Commonwealth Bank of Australia has delivered strong results for customers and shareholders, with a 20 per cent increase in cash Net Profit After Tax (NPAT), reflecting an improvement in economic conditions and outlook resulting in a lower loan impairment expense and a strong operational performance.
The result – covering the 12 months to 30 June 2021 – saw a $1.4 billion increase in cash profit to $8.7 billion.
Based on a pay-out ratio of 71 per cent of cash profit, the Board determined a final dividend of $2.00 a share, taking the total for the year to $3.50 a share fully franked. The total dividend equates to a distribution of $6.2 billion of the Group’s FY21 Cash Profit to shareholders in relation to FY21.
In addition, CBA’s board has announced a $6 billion off-market buy-back of shares following the divestment of a number of businesses.
The Group’s continued progress against its strategy, combined with the fact that its Common Equity Tier 1 (Level 2) capital ratio is 13.1 per cent – 260 basis points above the APRA’s 10.5 per cent ‘unquestionably strong’ measure – means the bank is well placed to support customers, manage ongoing uncertainties, while also returning a portion of surplus capital to shareholders.
Commonwealth Bank’s Chief Executive Officer, Matt Comyn, said the ability to return capital and pay a $3.50 total dividend reflected the success of executing the Group’s strategy as well as the ongoing strong operational performance of the core businesses of retail, business and institutional banking.
“We are focused on continuing to make progress on our more ambitious strategy – building tomorrow’s bank today for our customers,” he said.
“Reimagining banking through new products and partnerships that will support our customers and help build Australia’s future economy, while focused on disciplined execution and investing in digital and technology capability.”
Earnings per share based on the cash profit from continuing operations was $4.89, up 80c on the prior year, while return on equity was 11.5 per cent, an increase of 130 basis points from the prior year.
Operating income, which was up 1.7 per cent on the prior year to $24.16 billion, was driven by above system volume growth in home lending (1.2x system), business lending (more than 3x system), household deposits (1.2x system) and business deposits (almost 2x system).
Group margins for the year reduced by four basis points – to 203 basis points from the continued impact of the low-rate environment, although the second half saw a small improvement in margins as the Group benefited from lower funding costs.
Operating expenses rose by 2.4 per cent to $10.78 billion excluding remediation costs, reflecting investment in the franchise and higher volumes.
The loan impairment expense (LIE) was lower than the prior year, reflecting an improvement in economic conditions and outlook, at 7 basis points as a percentage of average gross loan and acceptances.
Provision coverage remains strong with the provision coverage ratio at 1.63 per cent, reflecting the economic uncertainty from the continuing impacts of COVID-19.
Mr Comyn said the bank’s continued balance sheet strength and very strong capital position has allowed CBA to support customers while delivering strong and sustainable returns to shareholders
“We are prepared for a range of different economic scenarios and are well placed to support our customers. We’re committed to new and ongoing support measures for those most impacted by COVID-19 and other events. We will continue to work closely with our retail and business customers to understand their needs,” Mr Comyn said.
“Looking ahead, we anticipate ongoing economic impacts and earnings pressure from lower interest rates. We will continue to invest in the business to reinforce our product offering to our retail and business customers and extend our digital leadership. Through disciplined execution and our people’s care and commitment, we will continue to deliver for our customers, community and our shareholders as we build tomorrow’s bank today.”
