Investing.com - Commonwealth Bank Of Australia (ASX:CBA) has reported a cash profit of $5 billion, slightly missing analysts' projections, as CBA CEO Matt Comyn warns of ongoing economic strain on Australian households leading to reduced expenditure.
Analysts had expected the bank's cash net profit to reach $5.1 billion. Comyn attributed the slightly lower profit to the impact of high inflation and a competitive business environment. He stated that 2023 posed significant challenges for many customers struggling to manage cost of living pressures, with downside risks escalating as persistent inflation and slowing demand affect Australian businesses.
This profit result comes close to the bank's record half-year profit of $5.15 billion from the previous year, a period marked by intense competition in the mortgage sector. CBA has announced an interim dividend of $2.15 per share, fully franked, marking a 2% increase from the previous half.
The bank's net profit margin, an indicator of profitability comparing the bank's funding costs with its loan charges, dropped 6 basis points from the prior half, settling at 1.99%. This decline resulted from increased competition, customers opting for higher-yielding deposits, and escalating funding costs.
Despite the current financial strain, Comyn expressed optimism about the Australian economy's prospects, although he anticipates the economic pressure to persist into 2024, with a rise in late payments and arrears. He highlighted the economy's resilience, backed by a robust labour market, savings and repayment buffers, population growth, and relatively high commodity prices. Yet, he noted that cash rate increases have a delayed impact on household and business customers.
Comyn reported that consumer arrears remain historically low, and loan impairments decreased by $96 million over the half. However, the bank is preparing for worsening conditions, with loan impairment provisions - funds reserved for potential loan impairments - increasing by $113 million from the previous half amid ongoing cost of living pressures.
After a brief retreat from the mortgage wars resulting in market share loss for three months last year, CBA has ramped up its efforts in recent months. Comyn indicated volume growth in home and business lending. Operating expenses have risen by 4%, and staff expenses have grown by 5%.
CBA shares closed at a record high of $116 per share on Tuesday.