The Commonwealth Bank (CBA) has squeezed out an extra cent for shareholders on its interim dividend which will now be $1.99 a share after a flat result for the six months to December 31. Nevertheless the cash net profit hit a record $4.9 billion for the half.
And the bank also warned that the “lower growth environment” is going to be with it and its peers for a while yet.
The CBA’s played up a stronger performance on an “underlying basis” but its rivals – but like the NAB, Bendigo and Adelaide and Metway (owned by Suncorp), the industry yardsticks cash profit and or measures, were flat to marginally stronger in some cases, and weaker in others, especially the key cost to income ratio (which cut the bank’s net interest margin).
The bank said cash profit was up just 2% in the half to $4.907 million, while return on equity was a solid 16%.
The Group’s statutory net profit after tax, was $4,895 million, up 6% on a the December, 2015 half year. In past years when the cash profit has seen a stronger rise (or higher figure), that has been played up by the CBA. This time statutory profit got top billing in the profit announcement.
The bank’s net interest margin fell to 2.11% in the latest half year from 2.15% a year ago and 2.14% at the end of June (and the 2015-16 financial year).
The bank’s cost to income ratio jumped sharply to 43.% from 42.1% a year ago and 42.7% last June.
Revenue rose 3% to $22.6 billion for the half.
Looking to the rest of the year and into the first half of 2017-18, the CBA said "Prospects for the Australian economy remain encouraging. Despite the disappointing GDP numbers for the third quarter last year, income growth is on a more positive trajectory.”
"Increased global demand for commodities and some supply cutbacks have raised prices and improved Australia’s terms of trade; the negative effects on spending and jobs from the multi-year reduction in mining investment are coming to an end; and the lower Australian dollar has enabled export sensitive industries to make more of a contribution to economic growth, alongside resources and construction.
"These trends can broaden the base of Australia’s economy, if supported by the right trade, investment, immigration, infrastructure and taxation policies.
"And they could also stimulate a more vibrant services sector that takes advantage of Australia’s links with the high income growth region in Asia. So we remain positive about Australia’s medium to long term growth prospects, and we have the confidence to continue to invest,” the bank said.
"In the shorter term, however, the combination of geopolitical uncertainty and weak economic recovery in parts of the world means the risk of market volatility, and indeed economic shock, remains heightened. The strength of the Australian banking system over the past decade has been critical in insulating Australia from global shocks. Given on-going challenges, we will maintain appropriate capital and liquidity levels, funding strategies and credit origination and management standards.
"And while continuing to invest, we will also continue to manage expenditure carefully to reflect the lower growth environment.”
