So much for all the bullish forecasts about the Commonwealth Bank’s (ASX:CBA) interim result. Yes, a cash profit of just over $5 billion was reported, but the underlying data—so beloved by analysts looking for a 'good story'—wasn't pretty.
The bank’s statutory profit showed a larger 8% fall to $4.837 billion.
The weak result, analysts had been pitching around $5.1 billion, belied the record close on Tuesday at $116 a share.
Wall Street’s massive sell-off on Tuesday after stronger than expected US inflation figures will see the local market slide, and the CBA’s results will be part of that mix.
The CBA revealed Wednesday morning that its cash profit has fallen 3% in the first half of the financial year to $5 billion as profit margins suffer and net interest margins narrowed.
The five-cent lift in the interim dividend to a record $2.15 confirmed the weakness of the figures; it was almost derisory after the 35-cent-a-share lift a year ago to the then record interim of $2.10.
CEO Matt Comyn described the 2023-24 year as challenging, but then it has been just that for millions of bank customers, mortgagees, and small businesses.
“Our lower cash profit reflects cost inflation and a competitive operating environment,” he said in the earnings release.
CBA’s net interest margin (NIM) fell 11 basis points to 1.99% as a result of increased competition for deposits, customers switching to higher-yielding deposits, and higher funding costs as the leads and lags of rising interest rates worked their way out of the markets.
The bank said “a lower contribution from New Zealand” played a part in the fall in the NIM and helped explain why the bank’s revenue was flat at $13.65 billion for the six months.
