For footnotes see page vii of this ASX Announcement.
Commonwealth Bank of Australia │ ACN 123 123 124 │ 9 February 2022 │ Media Release 014/2022 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000
▼ 130bpts on Jun 21
Maintained strong capital surplus post the successful completion of a $6bn off-marketshare buy-back.CET1 of 18.4% on an internationally comparable basis.
APRA, Level 23
11.8%
Common Equity Tier 1 capital ratio
Home
lending
Business
lending
Business deposits
Household
deposits
+$40.4bn
+$36.9bn
+$21.0bn
+$13.2bn
+8.5%
+14.1%
+12.2%
+12.5%
1.1x
1.2x
1.4x
1.7x
Dec 21 vs Dec 20
Volume growth in core businesses2
NPAT was supported by strong business outcomes, reduced remediation costs and lower loan loss provisions due to an improved economic outlook but impacted by lower margins.
▲ 23% on 1H21
▲ 26% on 1H21
Cash NPAT
Statutory NPAT
$4,741m
$4,746m
Net profit after tax
For the half year ended 31 December 20211
onlyStrong financial and operational performance delivered in a low rate environment through continued customer focus, disciplined execution and investment.
usepersonalsystem
CBA Growth 12 months to Dec 21
For
ASX Announcement
1H22 Results

Dividend

$1.75

Per share, fully franked

  • 17% on 1H21

The interim dividend was $1.75 per share, fully franked. This represents a normalised cash payout ratio of ~70%, in line with the Board's interim target payout ratio normalised for long run loan loss rates.

Net interest margin

1.92%

▼ 17bpts on 2H21

▼ 14bpts on 1H21

▼ 9bpts excl. liquids on 2H21

▼ 5bpts excl. liquids on 1H21

Excluding the impact from increased lower yielding liquid assets, the Bank's net interest margin (NIM) decreased 5bpts due to increased switching to lower margin fixed home loans, the impact of the rising swap rates due to market expectations of higher interest rates, and continued pressure from home loan competition.

Operating performance4

$6,617m

▲ 4% on 1H21

Strong operating performance driven by above system volume growth and lower remediation costs.

i

Results overview

Building tomorrow's bank today Chief Executive Officer, Matt Comyn

use only

The Bank has delivered a strong financial result in a low rate environment. This has been achieved through continued customer focus and disciplined operational execution.

Higher cash profits were a result of continued volume growth across the business in home lending, business lending and deposits, flat operating costs and significantly lower loan impairment expense due to the improving economic outlook.

We have continued to invest in operational execution and the ongoing strengthening of our business, consistent with our strategic priorities.

A highlight of the result is our continued capital and balance sheet strength. Our disciplined and balanced approach to capital optimises growth, reinvestment and shareholder returns. This has allowed us to return excess capital to our shareholders and lower our share count while remaining strongly capitalised and provisioned. We retain flexibility to provide further support to our customers and communities. As a result, an interim dividend of $1.75 per share, fully franked, has been determined and we continue capital management actions with a $2bn on-market share buy-back.

personal

Key financials

For the half year ended 31 December 20211.

  • Statutory NPAT was $4,741m up 26%.
  • Cash NPAT of $4,746m was 23% higher due to above system growth in all core markets, lower collective provisions from an improvement in economic outlook and a reduction in remediation expenses.
  • Operating income was $12,205m up 2%, driven by continued core volume growth and improved volume driven fee income, partly offset by reduced net interest margin.
  • Net interest margin was 1.92% down by 14bpts. Excluding the impact from increased lower yielding liquid assets, margin reduced by 5bpts mainly driven by switching to fixed rate home loans, the impact of rising swap rates and continued pressure from home loan competition.
  • Operating expenses were flat at $5,588m, driven by increased staff costs to support higher volumes and delivery of strategic investment initiatives; offset by lower occupancy, IT and remediation costs.
  • Loan impairment expense decreased $957m to a benefit of $75m reflecting an improved economic outlook. Loan loss provisions remain significantly higher than the expected losses under the central economic scenario.
  • Deposit funding of 73%, as the Group maintained a significant portion of its funding requirements from customer deposits.

Common Equity Tier 1 (CET1) capital ratio

of 11.8% (Level 2, APRA).

  • Interim dividend of $1.75 per share, fully franked.

Outlook Chief Executive Officer, Matt Comyn

For

Building a brighter future for all.

We expect the Australian economy to have a strong year in 2022 despite early challenges from the Omicron strain of COVID-19. Both the unemployment rate and the underemployment rate are at the lowest since 2008, with high participation rates.

