Reporting Summary

Commonwealth Bank Limited (CBA)

1H Year Results - Released 15/02/2017

  • Beat consensus estimates for cash NPAT but missed on net interest income

Financial Results

  • Cash NPAT of $4.91b reported compared to consensus expectations of $4.84b and was up 2% from a year ago
  • Net interest income reported as $8.7b compared to consensus expectations of $8.8b
  • Net interest margin recorded as 2.11% compared to consensus expectations of 2.06% and was down by 4 basis points from a year ago
  • Interim dividend of $1.99 fully franked, payable on 4 April

Operational Key Points

  • Strong home lending and solid corporate lending, together with growth in deposits, underpinned income
  • Net interest margins were impacted by higher funding costs
  • Deposit growth:
    • Retail Banking Services achieved a 30% growth in transaction deposits and a 16% increase in new transaction accounts
    • Total customer deposits increased 8% to $541b and contributed 66% of total Group funding
  • Balance Sheet:
    • Capital generated by earnings was offset primarily by APRA’s requirement to hold an additional 80 basis points of capital for Australian residential mortgages, which was implemented on 1 July 2016. CBA ranks near the top of the top quartile of international peer banks for CET1.
  • Credit Quality:
    • Loan impairment expense (LIE) remains low at 17 bpts of gross loans and acceptances
    • Personal loan arrears were seasonally lower, although still elevated in WA
    • Home loan arrears continue at low levels, despite higher arrears in WA

Management Outlook – CEO: Ian Narev

“The combination of geopolitical volatility and weak economic recovery in parts of the world means the risk of market volatility, and indeed economic shock, remains heightened. At the same time, recent trends in the Australian economy are more positive. Our job as a major financial institution is to maintain a focus on the long term, whilst ensuring that we can withstand nearer term shocks. Our contribution to Australia’s economic growth must continue to be the combination of strength and innovation that has served Australia well through global volatility. So we will continue to manage our balance sheet, and our expenditure, conservatively. But we will also continue to invest confidently so we can play our part in the bright future that we see for Australia”.

Michael Ron

Research Analyst

Michael has been trading equities since 2003 and since joining DJ Carmichael in 2004 has worked in numerous roles in operations, trading, compliance and research. Michael’s expertise is in trading and equity strategy using a combination of both technical and fundamental analysis.

Michael holds a Graduate Diploma in Applied Finance, Diploma of Financial Markets, Diploma of Financial Planning, Advanced Diploma of Business Administration and is currently studying towards a Master of Applied Finance.