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CBA ‘optimistic’ as profit falls 3% in first half of FY24

By Keith Ford
3 minute read

The big four bank has reported a $5.02 billion profit for the first half of the financial year.

Commonwealth Bank has posted a cash net profit after tax of $5.02 billion for the half year ended 31 December 2023, a decrease of 3 per cent on the same period a year earlier.

In a statement to the ASX on Wednesday, the bank said the result reflected cost inflation and a competitive operating environment, offset by a decrease in loan impairment expense.

“We further strengthened our balance sheet, with high levels of provision coverage, surplus capital and conservative funding metrics. This ensures that we are well positioned to support our customers, manage potential headwinds and deliver long-term sustainable returns to our shareholders,” said CBA chief executive Matt Comyn.

“The stability of our earnings and our balance sheet strength allows us to invest in products, services and experiences that our customers value and to keep our customers safe.”

Operating income for the half was flat at $13.65 billion, which CBA said was supported by volume growth and higher volume-based fee income, offset by margin compression.

Net interest margin was 1.99 per cent, six basis points lower since 2H23, mainly due to increased deposit price competition and deposit switching.

The first-half operating expenses rose 4 per cent to $6.01 billion, with the bank attributing this to inflation and additional technology spend to “support the delivery of our strategic priorities”, partly offset by productivity initiatives.

Loan impairment expense decreased by $96 million driven mainly by lower collective provision charges reflecting ongoing portfolio resilience.

The year “2023 was increasingly challenging for many of our customers who are finding it harder to absorb cost-of-living pressures. The economy has been fairly resilient, supported by a strong labour market, savings and repayment buffers, population growth and relatively high commodity prices,” Mr Comyn said.

“However, downside risks are building as slowing demand and persistent inflation impact Australian businesses. Ongoing geopolitical tensions also create uncertainty.”

CBA said its capital position remained strong throughout the half with its Common Equity Tier 1 (CET1) Capital Ratio coming in at 12.3 per cent as at 31 December 2023, up 10 basis points on the 30 June 2023 level.

It added that this figure was after the payment of the 2023 final dividend to shareholders and the purchase of $154 million worth of CBA shares as part of the previously announced $1 billion on-market share buy-back.

“As cash rate increases have a lagged impact on households and business customers, we expect financial strain to continue in 2024, with an uptick in our arrears and impairments,” Mr Comyn added.

“We remain well provisioned and capitalised, with capacity to navigate an uncertain economic environment. We will stay focused on our customers, offering personalised support and financial flexibility, and we will continue to invest in our franchise.

“We remain optimistic about the outlook for the Australian economy and we remain focused on executing our strategy to deliver on our purpose.”

Deposit funding remained at 75 per cent of total funding, as the bank continued to satisfy a significant portion of its funding requirements from retail, business and institutional customer deposits.

CBA has declared a fully franked interim dividend of $2.15 per share, representing a payout ratio of 72 per cent of cash earnings.