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CBA reports $10.2bn profit amid ‘tighter and rapidly changing’ conditions

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The bank has announced its full-year results.

Commonwealth Bank (CBA) has reported a $10.16 billion cash net profit after tax for the 2023 financial year, 6 per cent higher than in the previous financial year.

In its full-year results released to the ASX on Wednesday morning, the bank noted that its lift was supported by growth in net interest income but partly offset by higher loan impairment expenses and operating costs.

Operating income rose by 13 per cent to $27.24 billion, which CBA said was driven by volume growth in home and business lending and an increase in net interest margin (NIM).

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The bank’s NIM was up 17 basis points to 2.07 per cent due to the rising interest rate environment, while being partially offset by the impact of increased competition, particularly in home lending.

According to CBA chief executive officer Matt Comyn, the results demonstrate the bank’s continued focus on supporting customers and providing “strength and stability for the broader economy”.

“It has been an increasingly challenging period for our customers, dealing with rising cost-of-living pressures. Our balance sheet resilience allows us to support our customers and deliver sustainable returns for shareholders,” he said.

“The bank’s portfolio quality has remained sound with arrears and impairments below long-term averages, supported by a strong labour market as well as savings and repayment buffers.”

Loan impairment expenses increased to $1.47 billion, which CBA said reflected ongoing cost-of-living pressures as well as the impact of rising rates.

Operating expenses rose by 5 per cent versus FY22 to $11.65 billion due to inflation, the bank’s additional technology spend to support the delivery of strategic priorities, and volume growth.

In terms of volume growth in its core business, CBA reported an 11.4 per cent increase in business lending to $14.5 billion and a 2.8 per cent lift in business deposits to $6.2 billion.

Growth was also seen in home lending, which was up 5.0 per cent to $26.2 billion, and household deposits, which increased by 5.2 per cent to $18.3 billion.

The bank noted that it had maintained a “strong capital position” after returning $10 billion to shareholders via dividends and buy-backs, with a CET1 capital ratio of 12.2 per cent.

“With tighter and rapidly changing financial conditions we have taken a prudent approach to managing risks including credit, interest rate, funding, and liquidity risks,” Mr Comyn said.

CBA has declared a final dividend of $2.40 per share, fully franked, bringing the total dividend for the financial year to $4.50 per share, 17 per cent higher than FY22.

After successfully completing a $3 billion on-market share buy-back in FY23, the bank also indicated that it intends to undertake a further $1 billion buy-back in FY24 “subject to market conditions”.

Regarding the outlook, Mr Comyn highlighted the resilience of the Australian economy on the back of a recovery in population growth, higher commodity prices and low levels of unemployment.

“However, there are signs of downside risks building as rising interest rates have a lagged impact on mortgage customers and other cost-of-living pressures become a financial strain for more Australians,” he warned.

The CBA CEO suggested that the local banking system remained strong after navigating “rapidly changing and uncertain global financial conditions through sound liquidity risk management and strong capital regulation”.

“We are well provisioned for the changing financial conditions and our strong balance sheet underpins our ability to support our customers and manage headwinds while delivering sustainable returns for shareholders,” Mr Comyn added.

CBA reports $10.2bn profit amid ‘tighter and rapidly changing’ conditions

The bank has announced its full-year results.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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