A highlight of the half year financial result was the strong business performance that delivered record volumes over the period. Over the past six months, home lending balances have grown at 1.5 times system, while business lending grew at approximately three times system over the year. In addition, new business transaction account openings grew 50 per cent in comparison to the prior comparative period.
Further, both household and business deposits increased. Over the past six months, household deposits have grown by $23 billion, 1.1 times system, while business deposits have grown by $13 billion, 1.7 times system. The bank is now 75 per cent deposit funded after seeing a further increase in the flow of deposits since the start of the pandemic.
The consequences of COVID-19 have also seen the bank raise its total provisions to cover for potential future write-downs to $6.8 billion, giving it room to handle a range of various economic scenarios.
The bank’s financial strength is further reflected in its level of capital with strong organic capital generation together with the divestment program proceeds, taking the Common Equity Tier 1 (CET1) capital ratio to 12.6 per cent. That was 90 basis points higher than 12 months ago and more than 200 basis points above APRA’s 10.5 per cent ‘unquestionably strong’ benchmark. As such, the bank remains one of the best capitalised large banks in the world on an internationally harmonised basis.
The strong business performance combined with significant capital surplus allowed Commonwealth Bank to deliver an interim dividend of $1.50 per share – a 67 per cent payout ratio – and fully neutralise its Dividend Reinvestment Plan.
This dividend payout ratio is slightly below the bank’s target dividend payout range, but is reflective of a period of economic uncertainty, and is in accordance with the latest APRA industry guidance released in December.
Commonwealth Bank’s Chief Executive Officer, Matt Comyn, said the bank’s strong financial performance amidst the current economic environment means it is uniquely placed to respond to the rapidly changing operating context while continuing to support its customers.
“We have refreshed our strategic priorities to build on our strong foundations and position us for the future. This is an evolutionary change to enable the bank to focus on the new challenges and opportunities ahead. We have set an ambitious agenda and are committed to building tomorrow’s bank today for our customers,” Mr Comyn said.
Looking ahead, Mr Comyn said the bank was committed to supporting its customers and helping the economy recover.
“Australia is relatively well positioned having started from a position of fiscal and economic strength. We have a solid pipeline of infrastructure projects, the outlook for mining and agriculture exports is strong, and the community has benefitted from the Government’s significant income support measures,” he said.
While the outlook was positive, Mr Comyn sounded a note of caution, stating the coming months may present economic challenges as the government’s stimulus measures start to roll off.
“We continue to monitor our lending portfolios closely for any signs of stress. The low interest environment will continue to put pressure on our revenue which is why we remain focused on performance, operational execution and capital allocation.”
Mr Comyn added that CBA was well-placed for the challenges ahead, stating: “The strength of our balance sheet and capital position enables us to support customers and help lead the country through recovery.”