Commonwealth Bank reported a net profit of A$5.2 billion for the six months to December 2022 – an increase of 10 per cent over the previous corresponding period. After adjusting for gains on sales and hedging, cash profit rose 9 per cent to $5.1 billion.
Income: Net interest income rose 19 per cent to $11.6 billion, compared with the previous corresponding period. Other operating income fell 17 per cent to $1.9 billion. Total operating income rose 12 per cent to $13.6 billion.
Expenses and cost to income: Operating expenses rose 5 per cent year-on-year to $5.8 billion but were down from $5.9 billion in the June half last year. Operating expenses as a proportion of total operating income was 42.5 per cent – down from 45.3 per cent in the previous corresponding period.
Impairment expense: After reporting a benefit of $75 million in the December half 2021 and a benefit of $282 million in the June half last year, the bank reported a loan impairment expense of $511 million in the latest half. The bank said the impairment charge was a return to a more normal level. The loan impairment expense as a proportion of gross loans and advances was 11 basis points.
Credit quality: Home loans in arrears (past due by 90 days or more) fell from 52 bps in the December half 2021 to 43 bps in the latest half. Credit card and personal loan arrears also fell. Gross impaired assets fell by $500 million to $3 billion. Gross impaired assets as a percentage of gross loans and advances fell 8 bps to 33 bps.
Margin: The bank’s net interest margin was 2.1 per cent, rising from 1.87 per cent in the June half last year and 1.92 per cent in the December half 2021. Funding cost (deposit rates) was the biggest driver of this higher margin.
Return on equity: ROE of 14 per cent was down 120 bps from the previous corresponding period but up 60 bps from the June half last year. On a cash basis, ROE of 14.1 per cent was up 160 bps on the previous corresponding period.
Earnings per share: EPS rose 13 per cent to $3.07 a share. On a cash basis, EPS rose 11 per cent to $3.04 a share.
Dividend: The bank declared an interim dividend of $2.10 a share for the half, unchanged from the June half last year and up from $1.75 a share in the December half 2021. The dividend payout ratio of 69 per cent is in line with the bank’s target ratio, but at the low end.
The divisions: The bank’s biggest division, retail banking services, made a cash profit of $2.7 billion – an increase of 16 per cent over the previous corresponding period. The business banking division’s profit rose 31 per cent to $1.9 billion. Institutional banking and markets was down 23 per cent to $453 million. New Zealand was up 6 per cent to $718 million.
Market share: The bank’s share of Australian home lending fell from 25.4 per cent in the December half 2021 to 25.1 per cent in the latest half. Its share of household deposits fell from 27.6 per cent to 26.9 per cent. Business lending share was steady at 15.7 per cent and business deposit share rose from 22.1 per cent to 22.4 per cent. New Zealand home loan share rose from 21.4 per cent to 21.6 per cent and deposit share fell from 18.3 per cent to 18 per cent.
Capital: The common equity tier 1 capital ratio fell 10 bps from the June half last year to 11.4 per cent.
Funding and liquidity: The bank’s average lending interest earnings assets rose 7 per cent to $825.9 billion, including home loans of $557.8 billion (up 5 per cent). Customer deposits made up 75 per cent of the bank’s funding, compared with 73 per cent in the previous corresponding period. The bank issued new long-term wholesale funding of $18 billion. Long-term wholesale funding accounted for 71 per cent of total wholesale funding, with an average term of 4.8 years.
The net stable funding ratio was 129 per cent and the liquidity coverage ratio was 131 per cent.
Customer remediation: Spending on customer remediation continued to grow during the half, with the cumulative cost rising from $3.5 billion in 2021/22 to $3.8 billion in the latest half. The bank has paid a total of $1.9 billion in refunds, with an estimated $518 million still to be paid. The cumulative program cost is $1.4 billion.