By Alice Uribe
SYDNEY – The Commonwealth Bank of Australia reported a 6.0% rise in annual net profit, in part due to volume growth in its core home lending and business banking units, and a revision of the pandemic-related provisions.
CBA, Australia’s largest bank by market value and the country’s largest mortgage lender, said its net profit rose to A$10.77 billion ($7.50 billion) in the period 12 months to June, compared to AUD 10.18 billion a year earlier on a statutory basis.
Cash profits – the measure tracked by analysts that excludes items such as hedging and losses or gains on acquisitions and asset sales – rose 11% to A$9.60 billion.
The company’s directors declared a final dividend of A$2.10 per share, up from A$2.00 last year. Consensus forecasts compiled by FactSet predicted that the CBA’s annual profit would be A$10.45 billion.
CBA recorded growth across all of its core units, with retail banking cash revenues of A$4.93 billion, up from A$4.70 billion the previous year. Corporate banking cash profits were A$3.0 billion, down from A$2.84 billion, and institutional banking and markets profits were A$1.05 billion, an increase from A$926 million the previous year.
“We have been focused on strengthening our commitments and relationships with our clients, which has resulted in further growth in our core retail, business and institutional deposit and lending volumes,” said said general manager Matt Comyn. “Our operating performance was superior thanks to this continued volume growth and profitability was further supported by the good credit quality of the portfolio.”
The 2022 result was helped by a reduction in funds set aside to manage the challenges of Covid-19, which saw ABC loan impairment charges fall from A$911m to a profit of 357 million Australian dollars. The ABC said this was partly offset by forward-looking adjustments for emerging risks, including inflationary pressures, supply chain disruptions and rising interest rates.
For the full year, CBA’s operating expenses were A$11.19 billion, down 1.5% partly due to lower remediation costs, but increased offset by higher staff costs.
Yet competition from home loans has hit a lender’s net interest margin, a measure of the difference between what a bank pays to obtain deposits and funds, and what it charges to lend money. . For fiscal year 2022, the ABC’s NIM was 1.90%, down 18 basis points from a year earlier, which the ABC attributed in part to lower margins on home loans, but said this was partly offset by increased income on deposits.
NIMs of Australian banks had been under pressure in a low interest rate environment, which helped lead to a surge in property prices in Australia. With the Reserve Bank of Australia making successive interest rate hikes in recent months, analysts believe lenders should see margin gains over time. The CBA said Wednesday that its medium-term outlook remained unchanged, expecting spreads to rise amid rising rates.
The ABC said consumer arrears remained low in fiscal 2022, reflecting the quality of origination, low unemployment and large reserves of household savings, as troubled and impaired assets declined. to A$6.4 billion, from A$7.5 billion in FY2021.
Meanwhile, total loan impairment provisions fell to A$5.35 billion from A$6.21 billion the previous year, which the ABC said reflected good credit quality in the market. portfolio and the reduced level of Covid-19 overlays.
Still, Mr Comyn said while Australian households and businesses were in a strong position amid low unemployment, inflation and a rapidly rising cash rate were having a negative impact on consumer confidence.
“We expect consumer demand to moderate as cost of living pressures increase,” he said.
The ABC continues to view the medium-term outlook for Australia as positive. Mr Comyn said the bank would continue to invest in its business, with plans to expand its digital position.
The bank’s closely watched Common Equity Tier 1 capital ratio, a key measure of a bank’s ability to withstand financial shocks, was 11.5%, down 160 basis points year on year.
Write to Alice Uribe at [email protected]
Corrections & Amplifications
This article has been corrected at 23:25 GMT to reflect that the CBA said on Wednesday that its medium-term outlook remained unchanged, expecting margins to rise amid rising rates. The original version had an error on the day the CBA released its annual result in Australia.