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CommBank posts 'cracker' first-half result

The Commonwealth Bank has posted a $3.78 billion half-year profit and said the economic outlook is improving, as better global conditions held to revive confidence among households and businesses.

The country’s biggest lender today said cash earnings had increased by 6 per cent, as its flagship retail bank continued to benefit from solid earnings growth while it kept costs contained.

Bellwether for the Australian banking sector.

Bellwether for the Australian banking sector. Photo: Quentin Jones

CBA shares jumped $1.59, or 2.4 per cent, to close at $67.11, after earlier in the day touching a new record high of $67.38, taking the bank's market capitalisation to $108 biillion.

Morningstar head of banking research David Ellis said Commonwealth Bank "did not disappoint with a cracker first half’’.

‘‘Australia’s largest bank continues to prosper due to better margins, higher trading income, a recovery in wealth management and productivity improvements," Mr Ellis said.

CBA's massive retail banking arm, where it writes one in every four home loans, posted a 13 per cent rise in income, contributing $1.5 billion to the result.

But in a sign that banks may continue to resist passing on any further cuts to the cash rate in full to borrowers, it also said its funding costs were under pressure.

Global outlook brightens

Although credit growth remaining sluggish across much of the economy, chief executive Ian Narev said the global economy had benefited from a period of stability over the last six months, which had lifted the economic outlook.

‘‘In each of the major areas of concern – European Union stability, US recovery and China’s on-going growth – developments have been positive overall,’’ Mr Narev said.

He stressed that the recovery in the United States remained fragile, and there was still no lasting resolution to the eurozone’s sovereign debt crisis.

‘‘But if the current stability continues, we believe it will translate into a slow but steady rebuilding of consumer and business confidence in Australia.  And that is our base case for the 2013 calendar year.’’

As part of a plan to pay out a higher share of profits in the December half, the bank will raise its interim dividend by 20 per cent to $1.64.

Consequently, the final dividend paid later this year will be slightly lower than the 2012 payment, it said.

During the six month period, the Commonwealth Bank also said it had taken advantage of an easing on global funding markets, raising $13 billion in capital, with its net interest margin widening to 2.1 per cent from 2.06 per cent in the previous half.

Deposit competition drives costs

Despite the solid earnings growth, which was slightly higher than analysts had been expecting, CommBank became the latest lender to complain about funding costs, saying competition for deposits remained ‘‘fierce’’ and this continued to put pressure on margins.

‘‘Strong deposit growth during the period has seen the group satisfy a significant proportion of its funding requirements from high quality retail customer deposits. However, competition for deposits remains intense which had a negative impact on margins,’’ the bank said. 

Banks have blamed competition for deposit funding for their failure to pass on official cuts in interest rates in full to borrowers.

Return on equity – a key measure of banks’ overall profitability – remained steady at 18.1 per cent.

CBA’s share of the home loan market has slipped from 25.3 per cent to 25.1 per cent over the past year, but it remains Australia’s dominant mortgage lender.

CBA's earnings are viewed as a bellwether for the banking sector as it reports on an earlier schedule to the country's other 'Big Four' banks - Westpac, National Australia Bank and ANZ.


  • But Allan told me that Banks were going to go broke because they are highly leveraged to house prices. Don't tell me he was wrong again.

    No Vision
    Date and time
    February 13, 2013, 10:38AM
    • Yikes!!! I think he was....again

      Date and time
      February 13, 2013, 1:29PM
  • CBA posts another record profit ...... let the whinging begin!

    Date and time
    February 13, 2013, 10:41AM
    • Not if you have 12,000 CBA shares!

      Date and time
      February 13, 2013, 10:54AM
    • @Capitalist here having a whinge about whinging.

      Gavin S
      Bundanoon, NSW
      Date and time
      February 13, 2013, 11:15AM
    • Another record profit? Great!!! just not one cent from me, literally not one cent went to this or other Bank; that really feels good.

      Date and time
      February 13, 2013, 11:39AM
    • Couldn't be happier.

      Date and time
      February 13, 2013, 11:40AM
    • Meanwhile, over at the NAB, chasing profits through offshoring.....


      Date and time
      February 13, 2013, 12:58PM
    • It's not the profit that's the problem, it's the blatant lying and contempt shown towards customers every time the hold a little bit back or add a little bit on to the Reserve Bank rate changes. I'd much rather see a simple statement like "We're holding on to a bit to boost our profits for this year" rather than the usual BS the spin doctors give us.

      Date and time
      February 13, 2013, 1:31PM
    • HAHAHAHA.....
      "We're holding on to the rate cut to boost our profits for this year"
      That will be the day...wait for the statement about how next seasons record breaking profits are under threat already....before they have been made.
      Customers will just have to do thier bit to help out!

      Date and time
      February 13, 2013, 4:21PM

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