Commonwealth Bank chief executive Matt Comyn has defended the bank’s increased investment spend, which was largely responsible for expenses growing ahead of revenue in the year to June, saying CBA’s strong performance in home and business lending is a result of improvements generated by the investment.
While some analysts have questioned whether upgraded mobile apps and other digital interfaces are any more than window dressing, Comyn said the improvements expanded service offerings, increased engagement and produced faster turnaround times, which have had a direct impact on sales.
CBA grew new home lending by 33 per cent in the year to June, increasing the size of its home loan portfolio by 6.7 per cent, which was 1.2 times system growth over the year.
The business loan portfolio grew by 11.2 per cent, which was three times system growth, the household deposit book grew 11 per cent (1.2 times system) and the business deposit book grew 17.2 per cent (1.8 times system).
“Strong digital engagement is supporting this growth. The technology builds better relationships,” Comyn said.
CBA’s operating expenses rose 3 per cent year-on-year to A$11.4 billion. This included $1.8 billion of investment spend – up 25.9 per cent over the previous year. The ratio of operating expenses to total operating income rose from 46.3 per cent in 2019.20 to 47 per cent in 2020/21.
Net interest income of $18.8 billion was up 1 per cent, compared with the previous corresponding period. Total operating income rose 1.7 per cent to $23.8 billion.
Comyn said the bank’s long-term goal is to cut its cost base and its cost-to-income ratio but it will not shy away from making investments where it sees good outcomes.
He said the bank has been able to retire old systems and achieve better loan approval turnaround times. Sixty-five per cent of all proprietary home loan applications were auto-decisioned on the same day.
One part of its investment is allowing more third parties to work with the bank to offer customers a wider range of services. In May, the bank announced that it will work with online shopping start-up Little Birdie to offer the bank’s customers “the best shopping deals from across the internet”.
It is working with electricity retailer Amber to give customers access to real-time wholesale energy pricing.
In addition to these partnerships, the bank has acquired doshii, a software company that integrates point of sale systems; whitecoat, a healthcare payments business; and Quantium, which has developed CommBank IQ for the bank’s large business customers (which will be launched later this month).
The bank is also pursuing opportunities created by open banking. It is the first of the big banks to become an accredited data recipient under the Consumer Data Right. And it is using data to analyse and personalise services, with services such as assistance with savings goals.