Commonwealth Bank of Australia and Merrill Lynch became embroiled in a public war of words on Wednesday when the Australian bank was forced to cancel a A$2bn share placement managed by Merrill after investors complained they had not been informed of a rise in bad debts.

Immediately after Merrill completed the A$2bn ($1.4bn) institutional share placement on Tuesday night, CBA issued a statement warning of a deterioration in credit conditions and a rise in bad debts to 0.6 per cent of total loans — an increase from the bank’s previous forecasts and higher than analysts’ estimates of 0.5 per cent.