Australia’s biggest bank said today that cash profit for the six months to December 31 fell from $4.871 billion in the prior corresponding period after revenue fell 1.9 per cent to $12.41 billion.
The profit was lower than expected by analysts, although it was 1.7 per cent higher once discontinued operations including the local insurance businesses it sold to AIA are stripped out.
UBS analyst Jon Mott said the result was disappointing after a solid first quarter in which revenue had risen slightly.
“Momentum appears to be slowing as the housing market rolls over,” Mott wrote.
“CBA will need to go even harder on costs if the revenue environment continues to slow.”
Volume growth was offset by a lower net interest margin due to the increased cost of funding loans, competition and customers switching from higher-margin investor and interest-only mortgages to cheaper owner-occupier and principal and interest loans.
Customers have been switching as banks tighten lending standards and raise the cost of riskier loans in response to regulatory intervention and the harsh light of the financial services royal commission.
“The housing market transition is a rational outcome of the lending policy changes introduced over a number of years, especially following an extended period of outpaced growth in some markets,” chief executive Matt Comyn said.
Risk, compliance and remediation costs jumped to $221 million from $100 million a year earlier, although total expenses dropped 3.1 per cent due to the AUSTRAC money-laundering penalty and other costs occurring in the prior corresponding period.
Comyn, who took on the CEO role when the AUSTRAC scandal led to Ian Narev’s retirement, said CBA would continue to address its failings.
“There is much work ahead as we understand the implications and implement the recommendations of the Royal Commission,” Comyn said.
“We are already making the necessary changes and will be a better bank as a result.”
At 1018 AEDT, CBA shares, which surged 4.69 per cent on Tuesday following the release of the Hayne royal commission report, were 0.72 per cent lower at $73.07.
CBA’S FIRST HALF
* Cash profit down 2.1pct to $4.676b
* Net profit down 6.3pct to $4.599b
* Total income down 1.9pct to $12.411b
* Interim dividend flat at $2.00, fully franked
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