CBA profit soars to $9.9b

COMMONWEALTH Bank may sell off its CommInsure life insurance business after it beat analyst expectations with a full-year cash profit of $9.88 billion.

CBA, which lifted its profit 4.6 per cent to an eighth straight annual record, yesterday said it is in talks with potential buyers of its Australia and New Zealand life insurance businesses. Analysts had expected a 12-month cash profit of about $9.8 billion.

“Commonwealth Bank’s performance this year has again contributed to the financial wellbeing of our customers, shareholders, our people and the Australian economy,” chief executive Ian Narev said.

“This is the result of our consistent focus on customer satisfaction, innovation and financial strength.”

CBA declared a fully franked final dividend of $2.30 per share, up eight cents on last year and taking its 12-month payout to $4.29.

The bank introduced a discounted dividend reinvestment program, which should help it build capital reserves to help meet the Australian Prudential Regulatory Authority’s definition of “unquestionably strong”.

Profit for its retail banking unit jumped 9 per cent to $4.964 billion, while business banking was close behind with an 8 per cent rise to $1.639 billion.

Mortgage repricing in response to regulatory intervention in the home loan market contributed to a second-half cash profit of $4.97 billion.

But higher funding costs and competition for mortgage customers more than offset those gains, pushing net interest margin down 0.03 percentage points to 2.11 per cent.

Statutory profit for the 12 months to June 30 rose 7.6 per cent to $9.93 billion.

Commonwealth Bank says third parties are interested in acquiring NZ insurance business Sovereign and local unit CommInsure, which has been beset by controversy.

The corporate watchdog in March cleared CommInsure of allegations its managers pressured doctors to alter medical opinions so it could deny claims but said some practices were “out of step with community expectations”.

“CommInsure and Sovereign are strong businesses with scale, expertise, competitive products and access to attractive distribution channels,” CBA said in a statement yesterday. “While the discussions may lead to the divestment of those businesses, we will also consider a full range of alternatives, including retaining the businesses, reinsurance arrangements or other strategic options.”

Remuneration details for Mr Narev and his executive team will be included in next week’s annual report.