Commonwealth Bank’s fiscal year profit falls, dividend rises – update

By Alice Uribe

SYDNEY — Commonwealth Bank of Australia reported a 6 per cent drop in full-year net profit, with growth in core businesses offset by ongoing competition in the bank’s largest retail banking business.

Commonwealth Bank, Australia’s largest bank by market value and the country’s largest mortgage lender, said its net profit, including discontinued operations, fell 6% to A$9.39 billion ($6.23 billion) in the 12 months to June. On a continuing operations basis, net profit for the full year fell 6% from a year earlier to A$9.48 billion.

Cash income – a measure used by analysts that excludes hedging positions and losses and gains from acquisitions and divestitures – fell 2% to A$9.84 billion from a year earlier.

At the divisional level, Commonwealth Bank’s retail banking services unit, which accounts for 54% of group net profit, saw full-year cash revenue fall 3% to A$5.36 billion from A$5.54 billion in the previous year, partly due to increased competition.

Cash revenue from commercial banking was A$3.77 billion, up 4 per cent from A$3.62 billion, while institutional banking and markets revenue was A$1.10 billion, up 5 per cent from A$1.05 billion in the previous year.

The Commonwealth Bank said the Australian economy remained resilient, with higher interest rates slowing the economy and gradually bringing down inflation.

“We will play our part in stimulating growth by lending to productive sectors of the economy,” said Chief Executive Matt Comyn.

Commonwealth Bank’s net interest margin, a measure of the difference between the amount a bank pays to take deposits and funds and the amount it charges to lend money, fell 8 basis points in fiscal 2024 to 1.99% from a year earlier, but rose 1 basis point from the previous half.

“Margins declined year-on-year, primarily due to competition and deposit shifting, partially offset by higher returns from portfolio and equity collateral replication,” Commonwealth Bank said.

Australian banks have been battling for dominance in the mortgage market in recent years, which has weighed on margins, but some analysts believe the headwinds are likely to improve modestly in the medium term as this aggressive competition eases. Reserve Bank Australia data shows that discounting of new loans has remained stable in recent months.

Market observers are also looking for any signs of deterioration in asset quality in the face of higher interest rates.

The Commonwealth Bank said problem and non-performing assets rose to A$8.7 billion in fiscal 2024 from A$7.1 billion in fiscal 2023, while the proportion of mortgages delinquent for more than 90 days stood at 0.65%, compared with 0.47% the previous year.

At the same time, total impairment losses at the end of June amounted to AUD 6.14 billion, an increase of 3% compared to the previous year.

The company’s directors have announced a final dividend of AUD 2.50 per share, up from AUD 2.40 per share in the previous year.

Commonwealth Bank’s closely watched Common Equity Tier 1 capital ratio, a key indicator of a bank’s resilience to financial shocks, stood at 12.3% in fiscal 2024, up 10 basis points from a year earlier.

“The bank managed its key balance sheet risks in a balanced and conservative manner and made strategic decisions to ensure strong capital, funding and liquidity,” the Commonwealth Bank said.

Write to Alice Uribe at [email protected]

(END) Dow Jones Newswires

August 13, 2024, 6:59 PM ET (10:59 PM GMT)