A key pressure point for all banks has been on net interest margins – which compare funding costs with what banks charge for loans. CBA’s margin plunged by 17 basis points compared with the June half, to 1.92 per cent. The bank said the bulk of this was due to a build-up in liquid assets required by regulators, and excluding this change its margin dropped by 5 basis points, but it expected the pressure on margins to continue in the second half of the financial year.
Even so, CBA indicated the margin pressure was more than offset by the growth in its volumes, and its overall operating income up 2 per cent to $12.2 billion.
CBA CEO Matt Comyn is upbeat on the outlook for the Australian economy.Credit:Alex Ellinghausen
Mr Comyn described the profit result as “strong,” and he highlighted the strength of CBA’s balance sheet, which had allowed the bank to expand its share buyback.
“Higher cash profits were a result of continued volume growth across the business in home lending, business lending and deposits, flat operating costs and significantly lower loan impairment expense due to the improving economic outlook,” Mr Comyn said.
More than one in four Australian home loans are with the CBA, and a key driver of its performance in recent halves has been that it has further cemented its dominant position. In the six months to December, its mortgage book grew at 1.2 times the industry average, while its business loan portfolio grew at 1.7 times.
Also boosting profits in the half, CBA’s expense for impaired loans plunged by $957 million compared with last year – when provisions were higher due to the economic threat of COVID-19.
Loading
In the past year, CBA shares have risen 7.9 per cent and the stock closed at $94.30 on Tuesday.
While the bank has been expanding its already dominant position in retail banking, going into the result some analysts were concerned about a crunch on its profit margins due to stiff competition in the mortgage market and ultra-low interest rates.
CBA hikes dividend as profits rise 23 per cent to $4.7b, lifts share buyback
Source: Philippines Alive
