Commonwealth Bank has posted a cash net profit after tax of $5.15 billion for the half year ended 31 December 2022, an increase of 9 per cent on the same period a year earlier.
In a statement to the ASX on Wednesday, the bank said the result was supported by growth in operating revenue but partly offset by higher operating costs and loan impairment expense.
“Higher interim cash profits were a result of volume growth and the recovery in our margins as cash rates rise from historic lows. The result was further supported by sound portfolio credit quality,” commented CBA chief executive officer Matt Comyn.
“Our continued balance sheet strength and capital position creates flexibility to support our customers and manage potential economic headwinds, while delivering predictable and sustainable returns to shareholders.”
Operating income was up 12 per cent to $13.59 billion. Net interest income increased by 19 per cent, primarily driven by a recovery in net interest margins in the rising interest rate environment as well as organic volume growth in home, business, and institutional loans.
Operating expenses rose 5 per cent, which CBA attributed to inflation, higher staff numbers, IT, and remediation costs. These were offset in part by the bank’s productivity initiatives.
CBA said that it continues to invest in its strategic priorities, with investment spending totalling $963 million in the half-year, an increase of 2 per cent. The cost-to-income ratio on a cash basis was 42.5 per cent, down from 45.3 per cent a year ago.
“Our strategic focus on building tomorrow’s bank today for our customers is illustrated by our leading outcomes on customer advocacy scores,” said Mr Comyn.
“We continue to invest in technology and our core businesses to improve customers’ lived experience and to solve their unmet needs. This focus is a key driver of growth in our core deposit and lending volumes to retail and business customers.”
The bank indicated that it has maintained a strong capital position after the payment of dividends and on-market share buybacks, with a CET1 ratio of 11.4 per cent.
This was said to have been supported by strong organic capital generation from earnings, the removal of the remaining $500 million of APRA operational risk capital add-on, and the benefit of divestment of the CommInsure General Insurance business.
Meanwhile, portfolio credit quality was reported to be sound, with consumer arrears remaining low while troublesome and impaired assets were down by $0.5 billion to $6.3 billion.
CBA also noted that its loan impairment expenses rose by $586 million to $511 million, in reflection of ongoing inflationary pressures, rising rates, supply chain disruptions and the decline seen in house prices.
“We expect business credit growth to moderate and global economic growth to slow during 2023. However, we remain optimistic that a soft landing for the Australian economy can be achieved and positive on the medium-term outlook for Australia” said Mr Comyn.
“The bank remains well-provisioned and capitalised to continue to support Australian households and businesses.”
CBA has declared a fully franked interim dividend of $2.10 per share, 20 per cent higher than the prior corresponding period and representing a payout ratio of 69 per cent of cash earnings.
The bank also announced its intention to increase its current on-market share buyback by a further $1 billion in light of its strong capital position.