Commonwealth Bank of Australia (CBA) has announced a cash profit of A$9.8 billion for the financial year ending June 30, 2024, marking a 2% decline compared to the previous year.
This result aligns with analyst expectations, underscoring the challenges the bank faces amidst a slowing economy and increasing competition in the lending sector. Despite these headwinds, CBA’s ability to maintain its profitability is notable, particularly given the current economic landscape.
The bank’s net interest margin, a key indicator of profitability, remained stable at 1.99% despite the pressures of a competitive mortgage market and customers shifting their deposits to higher-yielding options. However, the bank saw a 3% rise in operating expenses, driven primarily by higher wages and increased investment in technology. This investment, while necessary, has placed additional pressure on the bank’s overall cost structure.
CEO Matt Comyn highlighted the ongoing risks to the Australian economy, including challenges related to productivity, housing affordability, and broader global uncertainties. Despite these risks, Comyn emphasized that Australia remains well-positioned to navigate these challenges, although the bank is closely monitoring potential downside risks.
CBA also reported a slight uptick in mortgage arrears, with 1.3% of home loans now more than 30 days overdue. This increase reflects the broader economic pressures facing many Australians, particularly younger borrowers who are experiencing significant cost-of-living challenges. Nonetheless, about 80% of CBA’s mortgage customers remain ahead of their scheduled repayments, a positive sign of financial resilience among its customer base.
In terms of capital management, CBA continues to maintain a strong position, with a high-quality capital ratio of 12.3%, comfortably above its target of 11%. This strong capital base allows the bank to support its customers and the broader economy, even as it navigates a challenging operating environment.
The bank announced a final dividend of A$2.50 per share, bringing the total dividend for the year to A$4.65 per share. This represents 79% of the bank’s profit, providing a solid return for shareholders despite the slightly lower profit figures. The dividend payout exceeded market expectations, reflecting CBA’s commitment to delivering value to its investors.
Looking forward, CBA remains cautiously optimistic, leveraging its strong balance sheet and conservative funding metrics to support its customers and deliver sustainable returns. While higher interest rates and economic uncertainties persist, the bank is well-positioned to continue navigating these challenges, maintaining its focus on disciplined growth and operational efficiency.
