As expected the Commonwealth Bank (CBA) boosted its interim cash net profit to a record level and will pay a record interim dividend as well.
The country’s biggest bank told the market this morning that it had a cash profit of $4,623 million, up 8% for the six months to December 31. It also lifted its non-cash net profit 8% to $4,535 million.
The bank will pay an interim dividend of $1.98 a share – an increase of 8% on the 2014 interim dividend.
That’s a dividend payout ratio of around 70% of cash earnings which is in line with the prior year and consistent with the Board’s full year target of paying out between 70% and 80% cash NPAT.
The Dividend Reinvestment Plan (DRP) will continue to operate, but no discount will be applied to shares issued under the plan for this dividend.
The Bank said it would not buy CBA shares on market to neutralise the impact of the DRP on the number of shares on issue.
CBA vs XJO 1Y – CBA continues to outperform the broader market
In the statement with the results, released this morning, CBA CEO, Ian Narev said: "This result again demonstrates the benefits of sticking to a consistent strategy for a high quality franchise. Our ongoing focus on long term strategic priorities: people, technology, strength and productivity continues to benefit our customers, our shareholders, our people and other key stakeholders".
"The Group’s revenue momentum has continued, while our focus on productivity has delivered a further $300 million of cost savings over the last 12 months. We have also maintained the strength of the Group?s balance sheet in terms of capital, liquidity, deposit funding and provisioning."
The net interest margin dipped 2 points to 2.12% (or 2.12 cents in every dollar of income). Helping limit the fall was a 70 point drop in the bank’s cost to revenue ratio to 42.2% (that’s the key measure of a bank’s efficiency).
Net interest income and other banking income both grew 6%, with average interest earning assets up $49 billion to $739 billion and retail and business average interest bearing deposits up $27 billion to $432 billion.
The main drivers in the better result were a 12% rise in earnings from the bank’s core business, its retail division, while the contribution from ASB in New Zealand was up 15%.
Loan loss provisions also improved in the half year.
