Written by Sameer Manikkar
(Reuters) – Commonwealth Bank of Australia, the country’s largest lender, reported a smaller-than-expected fall in annual cash profit on Wednesday and announced its highest ever dividend, despite falling margins and rising mortgage overdue payments.
Cash profits were A$9.84 billion (US$6.52 billion) for the year to June 30, beating the London Stock Exchange Group’s estimate of A$9.68 billion but about 3% below the record A$10.16 billion posted the previous year.
Commonwealth Bank of Australia, which writes about a quarter of the country’s mortgages, announced a final dividend of A$2.50 per share, its highest ever, compared with expectations of A$2.40 for Visible Alpha.
Shares in Australia’s largest company by market value were up 0.4% at A$133.00 at 0034 GMT after rising about 1% in early trade.
The lender’s shares have already risen about 5% since the start of July, hitting an all-time high of A$138.24 on August 1.
Growth in loan volumes with relatively stable margins supported profits, but intense competition kept pressures on as inflation and interest rates rose, affecting households’ purchasing power and ability to repay loans.
“Many Australians continue to face challenges due to cost of living pressures and lower real disposable household income,” the bank said in a statement.
“Consumer arrears rose, reflecting the impact of higher interest rates and cost of living pressures on some borrowers.”
Mortgage payments delinquent for 90 days or more were 0.65% of total mortgages at the end of June, up 13 basis points from the end of December.
The bank’s net interest margin (NIM), a closely watched measure of the difference between interest earned on loans and interest paid on deposits, fell 8 basis points to 1.99%. However, it beat the consensus of 1.97% and was higher in the second half of the year than in the first.
Analysts at Citigroup said the consensus view of a net interest margin of 1.95% for the current half ending Dec. 31 was “probably too pessimistic.”
E&P Financial CEO Azib Khan said he expects the higher net interest margin to lift earnings expectations by 3% to 6% for the current fiscal year and next.
Despite the strong result, the Commonwealth Bank of Australia warned that higher interest rates were weighing on the economy and reducing household disposable incomes and demand, with the huge impact continuing to be absorbed despite slowing inflation.
“Australia remains well positioned but downside risks persist in relation to productivity and housing affordability, as well as ongoing global uncertainty,” chief executive Matt Comyn said in the annual results report.
(1 USD = 1.5081 AUD)
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