“Operating performance in the quarter was highlighted by balance growth in home lending, business lending and deposits, which helped offset ongoing margin pressures from lower interest rates,” he said.
CBA delivered an unaudited cash net profit after tax of $1.8 billion underpinned by stable income of $5.9 billion. The quarterly result on a comparable basis was 16% lower than 1Q20, primarily due to an increase in the Group’s loan loss provisions to cover the expected impact of COVID-19 on its customers and reduced earnings from lower interest rates and lower fee income.
The Bank has set aside more than $1.7 billion in credit provisions since Dec 19 to offset the expected COVID-19 impacts on our customers, taking total credit provisions to $6.7 billion. This represents a total provision coverage of 1.81% as a percentage of credit risk weighted assets, an increase of 11 basis points from the position at the end of the Group’s 2020 financial year on 30 June 2020.
Operating income was stable when compared to the quarterly average of the second half of FY20. This was driven by above system volume growth in home lending (up $5.6 billion vs Jun 20) and business lending (up $1.4 billion vs Jun 20) and system growth in household deposits (up $15.8 billion vs Jun 20).
Operating expenses fell by 4% when compared to the quarterly average of the second half of FY20 due to lower provisions covering Wealth and Banking customer remediation. Once these were excluded, expenses rose by 2% given the higher staff costs associated with supporting customers through COVID-19 as well as increased investment spend while partly offset by the benefits of the Group’s simplification program.
The core strength of the Bank continues to be the strong balance sheet with its Common Equity Tier 1 (CET1) Level 2 ratio standing at 11.8% at 30 September, well above the banking regulator’s “unquestionably strong” measure of 10.5%.
That was after the payment of $1.7 billion in dividends to shareholders – the final FY20 dividend of 98c per-share. Offsetting that pay-out was an increase in capital generated by the additional earnings over the quarter and the receipt of further sale proceeds from the divestment of CommInsure Life.
As a result, the Bank said in its statement to the Australian Securities Exchange on 11 November 2020 that its strong capital position meant it is well placed for a range of possible macro-economic outcomes.