CBA CFO Alan Docherty
Commonwealth Bank reported a net profit of A$4.8 billion for the six months to December 2023 – a fall of 8 per cent compared with the previous corresponding period.
After adjusting for $210 million of transaction costs related to the sales of PT Bank Commonwealth, Comminsure General Insurance and Count Financial, as well as hedging gains, cash profit fell 3 per cent to $5 billion.
Income: Net interest income fell 2 per cent to $11.4 billion, compared with the previous corresponding period. Other operating income rose 13 per cent to $2.2 billion. Total operating income was unchanged at $13.6 billion.
Expenses and cost to income: Total operating expenses rose 4 per cent to $6 billion. Operating expenses as a proportion of operating income rose from 42.4 per cent in the December half 2022 to 45 per cent in the June half last year and then fell to 44 per cent in the latest half.
Impairment expense: The loan impairment expense was $415 million – down from $511 million in the December half 2022 and $597 million in the June half last year. The loan impairment expense represented 9 basis points of gross loans and acceptances – down from 11 bps in the previous corresponding period.
Credit quality: Home loans in arrears (overdue by 90 days or more) rose from 43 basis points to 52 bps year-on-year. This compares with a historical average of 65 bps.
Credit card arrears rose from 46 bps to 60 bps and personal loan arrears rose from 95 bps to 114 bps. Troublesome and impaired assets rose from $6.3 billion to $6.9 billion year-on-year, representing 49 bps of total committed exposures. The number of hardship cases rose 9 per cent in the six months to December.
Margin: The net interest margin was 1.99 per cent – 11 basis points down from the margin of 2.1 per cent in the previous corresponding period and down 6 bps from the margin of 2.05 per cent in the June half last year. Lower home lending margins, deposit price competition, deposit switching and higher wholesale funding costs all contributed to the lower margin.
Return on equity: On a cash basis, ROE was 13.8 per cent – down 40 bps on the previous corresponding period.
Earnings per share: Earnings per share fell 2 per cent year-on-year to 299.8 cents per share.
Dividend: The bank declared an interim dividend of $2.15 a share, up from $2.10 in the December half 2022 but below the final dividend of $2.40 a share last year. The dividend payout ratio rose from 68 per cent to 72 per cent year-on-year. The bank will offer a dividend reinvestment plan with no price discount.
The divisions: The bank’s biggest division, retail banking services, made a cash profit of $2.7 billion – a fall of 7 per cent compared with the previous corresponding period. The business banking division’s profit rose 6 per cent to $1.9 billion. Institutional banking and markets was up 28 per cent to $589 million. New Zealand was down 11 per cent to $623 million.
Market share: The bank’s share of Australian home lending fell from 25.1 per cent in the December half 2022 to 24.5 per cent in the latest half. Its share of household deposits fell from 26.9 per cent to 26.6 per cent. Business lending share rose from 17 per cent to 17.1 per cent and business deposit share rose from 22.4 per cent to 22.8 per cent. New Zealand home loan share fell from 21.6 per cent to 21 per cent and deposit share rose from 18 per cent to 18.6 per cent.
Capital: The common equity tier 1 capital ratio rose 10 bps to 12.3 per cent at the end of December.
Funding and liquidity: Total group deposits of $872 billion accounted for 75 per cent of total funding – unchanged from the June half last year. The liquidity coverage ratio was 136 per cent and the net stable funding ratio was 121 per cent. The banks said its remaining Term Funding Facility outstandings would be paid off over the next four months.
Customer remediation: Spending on customer remediation continued to grow during the half, with the cumulative cost rising from $3.9 billion in 2022/23 to $4.05 billion in the latest half. The bank has paid a total of $2.5 billion in refunds, with an estimated $98 million still to be paid. The cumulative program cost is $1.4 billion.