The Commonwealth Bank of Australia (ASX: CBA) share price is sliding today, down 0.5%.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for $97.12. Shares are currently changing hands for $96.60 apiece.
This comes following this morning's release of CBA's quarterly update for the three months ending 31 March, and, for some context, at a time when the ASX 200 is down 0.2%.
Here's what the big four bank reported.
CBA share price dips despite profit leap
- Unaudited cash net profit after tax (NPAT) of $2.6 billion, up 10% from the prior comparative quarter
- Home lending increased by $6.9 billion, or 5.2% from the March 2022 quarter
- Business lending was up by $2.6 billion, a 12.0% year on year increase
- CET1 (Level 2) ratio of 12.1% under APRA's revised capital framework, unchanged in the quarter
What else happened during the quarter?
Over the three months, the bank progressed with its on-market share buyback, which has been offering some tailwinds for the CBA share price.
As at 8 May 2023, CommBank had completed approximately $2 billion of the $3 billion share buyback. CBA also purchased some $600 million worth of shares on-market to neutralise the impact of the 1H23 Dividend Reinvestment Plan.
On the cost front, operating expenses excluding remediation, fell by 1%, largely driven by lower staff costs. The bank spent more on IT, marketing and New Zealand flood relief payments.
Perhaps pressuring the CBA share price today was the bank's report that its net interest income came in 2% lower during the quarter. CBA said volume growth was offset by lower net interest margins (NIM). The bank's NIM came under some pressure from some stiff competition for home loans as well as its customers switching to higher-yielding accounts.
Home loan arrears remained at a low 0.44%. Management said this reflects the low levels of unemployment and stability in savings buffers over the quarter.
Total credit provisions came in at $5.7 billion. There was a small increase in collective provisions to $5 billion and an $82 million increase in individual provisions to $700 million.
The bank's balance sheet remained strong in the quarter, with customer deposit funding flat at 75%.
CBA reported having an $8.7 billion capital surplus to the minimum regulatory requirement.
What did management say?
Commenting on the results that have yet to lift the CBA share price today, CEO Matt Comyn said:
Our capital position remained strong with CET1 (Level 2) ratio at 12.1% following the payment of $3.5 billion in 1H23 dividends, well above APRA's minimum regulatory requirement of 10.25%.
We have maintained our disciplined approach to managing credit, interest rate, funding and liquidity risks, and our balance sheet strength positions us well to continue to support our customers and extend the credit required to grow the Australian economy.
What's next?
Looking at what could impact the CBA share price in the months ahead, Comyn said, "As higher interest rates impact the Australian economy in the period ahead, we expect economic growth to continue to moderate."
However, he added that Australia and CommBank are well positioned, with a strong national banking system and a return to population growth.
Comyn added:
We remain positive on the medium-term outlook. The strength of our balance sheet means we are well placed to continue supporting our customers and the broader Australian economy while delivering predictable and sustainable returns to our shareholders.
CBA share price snapshot
The CBA share price is down 6% over the past 12 months. Longer-term, shares are up 37% over five years.
