Australia’s largest commercial bank posted strong half-year financial results on higher interest rates, while business lending growth boosted after-tax profit significantly.
On 15 February, the Commonwealth Bank of Australia (CBA) cash profit $5.15 billion (US$3.6 billion) in the first half of fiscal year 2022-23, up 9% from 12 months ago.
At the same time, statutory net income after tax increased 10% to $5.22 billion.
Solid results were in line with what market analysts had predicted.
CBA CEO Matt Comyn said the strong results were due to higher lending volumes and a recovery in margins triggered by the rate hike cycle implemented by the Reserve Bank.
“Margins have improved as cash rates rise from emergency levels, but margins have not returned to pre-COVID levels,” he told investors on a briefing.
“Funding costs have risen significantly, which is in line with an escalating price-based offer across the Australian and New Zealand mortgage markets.”
Increase in key earnings metrics
In the six months ended December 31, 2022, CBA delivered operating income of $13.59 billion, an increase of 12% from last year.
This surge was primarily due to the strong growth of our lending business in both residential and commercial loans.
It is worth noting that net profit margina profitability measure calculated by subtracting the total interest charged to customers by banks from the total interest paid by banks for funding, increased by 23 basis points to 2.1% during the reporting period.
This increase marks the recovery of CBA’s net interest margin after nearly a decade of decline. banking industry.
Bank operating expenses also increased, up 5% to about $5.9 billion due to higher spending on staff and technology and inflation.
The rise in CBA’s earnings was not surprising as it was within market expectations.
In January, analysts at global investment bank Goldman Sachs said Australian banks were slowing public cash rate hikes and grappling with practices of not passing the full amount on to savers, leading to an increase in earnings for the current fiscal year. We estimated that revenue would surge by 20%.
Earlier, Treasury Secretary Jim Chalmers criticized banks for not treating their customers fairly and called on the Australian Competition and Consumer Commission to investigate bank deposit rates.
CBA optimistic about Australia’s economic outlook
When the CBA reported improving financial performance, banks expressed optimism about the economic outlook, pointing to the economy’s “solid” fundamentals, including falling unemployment, rising exports and returning migrants. bottom.
Despite predicting economic slowdown Throughout 2023, the CBA CEO was confident the Australian economy could avoid recession.
“We expect slow growth in business credit and slowing global economic growth in 2023,” Comyn said.
“However, we are optimistic that a soft landing for the Australian economy can be achieved and we are positive about Australia’s medium-term prospects.”
The CBA said while benefiting from higher interest rates, it was aware of the impact of the rate hikes on Australian households.
“We are aware that many Australian households are feeling the strain of rising interest rates, along with rising costs for electricity, food and other household items.” Comin said.
“Nevertheless, consumer spending remains resilient and there are signs of a slowdown in pocket spending.”
As such, the bank said it will focus on helping customers during difficult times.
“Supporting our customers through rate increases and cost of living increases remains a priority and is consistent with our aim to build a brighter future for all.” Comin said.
“We offer personalized support, flexibility and financial assistance to those who need it.”
Following its strong first half performance, CBA announced another $1 billion share repurchase.
The company also announced a full waiver of its interim dividend of $2.10 per share, up 20% year-over-year.
The bank estimates that more than 860,000 shareholders will receive dividends, averaging $1,650.