Commonwealth Bank FY24 Earnings Call Highlights

Commonwealth Bank (ASX: CBA) might be one of the most expensive banks in the world – But yesterday's full-year result reiterated its quality earnings, market dominance and resilient outlook.

FY24 Earnings Summary

CBA's FY24 results were slightly ahead of market expectations. Net profit was around 1% ahead of consensus and the dividend was also stronger-than-expected.

• Cash net profit down 2% to $9.83 billion

• Net interest margin down 8 bps to 1.99%

• Final dividend of $2.50 per share

• Total dividend for FY24 up 3% to $4.65 per share, representing a payout ratio of 79% of cash NPAT and towards the upper end of target payout range

Earnings Call Highlights

Australian economy: "Households and businesses have experienced a number of extreme shocks in the past few years ... The effects are still being felt ... Households continue to respond to higher prices and are finding it even harder than six months ago. More spend is being directed towards essentials and discretionary spend is being cut back." – CEO Matt Comyn

Net interest margin trends: "Net interest income fell despite 3.4% growth in average interest earning assets due to competitive pressure on margins... Net interest margin turned from a headwind over the year to a tailwind over the most recent half as net interest margins stabilized over recent months." – CFO Alan Docherty

Deposit mix: "We now hold the largest share of stable household deposits in Australia, which have grown over $110 billion since June 2019 and are 65% higher than the nearest peer bank." – CEO Matt Comyn

Mortgage book: "Those aged between 35 to 44 have the highest share of mortgage balances and are most exposed to higher rates... Proprietary new lending mix increased 7 percentage points to 66%, compared with only 28% for the overall market." – CEO Matt Comyn

Arrears and problem loans: "Arrears rates increased across home loan, credit card, and personal loan products as pressure continued to build on household disposable incomes ... Troublesome and impaired assets have increased in the quarter to $8.7 billion, reflecting movements in full well secured single name exposures and higher home loan restructures." – CEO Matt Comyn

Buybacks: There was no explicit mention of share buybacks in the transcript.

Economic outlook: "We expect a recovery in GDP growth, and a rebound in disposable income over the next 12 months... Australia's economy continues to be well-positioned, benefiting from strong fundamentals." – CEO Matt Comyn

Technology investments: "We invested more than $800 million in the past year to combat fraud, scams, financial and cybercrime to protect our customers ... We've significantly increased the number of technology changes delivered this year while reducing operational incidents." – CEO Matt Comyn

Analyst Q&A Highlights

The below topics have all been answered by CEO Matt Comyn and CFO Alan Docherty.

Savings and term deposit impact on net interest margins: "Savings pricing accounted for 4 of the 6 basis points of compression, with a mix shift and favorable deposit pricing. Term deposits contributed 2 basis points."

Divisional net interest margins: "Retail and business banking faced similar trends, with savings pricing and competitive behavior affecting margins. Treasury earnings contributed positively to overall group NIM."

CBA's high market share among migrants: "Strong migrant account growth is due to brand visibility and specific focus on customers with pathways to permanent residency."

Why has the bank been more active with buybacks or a higher payout ratio: "No changes to payout ratio. Capital is being deployed prudently, $1.5 billion of shares bought back over the last year. Dividend stability remains a priority."

More on buybacks: "The economics that remain accretive, less accretive than they were 12 months ago, but still accretive."

On productivity benefits: "I wouldn't be sort of banking on the same number or a higher number in the next year. We will set very aspirational targets in and around that. But, you tend to – we will take a multi-year view that, we don't want sort of false economies by chasing a productivity number that's excessive."

On rate cuts: “The main protection that we have on the rate cut cycle in terms of earnings stability of the deposit and interest earnings is obviously the replicating portfolio.”

This article was generated with the support of AI and reviewed by an editor.