CBA posts record profits
(9 August 2016 – Australia) Commonwealth Bank of Australia (CBA) has posted record profits, announcing a cash profit of A$9.45 billion for the year to 30 June, a 3 percent increase from the previous year.
In a call with analysts, the bank’s CEO, Ian Narev, said the increase was driven by strong growth in home loans but this was offset by a spike in bad corporate loans due to the downturn in commodities.
Narev added that the bank was walking a tightrope, meeting the expectations of its 2 million home loan customers, 11 million depositors and millions of retail shareholders who depend heavily on dividends.
In the period, CBA grew its business lending by 6.1 percent, while mortgage lending increased by 7 percent.
The bank’s cash profit was up 3 percent for the full year, it declined by 3 percent over the second half to A$4.6 billion, from A$4.8 billion. In the second half, business banking profits declined 5 percent to A$764 million, institutional banking and markets profit was down 9 percent to $556 million and wealth management dropped by more than a third to A$245 million.
The bank’s deposit funding grew by 8 percent in customer deposits for the year. Deposits now make up 66 percent of group funding and CBA said its net stable funding ratio is currently above the new regulatory requirement.
Return on equity (ROE) was 16.5 percent, down from 18.2 percent a year ago, following new share issues and capital raising in 2015. In the second half, ROE fell to 15.6 percent.
According to the bank, its common equity tier 1 capital ratio increased by 150 basis points to 10.6 percent, driven by higher profits.
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