Commonwealth Bank (CBA) today announced cash net profit after tax (NPAT) of $2.5 billion for the quarter ending 30 September 2022, underpinned by strong operating performance and sound portfolio credit quality.
The unaudited cash NPAT was 2% up on the quarterly average of CBA’s second half of FY22 and 13% ahead on the prior corresponding period for the first three months of FY22. Unaudited statutory NPAT came in at $2.7 billion for the quarter.
Operating performance rose 12% compared to the quarterly average of the second half of FY22, driven by higher operating income including stronger deposit earnings and volume growth across all core products. This increase was partly offset by the impact of competition and rising interest rates on lending products.
Matt Comyn, CBA’s CEO, said the first quarter trading performance underscored the consistent and disciplined execution of the Group’s strategy. “In a competitive environment we remained disciplined and achieved good volume growth in our core markets,” said Mr Comyn.
"The economy has shown resilience in the face of growing cost of living and interest rate pressures and despite these near-term challenges we remain optimistic on the medium to long term outlook.
"We recognise the concern and pressure many customers are feeling due to the higher cost of living, and increases in the cash rate. As well as providing a range of measures to help these customers, we also supported customers and communities impacted by natural disasters, particularly those affected by recent flooding."
The first quarter was marked by the Group’s franchise strength that domestically delivered a year-on-year 8.6% increase in household deposits, 6.3% in home lending and 12.6% in business lending. In the three months to 30 September 2022, home lending grew by $5.1 billion, business lending by $1.6 billion and household deposit growth of $7.9 billion.
The overall increase in net interest income was offset by a decrease in earnings from CBA’s Chinese bank investments including lower net profits from the Bank of Hangzhou after the partial sale of the Group’s equity stake and lower insurance income due to the floods in NSW and Western Australia partly offset by higher volume driven retail FX, cards, business lending and merchant fee income.
Operating expenses, excluding remediation, were approximately 4.5% higher compared to the quarterly average of the second half of FY22, with higher staff costs driven by wage inflation, additional working days and seasonally lower annual leave usage.
Portfolio credit quality remained sound with key credit quality indicators, including lower consumer arrears and troublesome and impaired assets, tracking lower. Home loan arrears also remained low, supported by a strong labour market. Consumer Finance (credit cards and personal loans) arrears improving in the quarter in line with seasonal trends and underpinned by historical low levels of unemployment.
Total credit provisions stood at $5.4 billion, a small uptick on the June quarter of FY22, reflecting an increase in collective provisions and a reduction in individual provisions.
The Group’s capital position remains strong with a CET1 (Level 2) ratio of 11.1% as at 30 September 2022. Excluding the payment of the final dividend of $2.10 a share to shareholders for the second half of FY22, CBA’s CET1 rose by 31 basis points, thanks to capital generated from earnings, the removal of the remaining $500 million of APRA’s operational risk capital add-on (imposed in 2018) and the completion of the divestment of the CommInsure General Insurance business.
Of the $2 billion on-market share buy-back announced earlier in the calendar year, approximately $1.5 billion had been completed by 14 November 2022. The remainder is expected to be finalised by the end of this calendar year, subject to market conditions, available trading windows and other considerations.