CBA share price on watch following $5b cash profit and dividend boost

CBA's profits have come in slightly ahead of expectations.

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The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch today.

That's because the banking giant has just released its half-year results and delivered a cash profit slightly ahead of expectations.

CBA share price on watch following half-year results

For the six months ended 31 December, Australia's largest bank reported the following compared to the prior corresponding period:

  • Operating income up 0.2% to $13,649 million
  • Operating expenses up 4% to $6,011 million
  • Cash net profit after tax down 3% to $5,019 million
  • Fully franked interim dividend up 2.4% to $2.15 per share

What happened during the half?

CBA's operating income was up slightly to $13,649 million during the first half. This was supported by volume growth and higher volume-based fee income, offset by margin compression.

Speaking of which, the bank's net interest margin has fallen 6 basis points since the end of FY 2023 to 1.99%. This reflects increased deposit price competition and deposit switching.

Also heading in the wrong direction were the bank's expenses. CBA's operating expenses increased 4% to $6,011 million due to inflationary pressures and additional spending on technology to support the delivery of strategic priorities.

This ultimately led to CBA's cash net profit after tax falling 3% to $5,019 million. Statutory net profit after tax was down by 8% to $4,837 million.

Nevertheless, this didn't stop the CBA board from lifting its fully franked interim dividend by 2.4% to $2.15 per share. This represents a payout ratio of 72%, which is up from 68% a year earlier.

CBA ended the period with a CET1 ratio of 12.3%.

How does this compare to expectations?

The good news for the CBA share price is that this result appears to have come in slightly ahead of expectations.

The market consensus estimate was for a first half cash profit of $4,972 million.

Outlook

CBA's CEO, Matt Comyn, commented that 2023 was a challenging year and warned that there could be some tough times ahead. He said:

2023 was increasingly challenging for many of our customers who are finding it harder to absorb cost of living pressures. The economy has been fairly resilient, supported by a strong labour market, savings and repayment buffers, population growth and relatively high commodity prices. However, downside risks are building as slowing demand and persistent inflation impact Australian businesses. Ongoing geopolitical tensions also create uncertainty.

As cash rate increases have a lagged impact on households and business customers, we expect financial strain to continue in 2024, with an uptick in our arrears and impairments. We remain well provisioned and capitalised, with capacity to navigate an uncertain economic environment.

The CBA share price is up 6% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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