CBA maintains strong balance sheet, increases FY15 results to over $9bn
(13 August 2015 – Australia) Commonwealth Bank of Australia (CBA) released its full year 2015 results on 12 August, attributing a 5 percent profit increase to maintaining a strong balance sheet throughout the year including high levels of capital.
The Group’s statutory net profit after tax (NPAT) was A$9.063 billion for the year to 30 June 2015 with cash profit A$9.137 billion.
CBA also announced the launch of a A$5 billion pro rata renounceable entitlement offer for all shareholders.
The Group is raising capital to meet future requirements including the change to average mortgage risk weights for Australian residential mortgages announced by the Australian Prudential Regulation Authority (APRA) in July 2015.
This further strengthens the Group’s internationally comparable capital ratios and places the Group in the top quartile of its international peers in relation to its capital levels.
Group chief executive, Ian Narev said: “Over many years now we have pursued a simple, consistent strategy.
“This result shows that execution of that strategy continues to deliver well for our customers and our shareholders.
“This financial year saw all-time highs in retail customer satisfaction, with the Group returning to the number one position at year-end, and ongoing high levels of customer satisfaction in our other businesses.
“As a result, our balance sheet continued to grow, and combined with ongoing margin discipline, this resulted in good levels of revenue growth given market conditions.
“We also maintained our focus on productivity, which is particularly important given increasing levels of regulatory and compliance costs,” Narev said.
The Net interest margin (NIM) decreased by 5 basis points to 2.09 percent year-on-year driven by the negative impacts of the falling cash rate environment and an increase in liquid assets.
Excluding treasury and markets, Group NIM was down 1 basis point over the year, with continued sound management of the volume/margin trade-off during the period in a highly competitive, low-rate environment.
Other banking income increased 12 percent due to increased commissions, higher trading income, which was driven by strong Markets sales and trading performance and a favourable counterparty valuation adjustment.
This was partly offset by the implementation of a new derivative valuation methodology, Funding Valuation Adjustment (FVA), which resulted in an initial cost of A$81 million.
Funds management income was flat on a “headline” basis at A$1,938 million.
Excluding the impact of Property transactions and businesses from the comparative results, income increased 8 per cent, driven by a 14 percent increase in average Funds Under Administration.
Insurance income decreased 3 percent due to an unusually large number of weather event claims during the year in New South Wales and Queensland.
Expense growth was higher, increasing 5 percent on the prior year, due to staff expenses and the impact of the lower Australian dollar.
In its statement, CBA said the major driver of expense growth was growing regulatory, compliance and remediation costs, including those associated with a number of legislative reforms (FATCA, FoFA, Stronger Super), provisioning for the costs of the Advice Review program and ongoing regulatory engagement.
Following the capital raising, the Group’s pro forma CET1 ratio will be 14.3 percent on an internationally comparable basis (which assumes full implementation of the Basel III reforms), and 10.4 percent on an APRA basis.
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