Commonwealth Bank reported net profit of A$4.7 billion for the six months to December – an increase of 26 per cent over the previous corresponding period. On a cash basis, profit rose 23 per cent to $4.7 billion.
Income: Net interest income of $9.7 billion was up 2 per cent, compared with the previous corresponding period. Other banking income rose 8 per cent to $2.3 billion. Total banking income of $12.1 billion was up 3 per cent on the previous corresponding period.
Margin: The net interest margin of 1.92 per cent was down 17 basis points from the June half last year and down 14 bps from the previous corresponding period. Adjusting for the impact of holding more low-yield liquid assets, NIM was down 5 bps compared with the previous corresponding period. The main reasons for the fall in margin were home loan competition, increased customer switching to lower margin fixed home loans and the impact of rising swap rates due to market expectations of higher interest rates.
Expenses and cost to income: Operating expenses were unchanged at $5.6 billion. The ratio of operating expenses to operating income was 45.8 per cent, down from 47.3 per cent in the June half last year and 46.7 per cent in the December half 2020. Investment spend was up 10 per cent but occupance and equipment costs, IT expenses and remediation costs were all down.
Impairment expense: The bank reported a loan impairment benefit of $75 million for the December after, after a benefit of $328 million in the June half last year and an expense of $882 million in the December half 2020.
Credit quality: Home loans in arrears by 90 or more fell from 57 bps to 52 bps year-on-year. Troublesome and impaired exposures fell from 70 bps of total committed exposures to 53 bps over the same period.
Return on equity: On a cash basis, ROE rose 180 bps to 12.3 per cent.
Earnings per share: EPS rose 25 per cent year-on-year to 272.8 cents a share.
Dividend: The bank declared an interim dividend of $1.75 a share, fully franked, which is up from the interim dividend of $1.50 a share in the previous corresponding period. The dividend payout ratio was 62 per cent, which is below the 2020/21 payout ratio of 70 per cent. The bank said it will target a full-year payout ratio of 70 to 80 per cent of cash profit. The bank is offering a dividend reinvestment plan, with no discount applied to shares allocated under the plan for the interim dividend.
The divisions: CBA’s biggest division, retail banking services, made a cash profit of $2.3 billion in the six months to December – up 8 per cent on the previous corresponding period. The business banking division’s profit rose 9 per cent to $1.5 billion. The institutional banking and markets division’s profit was up 38 per cent to $587 million. New Zealand profit rose 27 per cent to $679 million.
Market share: Australian home loan market share rose from 25.2 per cent to 25.5 per cent