A record close and peak price in trading told us how the market greeted the biggest non-tip of the year – a capital return from the Commonwealth Bank.
CBA shares hit an all-time high of $109.03 in trading yesterday and closed at $108.17, up 1.5%, driven by the combination of a higher-than-expected buyback and final dividend.
The CBA will conduct a $6 billion buyback which was higher than most forecasts which seemed to be pegged around $5 billion.
A total dividend of $3.50 a share will be paid after a final of $2 was declared. Some analysts got that right, some were a bit higher but most seemed to be just below.
A year ago the bank paid $2.98 cents a share as APRA kept the payout of banks and other financials low to preserve cash in the first waves of the pandemic. The bank paid $4.31 a share in 2018-19.
The bank reported a net profit of $8.8 billion for the year to June, up 19.7% on the prior corresponding period. Revenue rose 1.7% to $24.2 billion but operating expenses were up 3.3% to $11.4 billion.
Cash net profit after tax at the country’s biggest bank rose 19.8% to $8.65 billion in the year ended June 30.
“The continuing strength of our businesses, combined with a focus on customer needs, digital engagement and consistent operational excellence has contributed to a strong financial result this year,” CEO Matt Comyn said in Wednesday’s announcement.
Mr Comyn said the bank’s divestments (insurance, funds management, financial advice) had generated $6.2 billion in excess capital since 2018, and buying back its shares was the most efficient way to start returning to investors.
CBA’s profit rise was helped by a $554 million fall in its charges for impaired loans – a benefit that goes straight to the profit line.
The bank’s operating income from interest and fees rose 1.7% (held back by low interest rates on its flood of deposits), while its operating expenses were up 3.3%. Net interest margin was 2.03%.
Mr Comyn said divestments had generated $6.2 billion in excess capital since 2018, and buying back its shares was the most efficient way to start returning capital to investors.
Suncorp ($250 million), NAB ($2.5 billion) and ANZ ($1.5 billion) have also revealed buybacks.
The bank’s annual report showed Mr Comyn’s pay had increased to $5.2 million, up from $3.9 million last year, as he received a larger long-term bonus.
Mr Comyn said the economic recovery had continued strongly for most of the past financial year, but the pandemic continued to affect the economy, and low rates would crimp profits in the future.
“Looking ahead, we anticipate ongoing economic impacts and earnings pressure from lower interest rates. We will continue to invest in the business to reinforce our product offering to our retail and business customers and extend our digital leadership,” he said.
