Commonwealth Bank chief executive officer Ian Narev. Photo: Sasha Woolley
The Commonwealth Bank of Australia has delivered a record half year profit of $4.27 billion and rewarded shareholders with a higher dividend, as it reaps the benefits of a benign economic environment for banks.
The nation's biggest lender said it was ''cautiously optimistic'' about the future today, as it unveiled a profit result that showed banks were resilient to the fragile national economy.
There are no ominous signs of impending danger in the result, just another strong and consistent performance
In the six months to December, CBA's cash profit surged 14 per cent to $4.27 billion, beating market expectations for earnings of about $4.1 billion.
It was underpinned by higher revenue growth and lower bad loans, as record low interest rates helped more customers to stay on top of their debts.
Shareholders will pocket a higher interim dividend, which has been increased by 12 per cent to $1.83 a share.
Despite the result setting a new record for the highest interim profit for an Australian bank, chief executive Ian Narev said he was ''cautiously optimistic'' about the economic outlook.
''We have seen, in recent weeks, that there is still volatility in global markets,'' Mr Narev said in a statement.
''The risks presented by that volatility continue to supress business confidence. As a result, there is little real evidence, so far, of a meaningful increase in investment in the rest of the non-resource sector of the Australian economy, other than in housing."
At the same time, he noted various positive influences on the Australian economy, including a better outlook overseas, higher consumer confidence and, growth in the housing market, and the lower currency.
"So all in all, we continue to assume that any improvements in economic activity in the next year will be gradual rather than dramatic,'' Mr Narev said.
Market analysts had been expecting a result of about $4.1 billion and an interim dividend of $1.80, compared with $1.64 a year ago.
The result was underpinned by strong performances across all its main divisions, led by its massive retail banking unit, where earnings jumped 7 per cent in the half as households began to borrow more.
Morningstar's head of Australian research, David Ellis, described it was a ''cracker'' result with no negative surprises for the bank's shareholders.
''There are no ominous signs of impending danger in the result, just another strong and consistent performance building on a long and enviable track record of steadily increasing profits and dividends,'' he said.
The bank's wealth management arm also performed strongly, helped by the surge on sharemarkets, with its profits surging 14 per cent in the half.
Overall, revenue was up 8 per cent and customer deposits rose $40 billion to $426 billion.
Return on equity, an key gauge of profitability, rose by 80 basis over the year to 18.7 per cent.
The rise in profit comes as households gradually increase their borrowing in response to record low interest rates and a resurgent property market.
Average home prices in capital cities rose by an average of 9.3 per cent in the year to December, official figures show, while housing credit growth has also accelerated to its quickest pace in three years.
At the same time, banks' bottom lines are benefiting from cost cutting and improving credit quality.
In the past year, Commonwealth Bank shares have risen 17 per cent, compared with a 6 per cent rise in the benchmark ASX 200 index.
As the country's biggest bank and one of the largest lenders in the world, CBA's massive profits have previously sparked criticism from politicians and calls for more competition in banking.
However, the lender argues that a large chunk of the money it makes finds its way back into the community.
It expects to pay $2.9 billion in dividends to 800,000 direct shareholders this year, $2.8 billion in wages to its 51,000 staff and $1.7 billion in tax..
The interim dividend, which will be fully-franked, is due to be paid to shareholders on April 3.