Commonwealth Bank reported net profit of A$9.7 billion for the year to June – an increase of 9 per cent over the 2020/21 year. On a cash basis, profit rose 11 per cent to $9.6 billion. The net interest margin was down and income grew only a little but the bank said it expects margins to increase in a rising rate market.
Income: Net interest income of $19.5 billion was up 1 per cent, compared with the previous year. Other operating income rose 1 per cent to $4.9 billion. Income was flat in the June half, compared with the December half. Total operating income rose 1 per cent to $24.4 billion.
Margin: Group net interest margin fell 18 basis points year-on-year to 1.9 per cent. The fall was due to a large increase in low-yielding liquid assets. Another factor was above-average sales of low-margin fixed rate home loans.
Expenses and cost to income: Total operating expenses rose 2 per cent to $11.6 billion. Adjusting for one-off items, including accelerated software amortisation, operating expenses fell 1 per cent to $11.2 billion. On that adjusted basis, the cost-to-income ratio fell from 47 per cent in 2020/21 to 45.9 per cent in the year to June.
Impairment expense/benefit: The bank reported a loan impairment benefit of $357 million for the year to June, after an expense of $554 million in 2020/21. It released $506 million of collective provisions, added $321 million of net new and increased individual provisions and wrote back $172 million of individually assessed provisions no longer required.
Credit quality: Home loan arrears (overdue by more than 90 days) were 49 bps – down from 64 bps in 2020/21 and 63 bps in 2019/20. Credit card and personal loan arrears also fell. Gross impaired assets fell by $400 million to $3 billion.
Return on equity: On a cash basis, ROE rose 120 bps from 11.4 per cent in 2020/21 to 12.7 per cent in the year to June.
Earnings per share: EPS rose 14 per cent year-on-year to $5.57 a share (on a cash basis).
Dividend: The bank declared a final dividend of $2.10 a share, taking the total dividend payout for the year to $3.85 a share, fully franked. The payout was 10 per cent higher than the previous year. The final dividend payout ratio was 68 per cent. The bank is offering a dividend reinvestment plan but no discount will be applied to shares under the plan.
The divisions: CBA’s biggest division, retail banking services, made a cash profit of $4.9 billion in the year to June – up 5 per cent on the previous year. The business banking division’s profit rose 6 per cent to $3 billion. The institutional banking and markets division’s profit rose 13 per cent to $1.05 billion. New Zealand profit rose 9 per cent to $1.3 billion.
Market share: Home loan market share fell from 25.3 per cent in 2020/21 to 25.1 per cent in the year to June. Household deposit share rose from 27.4 per cent to 27.5 per cent. Business lending share