The banking giant Commonwealth Bank of Australia (ASX:CBA) released an upbeat financial result for the half year ended 31 December 2015. The Group reported a 4% increase in its cash net profit after tax (NPAT) for the half year to $4.8 billion.
Subsequently, it lifted its statutory net profit after tax (NPAT) by 2% compare to the previous corresponding period, to $4.62 billion.
Net interest income increased 6% on pcp, reflecting 9% growth in average interest earning assets. This was achieved on the back of solid volume growth and revenue momentum across the business. The Group’s transaction balances grew 21% as household deposits rose 10.6% and business lending increased 6.8% over the previous year. Conversely the household lending grew 6.5%, which was slightly below the Group’s expectation.
Net interest margin remained flat at 2.06%, while other banking income rose 4%. The ‘other banking income’ was improved by higher profits from associates and strong growth in fees and commissions, which was partially offset by derivative valuation adjustments.
The Group’s wealth management division achieved a 10% increase in underlying NPAT, which was driven by 17% growth in insurance and a 6% rise in funds management income.
On an underlying basis, CBA’s underlying expenses grew 3.8% due to rising costs in its business units. Moreover, the ongoing investment spend, inflation and unfavourable exchange rate movements resulted in a 6.1% increase in total operating expenses.
Total investment spending amplified 14%, with the majority of funds invested on productivity and growth initiatives. Loan impairment expense increased 3% on the pcp, to $564 million.
The board declared an interim dividend of $1.98 per share, unchanged from the previous year, with the dividend payout ratio at 70.8% of cash NPAT.
The Commonwealth Bank Group Chief Executive Officer, commented on the results: “Our focus on customers has continued during this period to benefit the people, businesses and communities we exist to serve. Our people remain the key to our on-going success. As a result of their efforts, we ranked outright number one for retail customer satisfaction.”
CBA surged more than 4% upon open, and last traded at $73.42 as at 11:44 AM (AEDT).
Author: Imran Valibhoy
Feb 10, 2016
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.