CBA slashes dividends

COMMONWEALTH Bank has reported a drop in full-year profit to $7.3bn and its lowest final dividend since 2006, as the pandemic hit the economy and saw expected loan losses swell.

CBA’s cash net profit was 11.3 per cent lower at almost $7.3bn for the 12 months ended June 30, the nation’s largest home lender said in an ASX statement on Wednesday.

The bank declared a final dividend of 98c, fully franked, adding to an interim payment of $2 a share.

The last time CBA paid a dividend under $1 was in 2006 for the second half of the 2005 fiscal year. That payment was 94c a share.

Analyst expectations for CBA dividends had varied widely, following the banking regulator’s revised and less-restrictive guidance urging banks to retain at least half their earnings rather than paying chunky dividends.

The Australian Prudential Regulation Authority softened its view but still wants banks to preserve capital during COVID-19.

The earlier guidance, released in April, had been for banks to “seriously consider” deferring decisions on dividends until the outlook on the pandemic was clearer.

Chief executive Matt Comyn said despite the challenging environment, operational performance remained strong.

“Combined with our strong balance sheet and capital position, this enables us to continue supporting customers and the economy,” he said.

“The next few months will be critical and some sectors will take longer to recover than others, however, we remain positive about Australia’s longterm prospects.”

CBA expects the domestic economy will contract 4.2 per cent this calendar year, while unemployment will peak at 9 per cent and take “a long period” to retreat from higher levels.

The bank’s shares were trading down about 1 per cent near the close.

Credit Suisse analysts said the final dividend equated to about 59 per cent of secondhalf cash earnings and labelled the profit a “solid result”.

The results showed CBA’s loan impairment expense ballooned to $2.5bn for the year due to expectations for COVID-19-related losses, compared with $1.2bn in financial year 2019. The loan impairment expense included $1.5bn set aside for COVID-19.

The bank said 135,000 home loans, or 8 per cent of CBA’s mortgage accounts, had repayments paused due to the pandemic as at July 31. Of the home loans on repayment deferrals about 14 per cent reflected customers that had lost their jobs and were receiving the federal government’s JobSeeker payment. The pauses were down from a peak of 154,000.