Australian households have accumulated savings and stronger wage growth is expected. An increase in demand for goods relative to services, supply-chain constraints and tightening labour markets will likely lead to a further increase in the rate of inflation.

While the inflationary risk does not currently appear as high in Australia, relative to global peer nations, the RBA has announced the end of quantitative easing in February. The CBA Economics team's forecast is for a

modest monetary policy tightening cycle through FY23, with the first official interest rate increase forecast for August 2022.

Non-mining investment is strong, confidence has held up reasonably well, and both exports and infrastructure investment are providing good support.

Looking ahead, we will continue to invest in the business to extend our product offering to our retail and business customers and extend our digital leadership. We are well positioned to support business investment to build Australia's future economy.

Through disciplined execution and our people's care and commitment, we will continue to deliver for our customers, community and our shareholders as we build tomorrow's bank today.

Commonwealth Bank of Australia │ ACN 123 123 124 │ 9 February 2022 │ Media Release 014/2022 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

ii

Operating performance

only

Our banking businesses continued to perform well in a low rate environment, delivering above market growth in home lending, business lending and deposits through customer focus and disciplined execution. Strong volume growth supported operating income and offset the impact of home loan competition and switching.

personal use

Operating income

Operating income

Cash basis

$12,205m

1H21 $11,961m 2%

Net interest margin

1.92%

1H21 2.06% ▼ 14bpts (excl. liquids ▼ 5bpts)

2H21 2.09% ▼ 17bpts (excl. liquids ▼ 9bpts)

Net interest income increased 1.5%, driven by above system volume growth in home and business lending, and deposits, partly offset by a decrease in net interest margin.

Net interest margin (NIM) was down 14 basis points. Excluding the impact from increased lower yielding liquid assets, NIM reduced by 5 basis points mainly driven by customers switching to fixed rate home loans, the impact of rising swap rates, and continued pressure from home loan competition.

Looking ahead, we expect home loan price competition and switching to continue to weigh on margins in the second half.

Non-interest income increased 4.1%.

The key drivers were:

  • Improved volume related lending and deposit fee income.
  • Non-recurrenceof prior period aircraft impairments and higher net profits from minority interests.

These increases were partly offset by:

  • Lower Global Markets and equities trading income.
  • Decreased merchant income mainly due to the impact of COVID-19 including fee waivers.
  • Lower insurance income mainly driven by increased weather event claims.

For

Operating expenses

Operating expenses

Cash basis

$5,588m

1H21 $5,591m ▼ 0.1%

Investment spend

$945m (total spend)

1H21 $856m ▲ 10%

Cost-to-income ratio

Cash basis

45.8% (headline)

Operating expenses were flat, driven by higher staff costs, offset by lower occupancy, IT and remediation costs.

Staff expenses increased 13% mainly driven by increased full-time equivalent staff and wage inflation, partly offset by

ongoing business simplification initiatives.

The staff increases were due to:

• Increased loan application processing and higher financial crime

assessment volumes.

  • Delivery of our strategic investment priorities.
  • Increased frontline and technology resources to help our customers and uplift our cyber security and data management capabilities.

Occupancy and equipment expenses

decreased 16% reflecting benefits from branch and ATM optimisations, and exiting commercial office space as we continue to consolidate our property footprint.

Information technology expenses

decreased 5% due to lower amortisation

and business simplification initiatives. This was partly offset by increased IT infrastructure and maintenance costs including higher cloud computing and storage volumes and higher software licence costs.

Remediation costs were significantly

lower, primarily driven by reduced Aligned Advice related costs.

The cost-to-income ratio (cash basis) was 45.8%.

1H21 46.7%

Commonwealth Bank of Australia │ ACN 123 123 124 │ 9 February 2022 │ Media Release 014/2022

Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

iii

Provisions and credit quality

Loan impairment expense

Loan Loss Rate (bpts)1

only

Loan impairment expense

-$75m

1H21 $882m

Loan impairment expense decreased $957m as a result of lower collective provisions reflecting an improvement in economic outlook and higher collective provision charges in the prior comparative period from the impact of COVID-19.

The

loan loss

rate

reduced

to

-2 basis

points,

down

from 22 basis points in 1H21.

bpts

1H21

2H21

1H22

Consumer

14

-6

0

Corporate

44

-13

-7

Total

22

-8

-2

$m

882

-2bpts

-328

-75

1H21

2H21

1H22

For personal use

Portfolio credit quality

Arrears on home loans and consumer finance remain low. Home loan arrears reduced primarily due to low interest rates, improvement in economic conditions, a strong property market and customer origination quality.

