Australia’s Commonwealth Bank’s full-year cash profit for 2022 rose 11 per cent to $9.6 billion. CBA announced they will raise their dividend with the strength of strong growth in home and business lending and lower bad debts even as interest rates rise. The Reserve Bank of Australia has raised interest rates for the fourth consecutive time to 1.85% in July. Intense mortgage market competition coupled with higher funding costs led to the margin being squeezed lower than the benefit from the higher cash rate late in the reporting period.
CBA 2022 Earnings Highlights
- CBA’s full-year revenue rose 1% to $25.1 billion, higher than expected because of the growth in business and home loans.
- Cash profit also came in above analysts’ expectations and was boosted by a decrease in loan impairment expenses as the bank withdrew additional buffers added on during the pandemic.
- CBA’s mortgage lending rose $36.4 billion to $528 billion in the year ended June 30.
- 7.4% increase is just below the average growth rate of all other lenders.
- CBA boosted its retail transaction accounts by 24%, while its credit card approvals jumped 29%
- Business lending increased more than housing, gaining $15.4 billion to $180 billion.
- 13.6% increase is 1.3 times higher than the average of all other lenders.
- Business transaction accounts rose 10%, and new facilities for retailers increased 32%.
- Net interest margin (NIM), the key driver of a bank’s revenue was 1.9%, down 0.18 of a percentage point over the year, in line with expectations.
- Deposit funding rose sharply: household deposits climbed 13.2%, or by $40.9 billion
- Business deposits increased 15.1%, or by $23.9 billion.
- 98% of its home loan lending was to customers with CBA transaction accounts, helping it to monitor risk.
- The number of home loans more than 90 days overdue fell to just 0.49% of all loans, down from 0.64% a year ago.
- Expenses fell 1.5% to $11.2 billion as the bank paid out less in remediation costs. But its cost growth disappointed, as wage inflation drove staff expenses up 9%.
Dividends and Buybacks
CBA will pay a $2.10 final, fully franked dividend. When added to the interim dividend of $1.75, the total dividend is $3.85, up 35¢ for the period, and 2¢ higher than the market expected.
Over the year, CBA returned $13 billion to shareholders via dividends and share buybacks. The full-year payout ratio was 68% and CBA said it would continue to target a payout ratio of between 70 and 80% of cash profits.
Outlook
Chief executive Matt Comy said the short-term outlook was “challenging” but “we remain of the view that the medium-term outlook for Australia is a positive one” and it would continue to invest in digital banking.
Common equity tier 1 (CET1) capital was 11.5 per cent, stronger than its level before COVID-19.
“A highlight of the result is our continued balance sheet strength and capital position that has allowed us to support our customers while delivering consistent and sustainable returns to shareholders,” Chief executive Matt Comy said.
Chief executive Matt Comyn said the Australian economy had positives and negatives; the short term would be challenging, he said, while the medium-term outlook was better. He pointed to the strong position of households and businesses given low unemployment, low underemployment and non-mining investment in the economy.
“We expect consumer demand to moderate as cost of living pressures increase,” he said.
CBA said it expected the margin to turn around as rates increase, as it passes more of the Reserve Bank’s rate rises through to borrowers than it does to savers.
Source: CBA
via a Sunburnt Country
From The TradersCommunity News Desk