Shares slide as CBA posts $9.6bn profit
COMMONWEALTH Bank has presented an optimistic view of the economy, as the nation’s largest home lender reported a rise in annual profit to $9.6bn buoyed by loan growth and subdued loan losses.
CBA said cash profit climbed 11 per cent to almost $9.6bn in the 12 months to June 30, from the prior year, as operating income edged up. That exceeded analyst estimates for an annual cash profit of about $9.4bn.
Competition for customers remained fierce with the bank’s net interest margin – what it earns on loans less funding and other costs – sliding 18 basis points through the year to 1.9 per cent. But the bulk of the decline occurred in the first half with a 5 basis point drop recorded in the latter six month period, as official rate hikes began in May.
CBA flagged it expected margins to rise as Reserve Bank rate hikes worked to temper rampant inflation, with higher rates helping to boost the bank’s profitability.
CBA’S shares dipped 0.6 per cent to $100.70 in early trading on Wednesday, bucking an increase in bank stocks.
Barrenjoey’s equities desk noted investors were likely to focus on CBA’S outlook, which could prompt selling in the shares.
“As investors focus on a more challenging outlook for Cba/the majors from here, expect some profit taking post the strong result,” they said in an email to clients.
Citigroup’s equities sales desk noted a solid result particularly on loan quality and said the market “should be comfortable with this (result)”.
However, Macquarie Capital’s analysts said the decline in margins was “arguably the key area of disappointment” in CBA’S annual results.
CBA chief executive Matt Comyn said while consumer demand would moderate as rate rises filtered through the economy, he remained positive on the health of consumers and businesses
“We expect consumer demand to moderate as cost-ofliving pressures increase. It is a challenging time, but we remain optimistic that a path can be found to navigate through these economic conditions,” he added. “We remain of the view that the medium term outlook for Australia is a positive one.”
Net interest income rose 1 per cent in 2021-22 as CBA’S residential mortgage and business lending grew, although home lending expanded at a rate that didn’t keep pace with its peer group.
Excluding lumpy one-off items, other operating income – which largely reflects fee income – increased 1 per cent.
CBA’S board declared a final dividend of $2.10 fully franked, to be paid on or around September 29, taking the full-year payment to $3.85. That is up from $3.50 in the prior financial year.
The bank’s common equity tier one ratio was at 11.5 per cent at June 30, and the bank said it would meet new regulatory requirements beginning in January.
“CBA is well placed to accommodate these changes, and expects to operate with a post-dividend CET1 ratio of greater than 11 per cent, except in circumstances of unexpected capital volatility,” it said.
CBA has completed a $6bn off-market share buyback and has started a further $2bn on-market buyback.