CBA hits forecasts with a $9.45 billion full year cash profit

Image: Getty/ AFP

The Commonwealth Bank warned of more bad debts as it posted a 3% rise in full year cash profit to $9.45 billion, in line with most forecasts.

Analysts had forecast a 3.7% rise to $9.48 billion.

Statutory net profit after tax was up 2% to $9.227 billion.

Revenue was down 2% to $44.379 billion. Operating income increased 5% to $24.606 billion and expenses rose 4% to $10.429 billion.

However, the net interest margin fell 2 basis points to 2.07%.

Australia’s biggest bank, with a 25% market share of home loans, also maintained its dividend payments. It declared a fully franked final dividend of $2.22 a share, taking the full year to $4.20, flat on 2015.

Loan impairment expenses were up 27% to $1.256 billion, mainly due to exposure in the resources, commodity and dairy industries.

The biggest bill for bad loans was for home loan arrears and losses, mainly in mining towns. There was also a significant increase in New Zealand’s dairy sector, impacted by a global milk glut.

Retail banking was the strongest division, with cash profit rising 11% to $4.436 billion. Here are the details for each division:

Ian Narev says continuing demand for Australian resources, a vibrant construction sector in NSW and Victoria, and employment growth in key services sectors have underpinned real GDP growth and employment stability.

“However, on-going economic strength will require a lift in the low rates of nominal growth,” he says.

“Income growth inside and outside Australia remains weak, so people are not feeling better off. When combined with on-going global economic and political uncertainty this makes households and businesses cautious, and hesitant to respond to monetary stimulus.”

Narev says the bank pursued a strategy of focus on customer satisfaction, innovation and strength.

“In the banking businesses, net interest income growth was supported by continued home and business lending and strong deposit growth, particularly in transaction banking,” he says.

“In other parts of the group we also saw trading income growth and an increase in funds under administration.

“Sound cost management saw improvements in the group’s cost-to-income ratio, and together with income growth, resulted in a 6% increase in operating performance on the prior year.”

He says the bank grew customer deposits by 8%.

The results at a glance:

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