The Commonwealth Bank has posted a mammoth $9.9 billion annual profit for the financial year.
The bank, currently beleaguered by a money-laundering scandal, posted a 4.6% increase in cash profit to $9.88 billion and a 7.6% surge in net profit after tax to $9.93 billion.
This is a beat on market consensus expectations of $9.809 billion in cash earnings and is another record high for the bank.
Bad debt provisions were down almost 13% to just under $1.1 billion.
Operating income increased 3.8% to $25.54 billion, while operating expenses increased 6% to $11.07 billion. Underlying expense growth of 2% was driven by rises in staff and technology costs.
Net interest margins fell three basis points to 2.11%, partly due to increased wholesale funding costs.
CEO Ian Narev said: “Commonwealth Bank’s performance this year has again contributed to the financial wellbeing of our customers, shareholders, our people and the Australian economy. This is the result of our consistent focus on customer satisfaction, innovation and financial strength.”
Common equity tier one capital was 10.1% on an APRA basis, the bank said. APRA requires the major banks to have a CET1 ratio of 10.5% by 2020.
“Our strong organic capital generation and commitment to financial strength, give us confidence that we will meet APRA’s‘unquestionably strong’ CET1 ratio average benchmark of 10.5% or more by 1 January 2020,” the bank said.
This table shows the breakdown of contributions by various divisions to the final result.
The bank will issue a final dividend of $2.30 per share, giving a full-year fully-franked dividend of $4.29.
Narev says headline indicators show that the Australian economy remains sound overall.
“However many households are concerned about job security, wages and the cost of living,” he says.
“Cyclical investment in mining and construction has underpinned our economy for some time. The next wave of more broad-based business investment that we need to secure jobs and lift wages is important.
“Business balance sheets have the capacity, and we have a strong banking system. But global caution remains high due to geopolitical change and less expansionist monetary policy. So all of us need to focus on working together to create an environment where businesses continue to invest to create rewarding jobs.”
For the year ahead, Narev says the bank will continue to strengthen its balance sheet.
“We will also maintain our focus on our long term sources of competitive advantage in our customer base and in technology, while accelerating the focus on productivity that we need to remain competitive for the long term, and listening more to our community to strengthen trust,” he says.
“And above all, we will continue to invest in our people, who are the most critical determinant of long term success.”
Here are the key numbers for the 2017 financial year:
The bank also says it’s in talks with “third parties” over the potential sale of the Commonwealth’s life insurance businesses in Australia and New Zealand.
“The outcome of those discussions is uncertain. While the discussions may lead to the divestment of those businesses, we will also consider a full range of alternatives, including retaining the businesses, reinsurance arrangements or other strategic options,” says the bank.
Aussie Home Loans John Symond this month exercised his put option requiring CBA to acquire his remaining 20% interest in the business.