CBA earnings buoyed by 19% surge in interest income
The Commonwealth Bank of Australia’s (CBA) has released its trading update for the first half of the 2023 financial year, disclosing a cash net profit after tax (NPAT) of $5.15 billion in the six months to 31 December, up 9% from $4.74 billion on 1H22.
Operating income rose 12% to $13.5 billion, driven by 19% growth in net interest income from $9.7 billion to $11.6 billion.
This came off the back of eight consecutive hikes to the cash rate from the Reserve Bank of Australia (RBA), and a marked increase in CBA’s lending volumes — the group’s Retail Banking Services business posted a 16% increase in operating income to $6.4 billion.
The revenue boost was slightly offset by a 5% increase in operating expenses to $5.7 billion, attributed to inflation, higher staff numbers, IT and remediation costs (up 0.8% to $44 million).
CBA also reported a sharp rise in loan impairment expenses, which increased to $511 million, reflecting “ongoing inflationary pressures, rising interest rates, supply chain disruptions and the decline in house prices”.
However, the total value of troublesome and impaired assets decreased by approximately $500 million to $6.3 billion.
The group’s cost-to-income ratio fell 2.8% to 42.5%, while its net interest margin rose 18bps to 2.1 per cent.
CBA reported a CET1 ratio of 11.4%, reflecting “strong organic capital generation” from earnings, the removal of the remaining $500 million of APRA operational risk capital add-on, and divestment of the CommInsure General Insurance business.
CBA’s underlying performance produced an interim dividend of $2.10 a share, an increase of 35 cents on the previous corresponding period.
The group announced it would increase the on-market share buy-back by an additional $1 billion, building on the $2billion announced in February last year.
CBA CEO, Matt Comyn, attributed the group’s 1H23 performance to its modernisation strategy.
“We continue to invest in technology and our core businesses to improve customers’ lived experience and to solve their unmet needs,” he said.
“This focus is a key driver of growth in our core deposit and lending volumes to retail and business customers.”
Reflecting on the outlook for the economy, Comyn acknowledged the impact of ongoing inflationary pressures on households, but said the fundamentals of the economy “remain solid”, citing “low unemployment, strong exports, and returning migration”.
“Supporting our customers through rising rates and higher cost of living remains a priority and aligns with our purpose to build a brighter future for all,” he added.
“We are providing personalised support, flexibility and financial assistance for our customers who need it.”
AUTHOR
Charbel Kadib
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