CBA's $10 billion bumper profit

Commonwealth Bank of Australia

CBA Details

Delivered a robust operating performance: For FY17, CBA has reported 7.6% yoy growth in Statutory NPAT at $9.93 billion, while posting 4.6% yoy growth in Cash NPAT at $9.88 billion. Operating income grew by 3.8% yoy, ahead of operating expense growth of 2.4%, delivering positive jaws on an underlying basis. Banking income grew 4.3% due to volume growth in home lending, business lending and deposits. However, Insurance income fell 1.1% due to loss recognition of $143 million. Further, personal loan arrears were elevated in Western Australia, while credit card arrears were seasonally higher in 2H17.  Bank has invested almost $1.3 billion whilst maintaining underlying expense growth to 2.4%. Higher wholesale funding costs and increased competition in home and business lending more than offset asset repricing, resulting in a 3-basis point decline in the net interest margin to 2.11%.  Loan impairment expense (LIE) remained low, at 15 basis points of gross loans and acceptances. Consumer LIE was flat at 18 basis points, while corporate LIE fell to 8 basis points from 20 basis points. Home loan arrears remained at low levels, despite higher arrears in Western Australia. Customer deposits contributed 67% of total funding and the Net Stable Funding Ratio (NSFR) stood at 107%. The average tenor of the wholesale funding portfolio was 4.1 years and the average tenor of new issuance was 5.2 years. On liquidity side, liquid assets increased from $134 billion in 2016 to $142 billion, and the Liquidity Coverage Ratio was 129%, while the Leverage Ratio was 5.1% on an APRA basis and 5.8% on an internationally comparable basis.

Financial summary; (Source: Company reports)

The Group’s Common Equity Tier 1 (CET1) ratio stood at 10.1% on an APRA basis, and 15.6% on an internationally comparable basis, maintaining CBA’s position in the top quartile of international peer banks for CET1. Further, banks strong organic capital generation and financial strength expected to aid in achieving APRA’s ‘unquestionably strong’ CET1 ratio average benchmark of 10.5% or more by 1 January 2020. CBA continues to strengthen its balance sheet, while focusing on its long-term sources of competitive advantage in customer base and in technology. Importantly, the strategic priority for bank in FY17 was to enhance the home loan experience for customers by better integrating its branch, online and mobile channels.


CBA Daily Chart (Source: Thomson Reuters)

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