A decline in cash earnings to A$9.83 billion has put Commonwealth Bank of Australia (ASX:CBA) under the microscope. However, despite a dip from the previous year's peak cash earnings of A$10.2 billion, the major bank declared a record dividend to shareholders.
The bank also indicated that it is easing capital buffers for bad loans, citing resilience within its mortgage portfolio.
Analysts had predicted a 5% decline in cash earnings to A$9.7 billion for the full year, anticipating pressure from higher interest rates and a sluggish housing market.
However, the bank managed to increase its mortgage margins during the period, posting an A$4.8 billion result for the second half, just below the A$5 billion first-half cash profit.
CBA CEO Matt Comyn expressed ongoing concerns about the Australian economy, highlighting risks related to housing affordability, productivity and global uncertainty.
“The Australian economy remains resilient with low unemployment, continued private and public investment, and exports supporting national income,” Comyn said in the bank’s full-year financial statement.
“Higher interest rates are slowing the economy and gradually moderating inflation.”
Breaking down the numbers
The bank reported statutory net profit after tax (NPAT) of $9,481 million, 6% down on FY23 and 4% down on 1H24. Cash NPAT was $9,836, 2% down on FY23 and 4% down on H124.
“NPAT was supported by volume growth in our core businesses offset by lower lending and deposit margins. The reduction in NPAT was driven by inflationary increases in operating expenses, partly offset by a lower loan impairment expense,” the bank stated.
Pre-provision profit dropped 2% on FY23 to $14,956 million – 4% down on the first half of the financial year.
However, the dividend was up 3% on FY23 to $4.65 per share fully franked.
“The final dividend was $2.50 per share, delivering a total FY24 dividend per share of $4.65, fully franked. The full-year dividend payout ratio is 79% of cash NPAT, at the upper end of our target payout range. The Dividend Reinvestment Plan (DRP) continues to be offered to shareholders and is expected to be satisfied through the on-market purchase of shares,” CBA noted.
Focused on relationships
Comyn said the solid results were based on the bank’s customer focus.
“Our results demonstrate our continued focus on supporting our customers, our disciplined operational and strategic execution, and the strength of our balance sheet.
“Many Australians continue to be challenged by cost of living pressures and a fall in real household disposable income. With slower economic growth and moderating demand, our strong balance sheet allows us to continue to support our customers and the broader economy, and deliver sustainable returns.
"We have made it easier for our customers to access hardship assistance; provided eligible homeowner customers with the option to suspend mortgage repayments; and supported all customers with access to money management tools.
"We have remained focused on deepening our customer relationships, which drives higher engagement, and a better understanding of our customers' needs to deliver superior experiences.
"Our ongoing focus on customers has led to more than one in three Australian consumers and more than one in four Australian businesses naming us their main financial institution.
“We have retained strong loan loss provision coverage, with surplus capital and conservative funding metrics. Our disciplined approach to managing our balance sheet settings positions us with flexibility and capacity for a range of economic scenarios, while continuing to deliver sustainable returns. We have declared a final dividend of $2.50 per share, fully franked, resulting in a full-year dividend of $4.65.”