Commonwealth Bank of Australia (ASX: CBA) posted a cash net profit after tax (NPAT) of $4.735bn for the first half of the 2018 financial year, a 1.9% decrease from $4.91bn in the same period of the previous financial year.
The result included a $375m expense provision which CommBank said it believes to be a reliable estimate of the civil penalty a Court may impose in the Australian Transaction Reports And Analysis Centre (AUSTRAC) proceedings.
Another $200m was included for expected costs related to currently known regulatory, compliance and remediation costs, including the Financial Services Royal Commission.
CommBank declared a fully franked interim dividend of $2.00 a share, 1 cent or 0.5% higher than a year earlier. This means a dividend payout ratio of 72% of cash NPAT.
CommSec's Tom Piotrowski speaks with Commonwealth Bank (CBA) CEO, Ian Narev about the bank’s first-half results, strength in its underlying earnings and its 10-year strategy.
Investors must own CommBank shares before the Record Date of 15 February 2018 to be eligible for the dividend (new investors must buy by 14 February), which will be paid on 28 March 2018.
Shareholders may opt for the bank’s dividend reinvestment plan (DRP) to receive new shares in place of all or part of the cash payout, with no discount for shares issued under the DRP.
Some banks in Australia, including CommBank, provide cash earnings in addition to statutory figures to better reflect their underlying operating results. The bank’s statutory NPAT grew 1.2% to $4.895bn, CommBank said in a statement to the Australian Securities Exchange (ASX).
CommBank said its total operating income for the half year increased by 2.3% to $13.122bn and this was “primarily driven by a 6.2% increase in net interest income”.
The group’s net interest margin improved 6 basis points to 2.16%. CommBank identified the key driver of this increase as volume and margin management in lending and deposits.
On a cash earnings basis, return on equity stood at 14.5% (down from 15.7% a year earlier), while cash earnings per share were down 3.2% to $2.72.
Total customer deposits were up 5% from this time last year to $568.3bn, contributing 68% to the group’s total funding.
CommBank’s Common Equity Tier 1 (CET1) capital was 10.4% at the end of 2017, up 50 basis points from December 2016. This includes the impact of the provision for the estimated AUSTRAC penalty.
The bank’s CET1 capital position in international standards was 16.3%, up from 14.3% previously, and “maintaining CBA’s position in the top quartile of international peer banks for CET1”, according to CommBank’s statement.
What CommBank said
Outgoing chief executive Ian Narev said CommBank’s focus over the past six months had been on fixing mistakes and becoming a better bank.
“Customer satisfaction has remained high and customers are doing more with us, with transaction account volumes a stand-out. Combined with disciplined margin management, on-going productivity and stable credit quality, this has again produced industry-leading underlying performance,” he said.
“The pride and dedication of our people have also enabled continuing business momentum across CBA. This result underlines the continued impact of our strategy of investing in our people and technology.”
Narev also spoke about the current conditions and upcoming AUSTRAC proceedings.
“We have taken a significant provision for regulatory and compliance costs, consistent with accounting standards. We have also taken a $375m expense provision which we believe to be a reliable estimate of the civil penalty a court may impose in the AUSTRAC proceedings,” he said.
“At the same time, we have been able to increase our dividend, even whilst providing for these costs, and strengthening all aspects of our balance sheet so that we can support customers and deliver returns for our shareholders into the future.”
CommBank announced on 29 January this year that Matt Comyn would take over as chief executive from 9 April.