Home lending up 5% year-on-year, reports bank
CBA has confirmed a statutory net profit after tax of $10.18 billion in the year to June, up 5% on the 2022 financial year.
Cash net profit after tax of $10.16bn is up 6% on FY22, down 3% on the first half of the financial year.
Commonwealth Bank total home loan balances were $584bn, up from $570bn in the first half of the 2023 financial year. Home lending grew by $26.2bn over the financial year (up 5%), the bank reporting 1 times’ system growth for the 12 months (0.8% excluding Unloan and Bankwest).
In full year results released on Wednesday, CBA confirmed that cash net profit after tax of $10.16bn was 6% higher compared to FY22, which it said reflected strong operational performance, partly offset by higher loan impairment expense.
Operating income was $27.2bn, up 13%, which CBA said was driven by volume growth and higher net interest margin. Net interest margin (NIM) was 2.07%, up 17 basis points, which CBA said was due to the higher interest rate environment, partly offset by pressure from competition in the home lending market.
Operating expenses were $11.65bn, up 5%, which the bank said was due to inflation, additional technology spend to support the delivery of strategic priorities and volume growth, partly offset by productivity initiatives.
Loan impairment expense increased by $1.47bn, reflecting ongoing cost of living pressures and rising interest rates, and the non-occurrence of COVID-19 related overlay releases in the year prior.
Home loan arrears remained low at 0.47% (90 plus days) and 0.92% (30 plus days).
CBA CEO Matt Comyn (pictured above) said that the results demonstrated the bank’s continued focus on supporting customers, investing in communities and providing strength and stability for the broader economy.
“It has been an increasingly challenging period for our customers, dealing with rising cost of living pressures,” Comyn said.
“Our balance sheet resilience allows us to support our customers and deliver sustainable returns for shareholders.”
Acknowledging that the Australian economy had proven “resilient” amid slowing growth and increased financial stress on households and businesses, Comyn said that there were signs that downside risks were increasing.
He noted the “lagged impact” of rising interest rates on mortgage customers and other cost of living pressures which were contributing to financial strain for more Australians.
Commonwealth Bank’s strong balance sheet, including total loan impairment provisions of $6bn, put the bank in a strong to support customers and manage headwinds, he said.
“The Australian banking system remains strong and has navigated rapidly changing and uncertain global financial conditions through sound liquidity risk management and strong capital regulation,” Comyn said.
Home loan portfolio resilient, says bank
CBA results showed that as at the end of June 2023, 78% of home loan customers were in advance of their repayments, equal to the percentage in the financial years ending June 2022 and 2021.
90-day plus arrears were 0.47%, slightly below the same time last year (0.49%). Mortgagees in possession represented 0.02% of accounts, inline with the previous two financial years.
Borrowing capacity reducing
As at June 2023, the percentage of applicants with additional capacity to borrower was 89%, down from 91% in the financial year ending June 2022, and down from 92% in 2021.
Higher serviceability buffers and interest rates are impacting borrowing capacity, the bank said.
Impaired loans reached $1.86bn, with ASB impairments up $245m, which the bank said was due to increased hardship support mainly driven by the rising rate environment and cyclone and flood support.
The bank has confirmed a shareholder return on equity of 14%. Shareholders will receive a fully franked final dividend of $2.40 per share, taking the total dividend for the year to $4.50 per share, up 17% on FY22.
Highlights of the FY23 results are as follows:
- NPAT 10.18bn, up 6% on FY22
- Operating income $27.2bn, up 13%
- Pre-provision profit $15.5bn, up 19% on FY22
- Net Interest Margin (NIM) 2.07%, up 17 basis points on FY22
- Home lending growth of $26.2bn, up 5%
- Operating expenses $11.65 billion, up 5%
- Loan impairment expense up $1.47bn
- CET1 capital ratio of 12.2% as at June 30, 2023 ($9bn above the regulatory minimum capital requirement of 10.25%).
