The Commonwealth Bank, like so many other Australian groups, has ridden the rebounding in markets very nicely.
The shares have more than doubled from the lows of just over $24 reached in late January of this year, to end yesterday at $50.90, down 85 cents on the day, but around their highest levels since November-December 2007.
The shares have in fact touched a near two year high of $52.37 in the past week.
As the Reserve Bank said last week, all our banks have emerged from the credit crunch and the recession in very good shape, soundly capitalised, good profits, bad debts under control and now very dominant (the Big Four control around 80%-90% of the banking sector).
But despite this very solid position, the banks, CBA included, are still very cautious about the outlook.
"The outlook remains uncertain going into the new financial year," The CBA CEO, Ralph Norris (who by the way has had his pay bumped up 6% to more than $9 million, despite the profit fall in the year).
"Despite positive signs, overall credit growth in Australia is expected to continue to slow and economic conditions are likely to remain challenging.
"Accordingly the Group will retain conservative business settings, including maintaining appropriate levels of capital, liquidity and provisioning.
"The Group will also continue with its prudent approach to the management of credit, market and operational risk," he said in the annual report which was released yesterday.
The phrase ‘overall credit growth in Australia is expected to continue to slow" means the bank doesn’t expect an upturn in demand for money, despite the solid rise in home lending and the surge in house prices in recent months, led by Sydney and Melbourne.
The Reserve Bank credit figures for August showed business lending falling (and home lending up because of the solid rise in first home buyer demand. But that is expected to ease from now on with the reduction in the size of the grants).
Mr Norris said the bank "has emerged from a very difficult year in a strong position.
"In an environment where many global peers have been under significant financial pressure, the Group remains highly profitable and goes into the new financial year well positioned both competitively and financially.
"Despite the unprecedented pressures on the global financial system and the difficult domestic economy, the Group has remained well funded and has been able to support its customers in this time of need.
"This performance is a tribute to the strength of the Group’s business model and the enormous commitment and hard work of our people.
"However, the year has not been without its challenges.
"The Group has received some criticism in relation to its capital raising at the end of the last year and its exposure to Storm Financial and its clients.
"We take these matters seriously and have taken actions to address issues arising from the collapse of Storm.
The CBA earned a cash net profit of $4,415 million, down 7%, for the year to June.
The caution can be seen in the approach to the dividend which was cut for the final payment for 2009.
"Having maintained the interim dividend at the same level as the prior year, the Board took the view that in the prevailing uncertain environment it would be prudent to reduce the final dividend to $1.15 per share, a reduction of 25 per cent on last year’s final dividend.
"Total dividend paid for the year was $2.28 per share – down 14 per cent on the prior year.
"With 80 per cent of its shares held by nearly 800,000 domestic investors, a significant proportion of the $3.4 billion paid in dividends ends up in the hands of Australians."
But not a word about the chances for the dividend to be restored to 2008 levels.
