Commonwealth Bank of Australia, the country’s largest lender, said on Wednesday it would return up to A$2 billion ($1.4 billion) to shareholders through a buyback programme, after it reported a half-year profit of A$4.7 billion.
The bank, which has a market capitalisation of A$160 billion, is the second-most valuable company on the Australian stock exchange behind mining group BHP.
“The group maintained strong balance sheet settings and remains 73% deposit funded,” CBA said in a statement, adding that an interim dividend of A$1.75 per share would be paid.
The bank announced its financial results for the six months ended 31 December 2021. Half-year profit rose 26% over the same period last year.
CBA said the profit increase 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”.
The overall result was helped by strong growth in mortgage customers combined with retention of existing customers but net interest margin (NIM) fell 17 basis points to 1.92% from 2.09% in June amid a growing preference for fixed-rate mortgages among borrowers.
“Excluding the impact from increased lower yielding liquid assets, the bank’s NIM decreased 5 basis points 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,” CBA said.
Chief executive Matt Comyn said he expected the Australian economy “to have a strong year in 2022 despite early challenges from the Omicron strain of Covid-19”.
Comyn said while inflation in Australia was lower than in other parts of the world, he forecast the Reserve Bank of Australia would begin to lift interest rates in August 2022.
“Both the unemployment rate and the under-employment rate are at the lowest since 2008, with high participation rates,” he added.
- George Russell