Commonwealth Bank (ASX: CBA) posted an 11% jump in full-year cash profits to $9.6bn thanks to strong growth in core deposit and lending volumes to retail, businesses and institutional customers.
The profit figure was ahead of Bloomberg estimates of $9.3bn.
CBA Chief Executive Matt Comyn said the Australian economy is in a "strong position" underpinned by low unemployment, low underemployment and strong non-mining investment.
"However inflation is high, and we have seen a rapid increase in the cash rate which is negatively impacting consumer confidence. We expect consumer demand to moderate as cost of living pressures increase," said Comyn.
Earnings at a glance
Full year | 2022 | 2021 | Change % |
---|---|---|---|
Cash NPAT ($m) | 9,595 | 8,653 | 11 |
CET1 (%, level 2) | 11.5 | 13.1 | -160 bps |
EPS (cash, $) | 5.57 | 4.89 | 13.9 |
DPS ($) | 3.85 | 3.5 | 10 |
There's not a lot of net interest margin leverage going around, contrary to textbook theory that higher interest rates will expand bank margins.
CBA net interest margins fell 18 bps to 1.9% with fierce home loan competition and customers switching to fixed rate loans to blame. This was partially offset by benefits from lower funding costs and improved deposit margins.
Full-year mortgage lending rose 7.4% to $528bn, which was slightly below the average growth rate of other lenders.
It's widely expected that mortgage volumes will fall in FY23, with the Australian Bureau of Statistics reporting a -4.4% decline in new loan commitments in June.
Household deposits increased 13.2% to $351bn, growth that was in-line with the rest of the industry.
Business lending growth outpaced home lending, up 13.6% or 1.3 times higher than system averages to $180bn.
Interestingly, this narrative matches the recent decline in customer confidence to pandemic and Global Financial Crisis levels but rebound in business confidence.
The results had plenty of redeeming factors ahead of expectations of moderating economic growth and rising bad debts.
The percentage of home loans more than 90 days overdue fell to 0.49% compared to 0.64% a year ago.
Loan impairments decreased $911m to a benefit for $357m (from an FY21 expense of $554m). Though, the bank warned of "increased forward-looking adjustments for emerging risks including inflationary pressure, supply chain disruptions and rising interest rates."
CBA declared a final dividend of $2.10 per share, bringing its full year dividends to $3.85 per share, fully franked. The stock will go ex-dividend on Wednesday, 17 August.
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