Commonwealth Bank reported net profit of A$9.6 billion for the 12 months to June – an increase of 12.4 per cent over the previous corresponding period. On a cash basis, after adjusting for $2.1 billion of gains from the disposal of businesses, profit fell 11.3 per cent to $7.3 billion.
The bank said the lower cash profit was largely due to a big increase in its loan impairment expense and lower ongoing revenue following the disposal of a number of businesses.
Income: Net interest income of $18.6 billion was up 2 per cent compared with the previous year. Other banking income fell 2 per cent to $4.8 billion. Total banking income of $23.4 billion was up 1 per cent compared with the previous year.
Expenses and cost to income: Operating expenses rose 1 per cent to $10.9 billion. The ratio of operating expenses to total operating income remained unchanged at 45.9 per cent.
Impairment charge: The bank’s bad debt charge for the year was $2.5 billion, more than double the $1.2 billion charge in 2018/19. This was largely due to a $1.5 billion “forward looking adjustment”. The loan loss rate was 33 basis points of average loans and acceptances – up from 16 bps in 2018/19.
Credit quality: In line with APRA’s regulatory guidance, loans subject to repayment deferral are not included in arrears where they are otherwise performing. Home loan arrears fell from 70 bps to 63 bps over the year. Personal loan arrears were up from 1.4 per cent to 1.5 per cent over the year and credit card arrears jumped from 1.03 per cent to 1.23 per cent.
Margin: The net interest margin fell 2 basis points to 2.07 per cent. The bank said the biggest impact on margins was lower interest rates, partly offset by lower funding costs. NIM was down 7 bps in the June half and the bank said group NIM will fall by a similar amount in the current financial year. The NIM of the retail banking division rose 8 bps to 2.63 per cent.
Return on equity and assets: On a cash basis, the ROE was 10.3 per cent – down from 12.1 per cent in 2018/19.
Earnings per share: EPS fell 11 per cent to $4.12 a share.
Dividend: CBA declared a final dividend of 98 cents a share, taking the total dividend payout for the year to $2.98 a share. The dividend payout ratio for the June half was 58.7 per cent, compared with 78.8 per cent in the December half. The total payout represented a payout ratio of 70.8 per cent.
The divisions: The bank’s biggest division, retail banking services, reported cash profit of $3.99 billion – down 2 per cent from the previous corresponding period. The business and private banking division’s profit fell 9 per cent to $2.6 billion. The institutional banking and markets division’s profit fell 41 per cent to $655 million. The New Zealand division’s profit fell 23 per cent to $811 million. International Financial Services was down 48 per cent to $131 million.
Market share: The bank increased its home loan market share by 23 bps to 24.9 per cent. Its household deposit share rose 40 bps to 27.1 per cent. Business lending share rose 10 bps to 14.8 per cent. New Zealand home loan share fell 20 bps to 21.5 per cent and New Zealand deposit share rose 50 bps to 18.2 per cent.
Capital: The bank’s common equity tier 1 capital ratio 11.6 per cent – up 90 bps compared with the previous corresponding period.
Liquidity and funding: Deposits accounted for 74 per cent of the bank’s total funding, up from 69 per cent in the previous year. The weighted average maturity of long-term debt rose from 5.1 to 5.3 years. At June 30, the bank had access to $26.6 billion of funding provided through the Reserve Bank’s term funding facility, with $1.5 billion drawn. The bank’s liquidity coverage ratio was 155 per cent and the net stable funding ratio was 120 per cent.
Customer remediation: Cumulative spending and provisioning for the remediation program increased from $2.2 billion in 2018/9 to $2.6 billion in the year to June. That includes $1 billion of program costs, $732 million of refunds paid and $914 million of refunds still to be aid. The majority of the increase was in remediation costs related to aligned advice businesses.