LONG-TERM STRATEGY DELIVERS CONTINUING CUSTOMER SATISFACTION AND PROFIT GROWTH

• Statutory net profit after tax (NPAT) of $9,063 million – up 5 per cent on prior year^{(1) (2)};
• Cash NPAT up 5 per cent to $9,137 million;
• Return on equity (cash basis) of 18.2 per cent;
• Earnings per share (cash basis) up 5 per cent to 560.8 cents;
• Fully franked final dividend of $2.22 per share, taking total for the year to $4.20, up 5 per cent on prior year;
• Improvement in Group cost to income ratio of 10 bpts to 42.8 per cent, underpinned by continued focus on productivity;
• Capital position remained strong, with a Basel III Common Equity Tier 1 (CET1) ratio of 12.7 per cent on an internationally comparable basis⁽³⁾, and 9.1 per cent on an APRA basis as at 30 June 2015;
• Capital raising through approximately $5 billion pro rata renounceable entitlement offer which further strengthens the Group’s internationally comparable capital ratios and places the Group in the top quartile of international peers as recommended by the Financial System Inquiry;
• 7 per cent increase in average interest earning assets to $755 billion;
• Liquidity of $132 billion – representing a Liquidity Coverage Ratio of 120 per cent, $22 billion above regulatory requirements;
• Customer deposits up $39 billion to $478 billion – representing 63 per cent of the Group’s total funding; and
• Continued investment in the future ($1.2 billion in the 2015 financial year) with particular focus on technology and productivity.

The Commonwealth Bank of Australia (“the Group”) today announced its results for the financial year ended 30 June 2015. The Group’s statutory NPAT was $9,063 million, which represents a 5 per cent increase on the prior year. Cash NPAT was $9,137 million, also up 5 per cent. The Group also announced the launch of a $5 billion pro rata renounceable entitlement offer for all shareholders.

The Board declared a final dividend of $2.22 per share – an increase of 2 per cent on the 2014 final dividend. Total dividend for the year was $4.20 – an increase of 5 per cent. The cash dividend payout ratio for full year was 75.1 per cent of cash NPAT, which was in line with the prior year and within the Board’s target range of 70 to 80 per cent. The final dividend will be fully franked and will be paid on 1 October 2015. The ex-dividend date is 18 August 2015.

The Group maintained a strong balance sheet throughout the year, including high levels of capital with all ratios well in excess of regulatory minimum capital adequacy requirements. The Group is raising capital to meet future requirements including the change to average mortgage risk weights for Australian residential mortgages announced by APRA in July 2015. This further strengthens the Group’s internationally comparable capital ratios and places the Group in the top quartile of its international peers in relation to its capital levels.

Commenting on the result, Group Chief Executive Officer, Ian Narev said: “Over many years now we have pursued a simple, consistent strategy. This result shows that execution of that strategy continues to deliver well for our customers and our shareholders. This financial year saw all-time highs in retail customer satisfaction, with the Group returning to the number one position at year-end, and ongoing high levels of customer satisfaction in our other businesses. As a result, our balance sheet continued to grow, and combined with ongoing margin discipline, this resulted in good levels of revenue growth given market conditions. We also maintained our focus on productivity, which is particularly important given increasing levels of regulatory and compliance costs.

Technology again featured strongly in the high levels of investment that we maintained throughout this financial year. Our focus remains on the use of technology to improve all our channels, and to underpin continuous process improvement, to simplify our customers’ experience with us. The impact of our technology focus is particularly clear in transaction banking and deposits in this result.

Maintaining a flexible and strong balance sheet, including a strong capital position, continues to be a strategic focus for the Group. We now have greater certainty regarding the key requirements of global relativity and mortgage risk weights. Our announcement today strengthens our position in response to those requirements. This will provide us with on-going flexibility so we can continue to support our customers.

These results can only be achieved by the hard work and dedication of our people. Their commitment to enhancing the financial wellbeing of people, businesses and communities benefits a wide range of stakeholders. These include more than 15 million customers, and nearly 800,000 Australian households who directly own our shares and the millions more who own their shares through their superannuation funds. This year we paid over $6.8 billion in dividends to our shareholders and they saw the value of their investment grow by $9 billion⁽¹⁾. Beyond our customers and shareholders, our performance has benefited a broader group of stakeholders including our 52,000 people, more than 6,000 small businesses which supply goods and services to us, and the broader communities in which we operate, particularly the education sector in which we have recently announced significant new initiatives.”

Key components of the result include:

• Aligned with the Group’s strategic focus on the customer, the Group regained the number one position in customer satisfaction among the major Australian banks in its Australian retail banking business⁽²⁾, while maintaining equal first position in business customer satisfaction;
• Group net interest income increased by 5 per cent, with average interest earning assets up $50 billion to $755 billion and retail and business average interest bearing deposits⁽³⁾ – up $32 billion to $445 billion;
• Net interest margin (NIM) decreased by 5 basis points to 2.09 per cent year on year driven by the negative impacts of the falling cash rate environment and an increase in liquid assets. Excluding treasury and markets, Group NIM was down 1 basis point over the year, with continued sound management of the volume/margin trade-off during the period in a highly competitive, low-rate environment;
• Other banking income increased 12 per cent due to increased commissions, higher trading income, which was driven by strong Markets sales and trading performance and a favourable counterparty valuation adjustment. This was partly offset by the implementation of a new derivative valuation methodology, Funding Valuation Adjustment (FVA), which resulted in an initial cost of $81 million;
• Funds management income was flat on a “headline” basis at $1,938 million. Excluding the impact of Property transactions and businesses from the comparative results, income increased 8 per cent, driven by a 14 per cent increase in average Funds Under Administration;
• Insurance income decreased 3 per cent due to an unusually large number of weather event claims during the year in New South Wales and Queensland;
• Expense growth was higher, increasing 5 per cent on the prior year, due to staff expenses and the impact of the lower Australian dollar. The major driver of expense growth was growing regulatory, compliance and remediation costs, including those associated with a number of legislative reforms (FATCA, FoFA, Stronger Super), provisioning for the costs of the Advice Review program and ongoing regulatory engagement;
• The Group improved its cost-to-income ratio by 10 basis points to 42.8 per cent, assisted by the continued focus on productivity initiatives which delivered savings of $260 million over the past 12 months. Our focus on productivity continues to deliver both revenue and cost benefits;
• In a relatively stable credit environment, the ratio of cash loan impairment expense (LIE) to gross loans and acceptances remained unchanged at 16 basis points;