Australia's CBA posts record $6.7 billion full-year profit amid business lending push
The bank's profits eclipsed a Visible Alpha consensus of A$10.24 billion and last year's A$9.84 billion, opens new tab.
CBA, which is Australia's largest lender, declared a final dividend of A$2.60 per share, compared with A$2.50 apiece last year. Its full-year dividend payout of A$4.85 apiece is the highest ever and topped analysts' estimates.
CBA's cash earnings rose on lending growth, especially in business banking, while underlying margins were stable.
"It's a very strong result and shows that CBA is continuing to take market share in retail and business banking from its rivals," said Michael Haynes, equities analyst at Atlas Funds Management, which is a CBA investor.
The bank has long been favoured by investors, with its shares up 17% this year, sharply outperforming its three main rivals.
Interest rate cuts by the central bank lowered the bank's total loan impairment expenses as economic conditions improved. The Reserve Bank of Australia on Tuesday cut the official cash rate to 3.6% in its third interest rate reduction this year.
"Many households have seen a rise in disposable incomes due to the recent relief from reduced interest rates, lower inflation and tax cuts," CBA said in its full-year earnings report.
The bank warned the broader environment remained characterised by "a rise in global macroeconomic uncertainty, increased geopolitical risk and continued domestic competitive intensity", but said it maintained "prudent balance sheet settings over the long term".
CBA said 85% of its customers were ahead on their mortgage repayments. However, despite the improving economic conditions, CBA said home loan payments delayed for more than 90 days jumped 5 basis points to 0.70%, the highest since at least 2018. The bank said some customers continued to be impacted by cost-of-living pressures.
CBA, which underwrites a quarter of Australia's A$2.2 trillion mortgage market, saw its home and business lending grow 6.1% and 12.2%, respectively, in the past year, both outpacing the average growth seen by the overall banking system.
Cash profit from business lending hit A$4.1 billion, up 8% on last year. The increase was the result of CBA making a concerted push to take market share from its major rivals.
CBA's business lending share edged up to nearly 19% in the year, narrowing the gap with leader National Australia Bank (NAB.AX), opens new tab, which held about 21% in March.
Competition in business lending is heating up as banks target traditional sector leader NAB on the back of volatility under its chief executive, Andrew Irvine.
"Business banking is a higher margin business and CBA is moving more into that. Its priority is still to be number one for home lending and the icing on the cake is now business banking," said Atlas Funds' Haynes.
CBA's net interest margin, a key measure of profitability, rose 9 basis points from last year to 2.08%. The common equity tier 1 capital ratio, a measure of spare cash, was flat from last year at 12.3%.
The bank's chief executive, Matt Comyn, was paid A$7 million in the past year, down from A$8.9 million the previous year, according to the bank's annual report released on Wednesday.
Comyn was granted a 14% increase in his base pay after no increases in the prior two years. The overall reduction in his salary was the result of increased holding and deferral periods introduced for shares granted in 2021, the annual report said.
($1 = 1.5323 Australian dollars)
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