also reassure our BankWest customers that the BankWest brand, which is iconic in WA, is here to stay and will compete alongside our Commonwealth Bank branches,” Mr Norris said.

Mr Norris said the priorities for 2009/10 remained improving customer service and business banking while pursuing profitable growth.

The bank’s target was to become the number one ranked bank for customer service by June 2010, he said.

On Storm Financial’s collapse, Mr Norris said the bank had publicly acknowledged that there were some shortcomings in CBA’s conduct as it lent money to some clients of the financial adviser.

“We have also committed to putting right any wrongs on our part and we are proactively offering assistance to those facing hardship through the establishment of a resolution scheme, which is providing swift and fair resolution for affected customers,” he said.

Mr Schubert warned that more regulation for Australia’s already well-regulated banks may not be helpful and could result in higher costs and prevent the local banks from supporting their customers.

“It comes as no surprise that regulators are looking to introduce measures aimed at strengthening the banking system around the world,” he said.

“To overlay too much on top of our already relatively conservative settings to comply with every global initiative may not be helpful and could in fact have a negative impact on the economy and employment.”

Shares in CBA fell 44 cents, or 0.79 per cent, to $55.11 by 1442 AEDT.

AAP