The Commonwealth Bank has left interim dividend unchanged after revealing a small dip in December half-year profits.
The country’s biggest bank revealed a first-half cash profit of $4.47 billion, down 4% from a year ago and a touch higher than market forecasts.
Directors left the fully-franked interim dividend unchanged at $2 a share, for the third year in a row.
The result though will please the market – there seem to be no funny figures or hidden black holes in the wake of the banking royal commission and the crackdown on money laundering by AUSTRAC.
CBA shares are up 6% so far in 2020, slightly better than the 5.5% rise in the ASX 200.
The bank repeated previous statements last year that it would consider returning excess capital to shareholders at a later date.
But analysts are predicting CBA will launch a share buyback at a later date, and with tier one capital of 11.7 percent of risk-weighted assets, Mr. Comyn said the lender’s excess capital created “flexibility for future capital management initiatives.”
Analysts are predicting CBA will launch a share buyback at a later date, and with tier one capital of 11.7% of risk-weighted assets.
That’s more pie in the sky silly forecasting from analysts as any capital management will have to be approved by regulators such as ASIC, APRA, and the Reserve Bank and none seem in a mood to give the banks a break as they still have a lot of work to do to improve themselves and their processes in the wake of the Hayne Royal Commission.
On the economy, Mr. Comyn said growth would be hit in the first half of 2019 by the drought, bushfires, and coronavirus, before bouncing back in the December half of the year.
“We do expect that that’s going to weigh on both sentiment as well as GDP in this quarter and in the next,” Mr. Comyn said.
“But we think the combination of both the recovery and rebuild and also some of the underlying strength in the Australian economy will start to come through in the back half of this calendar year.”
While bank profit margins have been compressed by the record-low interest rates, the CBA said its net interest margin had widened by 1 basis point to 2.11%, helped by lower funding costs and its pricing of loans.
The bank, like rivals, did not pass through the full value of last year’s three cuts in official interest rates to home loan borrowers, so customers are effectively part subsiding shareholders in the CBA.
In a sign of the impact of the bushfires, the bank revealed a $100 million provision for exposure to the bushfire and drought, as well as $83 million in bushfire-related insurance claims.
On credit quality, generally in the half-year, the CBA said that while its provisions for bad debts rose due to these bushfire-related exposures, it said the proportion of consumers falling behind on their loan repayments had fallen, though there remained some “pockets of stress” in its loan book among businesses in retail, agriculture, and construction.
