CBA Chief Backs Economic Recovery Amid $9.8B Profit and Record Dividend Announcement

The Commonwealth Bank of Australia (CBA) anticipates an economic rebound in the coming year, following the postpandemic challenges that have drained household savings to record lows.

This optimistic outlook was shared by CBA’s chief executive, Matt Comyn, as the bank reported a cash profit of $9.84 billion and announced a record-high dividend for its investors.

Despite the challenges, CBA’s profit for the last financial year only dipped by 2% from last year’s record high, slightly beating analyst predictions of $9.7 billion. The bank declared a fully franked full-year dividend of $4.65 per share, a 3% increase from the previous year, representing 79% of its profits.

“We’re seeing the pressures on households, who are struggling with ongoing price increases,”

Comyn said following the release of the bank’s financial results.

“Although there’s been a gradual increase in arrears, levels remain low, and we’ve been proactive in reaching out to our customers.”

Younger Australians and working households have borne the brunt of recent economic hardships. Since January 2022, the savings of those aged 20 to 24 and 35 to 44 have declined, while Australians over 65 have steadily grown their savings since 2020. Household savings rates are currently well below the historical average, with many consumers cutting back on discretionary spending as they struggle to keep up with inflation, despite a slight uptick in real disposable income.

Although the majority of CBA’s mortgage holders are ahead of their repayment schedules, the number of customers falling behind has risen due to higher interest rates and increased cost-of-living pressures. Notably, the proportion of mortgage holders behind by 90 days rose by 18 basis points to 0.65%, while those 30 days behind increased by 38 basis points to 1.3%.

“Housing affordability is becoming a greater challenge for Australians, with more than 20% of pre-tax income now being spent on mortgages, the highest level in two decades,” Comyn noted.

Analysts had predicted that CBA would face challenges due to higher interest rates and competition in the home lending market. However, the bank’s net interest margin, which measures profitability by comparing funding costs with loan charges, rose by 1 basis point to 1.99%, exceeding expectations. Comyn acknowledged that while competition in home lending remained intense, it had eased somewhat over the past year, and the cost of wholesale funding had decreased.

CBA also reported a sharp 28% drop in impaired loan expenses, down to $802 million, representing just 9 basis points of lending. Operating expenses rose by 3%, driven by higher wages and increased technology spending, with overall investment spending rising by 1% to $2 billion.

Investors and analysts closely monitor CBA’s earnings, as they are often seen as an indicator of the broader Australian economy’s health.

Comyn highlighted that the Australian economy remains resilient, supported by low unemployment, ongoing private and public investment, and strong export activity. However, he also pointed