Chief executive Ian Narev says the bank is ‘cautiously positive’ about the Australian economy’s prospects

This article is more than 6 years old

This article is more than 6 years old

Commonwealth Bank has announced record profits of $8.68bn boosted by Australia’s booming housing and construction markets.



Australia’s largest bank lifted its cash profit 12% for the year to the end of June and increased its fully-franked final dividend 18c to $2.18, taking its full year dividend payout to $4.01.

Despite the strong performance, shares fell slightly on Thursday morning to $81.01 as investors calculated that the results suggested that the bank foresaw less scope for future gains in earnings.

The Commonwealth lifted its net interest margin, the profit it makes on its loans, by one basis point to 2.14% during the year despite strong competition among the big four banks for loans.

Customer deposits were up $34bn to $439bn and now represent 64% of the group’s total funding.

The bulk of profits came from its retail banking division which was up 12% to $3.47bn, while its business and private banking business was up 4% at $1.53bn.

The bank’s wealth management division lifted earnings 17% to $793m and its institutional banking and markets division recorded a 5% increase to $1.26bn.

Chief executive Ian Narev said the bank was “cautiously positive” about the outlook for the 2015 financial year as low interest rates help to offset weak consumer confidence and the slide in mining investment.

“Whilst business and consumer confidence levels have remained fragile, the levels of underlying activity confirm the strong foundations of the Australian economy,” he said.

“Lower interest rates have been positive for the housing and construction sectors, where increased activity has gone some way to offset the impacts of the anticipated reduction in investment in the resources sector.”

OptionsXpress market analyst Ben Le Brun said the result met market expectations but was not enough to push the bank’s shares higher, given it was already valued at around 15 times its forward earnings.

“The market got what it was expecting ... but that 15 times forward earnings is probably a reason to sell off a tiny bit in this session,” Le Brun said.

But, he said, the result was a good one and the bank’s shares were unlikely to weaken substantially.

“It is a very impressive result and it probably goes some way to show why it is probably the highest rated bank in the world at the moment,” he said.

“I think, if it does fall out of favour with the market over the next few days, it will be a very short-lived story.”