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Commonwealth Bank delivers half year cash profit of $4,477 million

The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch today following the release of its half year results.

How did Commonwealth Bank perform in the first half?

Commonwealth Bank has had a better than expected start to FY 2020.

According to the release, the bank’s operating income came in at $12,416 million, which was flat on the prior corresponding period but up 3.5% on the second half of FY 2019.

On the bottom line the banking giant reported cash earnings of $4,477 million for the six months ended December 31. Whilst this was down 4.3% on the prior corresponding period, it was higher than the consensus estimate of $4,405 million.

On a statutory basis, the bank’s net profit after tax came in 34% higher than a year earlier at $6,161 million. This was driven by a $1,688 million gain on the sale of the CFSGAM business.

This allowed the CBA board to declare a fully franked interim dividend of $2.00 per share. This was flat on the prior corresponding period and in line with the market’s expectations.

Other key metrics.

Elsewhere, the bank reported a cash return on equity of 12.7%, a common equity Tier 1 (CET1) capital ratio of 11.7%, and a group net interest margin (NIM) of 2.11%. The latter was up 1 basis point over the last six months.

Commonwealth Bank also revealed that its loan impairment expense was up 2 basis points to 17 basis points of average GLAA. This was largely down to drought and bushfire provisions and would have been down 1 basis point without them.

Operating expenses increased 2.6% during the half to $5,429 million. This was due to wage inflation and higher IT, risk, and compliance costs.

Management commentary.

CBA’s Chief Executive Officer, Matt Comyn, was pleased with its solid result in tough trading conditions.

He said: “Our focus on strong execution in the Bank’s core franchise has delivered a solid result. In an environment characterised by low interest rates and relatively low credit growth, our banking businesses performed well, leading to strong volume growth in home lending and deposits.”

“We helped more customers meet their financial goals, including $53bn in new lending to home buyers and $19bn in new business lending. We have also been supporting customers and communities impacted by bushfires and drought, and we will continue to do whatever we can to help them recover and rebuild,” he added.

Outlook.

Mr Comyn appeared cautiously optimistic on the future.

“The Australian economy is underpinned by good long-term fundamentals. Our population continues to grow, we have a strong trade and fiscal position, and a solid pipeline of infrastructure investment provides ongoing stimulus. Recent improvements in key indicators also demonstrate the economy’s resilience, including growth in employment and the rebound in housing.”

“Uncertainties remain about the global economic outlook, and we are mindful of the impacts of drought and bushfires. Against this backdrop, we are focused on investing in our core businesses and on continued execution. We have both the capacity and the appetite to lend more to support our customers and the economy. We will also continue to invest in innovation and growth to create new opportunities for our business and to deliver the best experiences for our customers,” he concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.