CBA the best performer on almost every earnings measure
On almost every measure, Commonwealth Bank was the top performer among the big banks in the 2013/14 financial year. It reported the strongest growth in profit, earnings per share and income. Its net interest margin was the highest, along with its return on equity, and it made the biggest reduction in its cost-to-income ratio. It had the biggest increase in common equity tier one capital and had the highest CET1 ratio.
KPMG head of banking Andrew Dickinson, analysing the performance of the big banks, said that, on the plus side, they were making progress with operational efficiency programs and had the potential to make further gains.
Dickinson said his biggest concern was that the banks were still dependent on reducing bad debts to generate profit growth.
"The A$1.6 billion aggregate reduction in impairment charges was equal to the increase in profit, and almost $200 million of that came from the release of economic overlays. You won't see that continue if rates go up next year," he said.
NAB's bad debt charge fell 54.7 per cent from $1.9 billion to $877 million, Westpac's fell 23 per cent to $650 million, ANZ's fell 17 per cent from $1.2 billion to $989 million and CBA's fell 12 per cent to $953 million.
EY and PwC took a more positive position in their commentaries, saying the results were underpinned by growth in housing finance as much as by reductions in loan impairment.
However, they also believe the banks face a difficult task maintaining growth in the face of subdued demand for credit and low interest rates and intense competition.
Profit growth: Commonwealth Bank led the field with a 12 per cent increase in cash profit, followed by ANZ (up ten per cent) and Westpac (up eight per cent). NAB's cash profit fell 9.8 per cent (CBA figures are for the 12 months to June, while figures for the other banks are for the 12 months to September).
Earnings per share: CBA's cash EPS was up 11 per cent, ANZ's nine per cent and Westpac's eight per cent. NAB's EPS was down 10.3 per cent.
Income: CBA's operating income increased by seven per cent, ANZ's was up six per cent, Westpac's five per cent and NAB's was up 1.9 per cent.
Margin: Commonwealth Bank was the only one of the Big Four to increase its net interest margin and its NIM was also the highest; its net interest margin rose one basis point to 2.14 per cent. Westpac's margin fell seven bps to 2.08 per cent. ANZ's margin fell nine bps to 2.13 per cent, NAB's also fell nine bps to 1.94 per cent.
Return on equity: Commonwealth Bank reported the highest increase in ROE and the highest ROE. On a cash basis, CBA's ROE rose 50 bps to 18.7 per cent, Westpac's rose 48 bps to 16.4 per cent and ANZ's rose ten bps to 15.4 per cent. NAB's cash ROE fell 2.3 percentage points to 11.8 per cent
Cost-to-income: Westpac had the lowest cost-to-income ratio but CBA reported the biggest reduction. CBA's cost ratio fell 70 bps to 42.9 per cent and ANZ's fell 20 bps to 44.7 per cent. Westpac's cost-to-income ratio rose 40 bps to 41.6 per cent and NAB's jumped almost ten percentage points to 53 per cent.
Capital: CBA's common equity tier one capital ratio rose 110 bps from 8.2 per cent to 9.3 per cent. ANZ's CET1 rose 30 bps to 8.8 per cent and NAB's rose 20 bps to 8.63 per cent. Westpac's CET1 fell 13 bps to 8.97 per cent.