Credit card and personal loan arrears remain low due to improved economic conditions and customer origination quality.

Troublesome and impaired assets decreased to $6.8bn from $7.5bn in 2H21. Corporate troublesome assets decreased by $0.8bn on the prior half, mainly

Consumer arrears2 > 90 days (%)

Personal Loans

Credit Cards

Home Loans3

1.51%

1.48%

1.38%

1.23%

1.09%

0.80%

0.97%

0.66%

0.61%

0.63%

0.64%

0.52%

0.57%

0.61%

0.49%

Dec 19

Jun 20

Dec 20

Jun 21

Dec 21

driven by refinancing, repayments and upgrades supported by improved economic conditions, partly offset by the downgrade of a small number of larger exposures into the troublesome portfolio across a range of sectors.

Gross impaired assets increased by $73m on the prior half, mainly driven by an increase in restructured home loans in New Zealand and the impairment of a small number of single name exposures in the corporate portfolio.

Troublesome and impaired assets ($bn)

% of TCE:

0.70%

0.61%

0.53%

8.2

7.5

6.8

Gross

3.1

Impaired

3.4

3.5

Corporate

5.1

4.1

3.3

Troublesome

Dec 20

Jun 21

Dec 21

Loan impairment provisions

Our total impairment provisions were $5,854m, a decrease of $961m against 1H21 reflecting an improvement in the economic outlook and lower consumer finance balances, partly offset by increased forward looking adjustments reflecting uncertainties due to higher inflation and interest rate expectations.

Provisioning coverage remains strong with the provision coverage ratio4 at 1.50%.

Total impairment provisions ($m)

1H21 6,815

1H22 5,854

Commonwealth Bank of Australia │ ACN 123 123 124 │ 9 February 2022 │ Media Release 014/2022

Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

iv

Balance sheet strength

only

Our capital, liquidity and funding metrics remained strong during 1H22. The strength of our balance sheet means the Bank is well positioned to continue supporting our customers as the Australian economy recovers.

Funding and liquidity

personal use

Deposit funding ratio

73%

Dec 20 75%

Liquidity coverage ratio1

134%

Dec 20 143%

Net stable funding ratio

131%

Dec 20 123%

Balance sheet settings remain strong. The Bank continued to satisfy a significant portion of its funding requirements from customer deposits with the deposit funding ratio being 73%. Customer deposits increased by $59.2bn during the year.

The Bank remains well positioned from a wholesale funding perspective, with long term wholesale funding accounting for 67% of total wholesale funding.

The Bank's Term Funding Facility (TFF) was fully drawn as at 30 June 2021, with maturities commencing from June 2023. The average tenor of the long term wholesale funding portfolio was 5.0 years (6.5 years excluding the TFF).

In September 2021, APRA announced a sector-wide phased reduction in the reliance on the Committed Liquidity Facility to zero by the end of 2022.

The Bank is well placed to manage the liquidity and funding impacts of both these changes.

The liquidity coverage ratio for the quarter ended 31 December 2021 was 134% which remains significantly above the minimum regulatory requirement of 100%.

The net stable funding ratio as at 31 December 2021 was 131%, well above the regulatory minimum of 100%. The increase in the ratio was due to the growth in customer deposits, the benefit of the TFF and our strong capital position.

Capital

For

Common Equity Tier 1 capital ratio

11.8%

APRA (Level 2)

Jun 21 13.1%

The Group has a strong capital position with a CET1 capital ratio as at 31 December 2021 of 11.8%.

During the first half, the Group successfully completed the $6bn off- market share buy-back that reduced CET1 capital by 133 basis points. Also reducing capital was the 2021 final dividend payment, 79 basis points, and higher risk weighted assets, 54 basis points. The Group's CET1 capital was supported by strong profit generation from the core banking businesses of 98 basis points, and the benefits of proceeds received from the majority sale of Colonial First State of 32 basis points.

The strong capital position and our progress on executing our strategy mean that we are well placed to continue to support our customers, manage ongoing uncertainties and continue returning excess capital to shareholders.

In November 2021 APRA announced revisions to implement Basel III reforms, effective from 1 January 2023. APRA has stated that the new framework does not require banks to raise additional capital.

CET1 %

Level 2

13.1%

-130bpts

11.8%

Current

APRA

10.5%

CET1

Benchmark

Jun 21 1H22 net Dec 21 movement 2

Commonwealth Bank of Australia │ ACN 123 123 124 │ 9 February 2022 │ Media Release 014/2022

Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

v

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Commonwealth Bank of Australia published this content on 08 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 February 2022 20:41:02 UTC.