The Commonwealth Bank of Australia (ASX: CBA) share price will be in focus this morning following the release of its full year results.
How did Commonwealth Bank perform in FY 2020?
For the 12 months ended 30 June 2020, Commonwealth Bank reported operating income of $23,758 million, up 0.8% on the prior corresponding period. This reflects volume growth in home lending and deposits, which offset a 2 basis point decline in its net interest margin to 2.07%.
Management advised that home lending grew at 1.3x system growth due to strong operational execution. Household deposit balances grew 9.8% year-on-year, and spot transaction account balances were up 25%.
The bank's statutory net profit after tax including discontinued operations was $9,634 million, up 12.4% on FY 2019. This statutory result includes significant gains on the sale of businesses.
Whereas the company's cash net profit after tax from continuing operations was down 11.3% to $7,296 million. This was driven largely by higher COVID-19 loan impairment expense.
Commonwealth Bank dividend.
As was expected, Commonwealth Bank has cut its final dividend down materially following recent guidance by APRA.
It has declared a 98 cents per share fully franked final dividend, which represents a dividend payout ratio of 49.95% of second half statutory earnings. This was in line with APRA's guidance that banks should retain at least 50% of earnings
This final dividend brings Commonwealth Bank's full year dividend to $2.98 per share, which is down 31% on FY 2019's dividend.
At the end of the period, Commonwealth Bank's CET1 ratio stood at 11.6%. This is up 90 basis points year on year and comfortably ahead of APRA's 'unquestionably strong' benchmark of 10.5%.
COVID-19 loan deferrals.
Commonwealth Bank also provided the market with an update on its COVID-19 loan deferrals.
As of the end of July, COVID-19 related home loan deferrals stood at 135,000 home loans. This represents 8% of total accounts and is down from a peak of 154,000 home loans.
Approximately 59,000 business loans are currently being deferred. This represents 15% of its total balance and is down from 86,000 business loans at the peak.
Management commentary.
Commonwealth Bank's Chief Executive Officer, Matt Comyn, was pleased with the company's performance in a challenging environment.
He said: "Despite the challenging environment, operational performance in the business remains strong. Combined with our strong balance sheet and capital position, this enables us to continue supporting customers and the economy. Using our strengths in customer service, technology and data we will check-in regularly with customers to assess their financial needs and to support their recovery."
"The next few months will be critical and some sectors will take longer to recover than others, however, we remain positive about Australia's long-term prospects. We will also continue to work with government, regulators and our industry peers to support initiatives that stimulate economic activity and jobs," he concluded.
