CommBank reports 2% drop in FY24 profit as competition hits NIM
Commonwealth Bank of Australia’s annual cash net profit after tax for the 2024 financial year fell 2% to $9.8 billion, driven by lower lending and deposit margins, the nation’s biggest bank has revealed.
The FY24 financial results released on Wednesday, August 14, show that CommBank’s lower margins were brought about by increased business competition and inflationary pressures in operating expenses.
The $9.8bn cash NPAT was down 2% compared to 12 months ago and 3% lower compared to the first half of FY24. Statutory NPAT was $9.48bn, down 6% on FY23.
Net interest margin was 1.99% for FY24, down eight basis points on FY23, largely as a result of competition for loans and deposits
In a media statement on its website, CBA said the fall in profits was partly offset by volume growth and lower loan impairment expense. It said despite the profit fall, the bank’s board had declared a fully franked final dividend of $2.50 a share, an increase of 3% on 12 months ago, taking the total for the year to $4.65 a share.
CBA CEO comments on results
CommBank CEO Matt Comyn (pictured above) focused on the positive, saying in the ASX announcement that the bank’s results “demonstrate our continued focus on supporting our customers, our disciplined operational and strategic execution, and the strength of our balance sheet”.
“We have retained strong loan loss provision coverage, with surplus capital and conservative funding metrics,” Comyn said. “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.”
Comyn said many Australians continue to be challenged by cost of living pressures and had experienced 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.”
Comyn said CommBank had 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.
For mortgage and consumer finance customers most in need, 132,000 tailored payment arrangements had been provided to help people manage repayments and their household budgets.
More than 6 million eligible customers can now access up to $2,000 in credit with no interest and no monthly fees, while proactive alerts have been sent to GoalSaver account customers to help deliver bonus interest.
“For customers who are finding it tough, we can support them in lots of different ways – from helping them feel more in control, to easing the pressure with a repayment plan, or accessing a safety net or working capital to support their business,” Comyn said.
“That help is easier than ever to access. We want people to reach out early if they need it.”
As well as direct financial assistance, CommBank has committed to greater investment in security measures, said Comyn.
The $800 million spent in the 12 months to 30 June 2024 to combat fraud, scams, cyber and financial crime had resulted in scam losses falling by 50% this year.
Comyn said NameCheck, an Australian-first innovation which verifies account-to-account payments, had prevented $410 million in mistaken payments and scams.
Separately, 20,000 payments a day are being blocked due to concerns about their source or eventual destination while the number of alerts sent out by CBA about possible unauthorised card payments had risen five-fold on last year with the aim of preventing fraudulent transactions.
On fraud and scams, Comyn said CBA’s innovations and the work it was doing with government and business was making a difference.
“People want safe and secure banking. We decreased scam losses to our customers by more than 50% we’re working with other businesses and government to further reduce scams but there’s much more to do. One dollar lost to scammers is a dollar too much.
“Banks, telcos and social media companies need to work together to stop scammers and disrupt cyber and financial crime. We’re helping to coordinate that approach. We’re also sharing our technology and intelligence with other organisations.”
Key CommBank FY24 results
Mr Comyn said the group’s balance sheet strength would allow CBA to continue supporting the broader economy.
“Over the last financial year, CommBank directly helped 120,000 customers buy a home, funded $50 billion to home builders, developers and tradies and lent $39 billion to Australian businesses more broadly to support their growth,” he said.
Among the key data from CBA’s full financial year 2024 results included:
- operating expenses of $12.2bn, up 3% year-on-year as a result of higher inflation impacting salary costs;
- investment spend of just over $2bn including technology improvements to enhance customer services, improve resilience and to meet evolving regulatory requirements;
- net interest margins of 1.99%, down 8bps on FY23 largely as a result of competition for loans and deposits;
- loan impairment expense of $802m, down 28% on a year ago, reflecting the bank’s robust credit origination and underwriting practices, rising house prices and improved outlook in consumer finance;
- a Common Equity Tier Ratio 1 (CET1) capital ratio of 12.3%, well above the banking regulator’s minimum requirement of 10.25%; and
- the group has extended the completion of its $1bn on-market share buy-back announced last year for a further 12 months.
The fully franked dividend payment of $2.50 a share represents a payout ratio of 79% of the group’s net cash profit after tax which is towards the top of the CommBank board’s target range of between 70% to 80%.
Eligible shareholders who are on the share registry on August 22, 2024, will receive their dividend payments on or about September 27, 2024.
About $8bn has been paid in dividends and share buy-backs benefiting more than 13 million shareholders who own Commonwealth Bank shares directly or in their super funds.
Outlook for Commonwealth Bank
Looking to the future, Comyn said higher interest rates were slowing the economy and gradually moderating inflation.
But at the same time, the economy was proving to be resilient as a result of low unemployment, continued private and public investment and exports supporting national income.
“Australia remains well positioned but downside risks continue around productivity, housing affordability as well as ongoing global uncertainty,” Comyn said.
“We will play our part in stimulating economic growth by lending to productive parts of the economy. We will also continue to invest in our franchise to bring our purpose to life, building a brighter future for all.”
Approximately $8 billion has been paid in dividends and share buy-backs benefiting more than 13 million shareholders who own Commonwealth Bank shares directly or in their super funds.
