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CBA posts $4.8b half-year profit

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Commonwealth Bank shares opened up more than three per cent as investors react warmly to its record $4.8 billion first half profit.

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Australia’s largest lender lifted its cash profit, the banks’ preferred measure of profitability, by 3.92 per cent from $4.623 billion for the prior corresponding period.

The result was slightly higher than analyst consensus of $4.77 billion.

At 1010 AEDT on Wednesday, CBA shares were up $2.32, or 3.18 per cent, to $75.19.

That was against a backdrop of a 1.09 per cent rise for the S&P/ASX200 financials.

“It’s very much a CBA result: it’s clean and that headline number is fantastic,” IG market analyst Evan Lucas said.

“You can’t deny $4.8 billion is a beat, probably on their own expectations.”

Net profit for the six months to December 31 rose 1.83 per cent to $4.618 billion and CBA lifted the proportion of profit paid to shareholders one percentage point to 70.8 per cent.

That kept the dividend unchanged for the first time since fiscal 2009, with investors receiving a fully franked $1.98 per share following last year’s rights issue.

CBA said the board had considered the sustainability of its dividend payments in making the decision.

“All our stakeholders rely on our stability, particularly when markets are volatile,” chief executive Ian Narev said in a statement.

“Global volatility concerns our customers, and presents challenges here in Australia. We must be cautious, but also remain focused on the long term to ensure that Australia remains a great place to live and to invest.”

Analysts welcomed the decision.

“In terms of their underlying profit, they haven’t passed that through. They’ve retained some of it and that’s a fairly prudent move in the current environment,” CMC Markets analyst Michael McCarthy said.

“It will help in terms of credibility with investors. They’ve delivered.”

Home lending grew 6.5 per cent, contributing to a nine per cent increase in average interest-earning assets to $806 billion.

More than half of those assets, $430 billion, were home loan balances.

That was partially offset by a five basis point decline in net interest margin – the money the bank makes on its loans – which was hit by an increase in funding costs amid global market volatility.

Customer deposits grew nine per cent, reducing the bank’s reliance on external funding.

Operating expenses to income ratio was constant at 42.2 per cent, although return on equity dropped 17.2 per cent due to the increased equity banked in last year’s $5.1 billion capital raising.

“This is an all-clear and that’s all they had to deliver today,” McCarthy said.

AAP

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