Commonwealth Bank reported net profit of A$8.8 billion for the 12 months to June – an increase of 19.7 per cent over the previous corresponding period. On a cash basis, profit rose 19.8 per cent to $8.6 billion. CBA increased its dividend and announced a $6 billion share buyback.
Income: 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.
Expenses and cost to income: Operating expenses rose 3 per cent year-on-year to $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.
Impairment expense: The loan impairment expense was cut from $2.5 billion in 2019/20 to $554 million in 2020/21, with a benefit of $328 million in the June half. The loan impairment expense as a percentage of average gross loans and acceptances fell from 33 bps to 7 bps.
Credit quality: The bank reported a small increase in home loan arrears from 63 bps in June last year to 64 bps at the end of 2020/21. This was due primarily to the completion of the COVID loan deferral arrangements in March. Credit card and personal loan arrears fell. The value of troublesome and impaired assets fell from $8.2 billion to $7.5 billion over the year.
Margin: The bank’s net interest margin fell 4 basis points to 2.03 per cent over the year. The bank said the fall was due to the impact of holding higher liquid assets and the low interest environment.
Return on equity: ROE on a cash basis was 11.5 per cent – up from 10.2 per cent in the previous corresponding period.
Earnings per share: EPS rose 20 per cent to 488.5 cents per share.
Dividend: The bank declared a final dividend of $2 a share, fully franked – up from an interim dividend of $1.50. The total dividend of $3.50 for the year is 17 per cent higher than the 2029/20 dividend. The dividend payout ratio was 71 per cent, unchanged from the previous year.
The divisions: CBA’s biggest division, retail banking services, made a cash profit of $4.8 billion for the 12 months to June – up 16 per cent on the previous corresponding period. The business banking division’s profit rose 11 per cent to $2.7 billion. The institutional banking and markets division’s profit was up 46 per cent to $922 million. New Zealand profit rose 43 per cent to $1.2 billion.
Market share: Australian home loan market share rose from 25 per cent to 25.3 per cent over the year, household deposit share grew from 27.1 per cent to 27.4 per cent, business lending share rose from 14.7 per cent to 15.6 per cent, and New Zealand home loan share rose from 21.5 per cent to 21.6 per cent.
Capital: CBA’s common equity tier 1 capital ratio rose 150 bps over the year to 13.1 per cent. The bank estimated that after the completion of its $6 billion share buyback, its CET1 capital ratio will be around 12.1 per cent and it will have $7.5 billion of surplus capital remaining.
Liquidity and funding: Total average interest earning assets rose 4 per cent to $929.8 billion. Deposits accounted for 73 per cent the bank’s funding – down from 74 per cent in 2019/20. The bank borrowed $51.1 billion under the Term Funding Facility. The bank’s liquidity coverage ratio is 129 per cent and its net stable funding ratio is also 129 per cent.
Customer remediation: Remediation expenses rose in 2020/21 – up from $461 million in 2019/20 to $575 million in the year to June. The cumulative remediation cost is now up to $3.2 billion, with $960 million of refunds paid, $1 billion still to be paid and $1.2 billion of program costs. Of the total $1.9 billion of refunds (paid and yet to be paid), $892 million is to customers of aligned wealth advisers, $615 million is to “other” wealth customers and $491 million is to bank customers.
COVID relief measures: The bank put deferral arrangement in place for 158,000 home loan customers last year, with 91 per cent back to repayments or closed since the program ended in March. Of the rest, 5000 are receiving hardship assistance. There were 6400 new deferrals at July 31, representing 0.4 per cent of the portfolio. In business lending, 83,000 loans were put on deferral last year, with more than 90 per cent back to repayment or closed. There were 240 new business loan deferrals at July 31, representing 0.1 per cent of the portfolio.