Commonwealth Bank of Australia (ASX: CBA) shares are on the slide on Wednesday morning.
At the time of writing, the big four bank's shares are down 1.5% to $159.81.
This follows the release of its half year results before the market open.
Image source: Getty Images
CBA shares fall despite strong result
For the six months ending 31 December, CBA delivered a 3% increase in operating income to $14.1 billion. This was supported by volume growth across its core segments, while its net interest margin (NIM) edged up to 2.08%. Management advised that competitive pressures on lending and deposit pricing were offset by stronger earnings from capital hedges and its replicating portfolio.
On the cost side, operating expenses climbed 6% compared to the prior corresponding period. This increase was largely due to higher staffing costs—driven by inflation and two additional working days—along with a ramp-up in technology investments, particularly in AI infrastructure and digital enhancements.
But despite these cost pressures, the bank still posted a 1% rise in pre-provision profit to $7.73 billion and a 2% lift in cash net profit after tax to $5.13 billion. Earnings per share came in at 307 cents, exceeding analyst expectations of 291 cents per share.
This allowed the CBA board to boost its fully franked interim dividend by 5% to $2.25 per share.
Expert opinion
Saxo Asia Pacific Senior Sales Trader, Junvum Kim, has been running the rule over the result this morning and appears to have been impressed. He told The Motley Fool Australia:
The Commonwealth Bank of Australia's results reflect a resilient stance amid economic headwinds, with a cash profit of AUD 5.13 billion aligning with expectations. Strong performances in home lending and business banking, alongside a net interest margin of 2.08%, showcase effective management in a competitive landscape.
Despite a 6% rise in operating expenses due to inflation and tech investments, the bank's decision to increase the interim dividend to AUD 2.25 per share signals confidence in its financial health. While cost of living pressures persist, CBA's solid CET1 ratio of 12.2% and favourable labour market conditions position it well for future growth, with an anticipated interest rate easing cycle in 2025 offering additional optimism.
However, it seems that some investors were needing an even stronger result from CBA to justify its sky high valuation.
Despite today's pullback, CBA's shares remain up approximately 39% since this time last year.
