Commonwealth Bank of Australia (CBA) is warning its funding costs could rise as a result of economic uncertainty in Europe.

Chairman David Turner gave a bleak assessment of Europe’s debt problems at CBA’s annual meeting in Brisbane, saying a return to accelerating growth in Europe in the near future was unlikely.

In the United States, a flexible labour force and productivity improvements provided a greater hope of a positive outcome in the medium term, he said.

“All of this will, of course, challenge Australia, and we are not immune to vagaries elsewhere in the world,” Mr Turner said.

“Wholesale funding markets will become more challenging and have the potential, once again, to place sustained upward pressure on group funding costs.”

Increased costs of funds from offshore wholesale credit markets were the reason CBA raised its interest rates above that of the central bank’s move on Melbourne Cup day 2010.

In the past week CBA’s rivals have also indicated offshore funding costs are likely to rise due to the debt crisis in Europe.

CBA also said on Tuesday it expected subdued credit growth to continue into next year.

The bank will focus on improving productivity to drive improved shareholder returns, Mr Turner said.

CBA shares gained 36 cents, or 0.73 per cent, to close at $49.68.

Tuesday’s meeting featured very little negative sentiment from shareholders, despite a contentious remuneration report being put to a vote.

CBA executives received long-term incentives for the year to June despite customer satisfaction performance measures not being met.

Satisfaction scores were negatively impacted by the bank’s rate rise last November, Mr Turner told the meeting.

But the rate hike was essential to recover costs of wholesale funding that had already been incurred, he said.

The “anomaly” in satisfaction ratings led the board to use its discretion and grant 25 per cent of the possible long-term incentives, Mr Turner said.

Not granting some of the long-term incentives would not have been fair to the executives, he said.

“I do hope that you agree with me that it was the right thing to do,” he said.

Over 82 per cent of shareholder votes were in favour of the remuneration report.

Chief executive Ralph Norris, who leaves the bank at the end of this month, told the meeting CBA’s aim of being number one in customer satisfaction remained on track.

The bank will deliver a first quarter trading update next week.