CBA hits half-year high

Mortgage lending surge key part of result

COMMONWEALTH Bank’s mortgage lending surge has underpinned an expectation-defying first-half result, even as the lender feels the heat from regulatory costs and a bushfire-related rise in loan impairments.

Shares in the nation’s largest bank climbed to a near fiveyear high of $88.56 yesterday afternoon – adding $6.8 billion to the company’s market value – after its $4.48 billion interim cash profit beat the $4.34 billion figure tipped by analysts.

Flat net operating income, higher expenses and an increase in loan impairments for the six months to December 31 did, however, weigh cash profit down by 4.3 per cent on last year’s $4.68 billion.

The bank is holding its fully franked interim dividend flat at $2 per share, as forecast, while it flagged it was also considering returning excess capital to shareholders later in the year.

Crucially, CBA’s home lending rose by 4.0 per cent – or $53 billion – for the sixmonth period, while business lending rose 3.0 per cent or $19 billion. Loan impairment expenses jumped 12 per cent to $649 million, representing 17 basis points of gross loans after factoring in the summer bushfire catastrophe.

Chief executive Matt Comyn said the result belied an environment of low interest rates and relatively low credit growth.

He remained positive about the momentum of the economy despite the recent fire crisis.

The summer bushfires resulted in $83 million of insurance claims provisions at the bank during the first half, while fires and drought were also behind a $100 million loan impairment overlay.

“Clearly, in the near term, we’ll (have) to deal with the impact from the drought, the bushfires and now global uncertainty around the coronavirus,” Mr Comyn said in a presentation.

“We do expect that that’s going to weigh on both sentiment as well as GDP in this quarter and in the next … but we think the combination of both the recovery and rebuild, and also some of the underlying strength in the Australian economy, will start to come through in the back half of this calendar year.”