By Scott Murdoch
SYDNEY, Feb 11 (Reuters) – Commonwealth Bank of Australia shares surged as much as 8.4% on Wednesday after the country’s largest lender reported record first-half cash earnings on the back of market share gains in home loans, business loans and deposits.
The bank’s ability to further entrench its scale advantage over its “Big Four” peers offset a small decline in margins due to competition and lower income from its treasury and markets divisions.
CBA reported a record cash net profit after tax of A$5.45 billion ($3.86 billion) for the six months ended December 31, higher than last year’s A$5.13 billion, and ahead of the Visible Alpha consensus estimate of A$5.19 billion.
The share price performance was CBA’s biggest intraday gain since late March 2020 and far outpaced the 1.6% rise in the benchmark S&P/ASX200 index on Wednesday.
“The main highlight from this result from CBA has been the growth in the business bank and operational excellence across mortgages in a higher competition environment,” said Michael Haynes, investment analyst at Atlas Funds Management, which owns CBA shares.
CBA, considered one of the most expensive banks in the world, had been the standout performer of Australia’s Big Four banks in the past year. But its shares are down 17% since reaching a record last June as the high valuation made resources stocks look more attractive for some investors.
ROBUST ECONOMY
CBA CEO Matt Comyn told investors on Wednesday that Australia’s economy had remained robust, driven by better-than-expected consumer demand and rising investment in artificial intelligence and energy infrastructure.
“Household consumption has risen, including across discretionary categories. Supply-side constraints mean that the economy is struggling to meet this increased demand,” he said.
But Comyn warned Australia’s interest rates, which rose last week for the first time in two years, would remain elevated while inflation stays high. Financial markets expect at least one more increase in rates this year.
For the first half, CBA reported a 3.7% increase in home lending volumes, while business lending volumes grew 6%, outpacing system growth on both counts. CBA has been rapidly gaining business banking market share, taking ground off rivals National Australia Bank and ANZ Group.
Household deposits rose 7.5%, also above the average of the major banks. These gains helped CBA retain its lead in home lending, maintaining a 25.4% share of the market.
The bank declared an interim dividend of A$2.35 per share, higher than last year’s A$2.25 and beating the Visible Alpha consensus of A$2.31.
However, CBA’s net interest margin, the difference between lending and deposit rates and a key measure of profitability, fell 4 basis points to 2.04%, from a year earlier.
That reflected intensifying competition among lenders to attract borrowers in a low-interest-rate environment during the July-December period.
Operating expenses during the first half jumped 5% to A$6.72 billion, with around A$1.2 billion spent on a revamp of its technology infrastructure to enhance its generative artificial intelligence capabilities, 10% higher than last year.
($1 = 1.4132 Australian dollars)
(Reporting by Scott Murdoch in Sydney, Sameer Manekar and Roshan Thomas in Bengaluru; Editing by Sriraj Kalluvila and Jamie Freed)
