Commonwealth Bank reported a net profit of A$8.6 billion for the 2018/19 financial year – 8 per cent down on the 2017/18 result. On a cash basis, profit from continuing operations was $8.5 billion – 5 per cent down on the previous corresponding period.
Income: Net interest income fell 1 per cent, compared with the previous corresponding period, to $18.1 billion. Other banking income fell 3 per cent to $5.1 billion. Funds management income and insurance income were both down. Total operating income of $24.4 billion was down 2 per cent.
Expenses and cost-to-income: Operating expenses increased by 2 per cent to $11.3 billion. Operating expenses as a proportion of total operating income rose from 44.1 per cent to 46.2 per cent.
Impairment charge: The bad debt charge was $1.2 billion – an increase of 2 per cent over the previous corresponding period. It increased 13 per cent in the June half, compared with the December half. The ratio of loan impairment expenses to gross loans and acceptances rose 1 bp to 16 bps.
Credit quality: Arrears on home loans fell from 70 bps to 68 bps year-on-year. Arrears on credit cards fell from 1.03 per cent to 1.02 per cent. Arrears on personal loans rose from 1.44 per cent to 1.56 per cent. Troublesome and impaired assets increased by $1.1 billion to $7.8 billion, reflecting downgrades to a small number of corporate exposures and emerging signs of weakness in sectors exposed to consumer discretionary spending, agriculture and the construction sector. Gross impaired assets as a percentage of gross loans and acceptances rose 6 bps to 48 bps.
Margin: The group’s net interest margin (on continuing operations) fell 5 basis points year on year to 2.1 per cent. NIM for the retail banking services division fell 17 bps to 2.57 per cent.
ROE: The return on equity fell 160 basis points from 13.9 per cent in 2017/18 to 12.3 per cent in the year to June. On a cash basis, ROE fell 110 bps to 12.5 per cent.
Earnings per share: On a cash basis, EPS fell 6 per cent to $4.80 a share.
Dividend: The bank declared a final dividend of $2.31 a share for the June half – an increase of 16 per cent compared with the first half. The total payout for the year, at $4.31 a share, was unchanged from the previous year. The dividend payout ratio rose from 80.4 per cent in 2017/18 to 87.6 per cent in the year to June. The bank neutralised its dividend reinvestment plan.
The divisions: The bank’s biggest division, retail banking services, made a cash profit of $4.3 billion, which was 12 per cent down on the previous corresponding period. Cash profit for business and private banking was $2.6 billion – down 7 per cent. Institutional banking and markets fell 8 per cent $1.1 billion. The biggest fall was in wealth management, whose cash profit fell 37 per cent to $160 million. On the positive side, the New Zealand division’s cash profit rose 8 per cent to $1.05 billion.
Market share: Home loan market share was steady at 24.4 per cent, while household deposit share fell from 28.4 per cent to 28.1 per cent. The bank’s mortgage business returned to above-system growth in the second half of the year. Credit card share fell from 27.2 per cent to 26.9 per cent. Business lending share fell from 15.8 per cent to 14.4 per cent. New Zealand home loan share was steady at 21.7 per cent.
Capital: The bank’s common equity tier 1 ratio rose 60 bps to 10.7 per cent. The bank said the sale of Colonial First State Global Asset Management, which was completed earlier this month, would add 68 bps to CET1.
Funding: The customer deposit funding ratio rose from 68 per cent to 69 per cent. The net stable funding ratio was steady at 112 per cent and the liquidity coverage ratio was 132 per cent. Long-term wholesale funding, which makes up 66 per cent of total wholesale funding, had a weighted average maturity of 5.1 years.