By online business reporter Michael Janda Courier Mail Thu Aug 16, 2012
The Commonwealth Bank has posted a $7.1 billion net profit, up 11 per cent on last year's result.
However its cash profit measure was up a smaller 4 per cent, also around $7.1 billion, and the bank's revenue actually fell 1 per cent for the half-year to June compared with the half-year to December.
CBA's return on equity (a measure of the bank's profit compared to the funds contributed by shareholders) fell 90 basis points to 18.6 per cent.
The Commonwealth Bank's chief executive Ian Narev says the bank's return on equity remained high compared with rivals despite suffering from a slowdown in demand for loans.
"As expected, revenue growth was subdued reflecting ongoing caution from both our retail and corporate customers," he explained in the report.
"This translated into lower credit growth and great pressure on market sensitive businesses. In addition, higher funding costs have put pressure on margins as competition for domestic deposits intensifies and wholesale funding continues to be expensive."
The bank increased its level of customer deposits by $30 billion to $379 billion, which now makes up 62 per cent of its funding.
CBA says its net interest margin is down 3 basis points on the previous financial year.
However, the bank benefited from a 15 per cent reduction in its bad debt expenses, with total provisions for bad and doubtful loans now at $4.85 billion.
Looking ahead, Mr Narev says he expects domestic economic conditions to remain subdued this financial year.
"It is difficult to see the catalyst for alleviating the uncertainty which will continue to affect consumer and corporate confidence," he added.
"So, in the near term, we expect current revenue trends to continue, and we will retain conservative business settings."
Despite the subdued outlook, analysts have generally welcomed the result, with Commonwealth Bank shares up 0.4 per cent to $55.78 by 11:18am (AEST) in a market that had fallen slightly overall.
"The record result contained no big surprises and we retain our positive view on the narrow moat bank," said Morningstar's head of banking research David Ellis said in a note.
"The painless transition to new CEO Ian Narev is a real standout and bodes well for the future."
The Commonwealth Bank board has declared a final dividend of $1.97 per share, 5 per cent up on last year.
Total dividend payments for the 2012 financial year were $3.34.