The Commonwealth Bank of Australia (ASX: CBA) share price is surging on Wednesday.
At the time of writing, the banking giant's shares are up 8% to $171.40.
Investors have been buying the bank's shares after it delivered a strong half-year result and lifted investor confidence with a solid dividend and resilient credit performance.
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CBA share price jumps on solid profit and dividend increase
For the six months ended 31 December, CBA reported statutory net profit after tax of $5.41 billion, while cash net profit came in at $5.45 billion. The latter was up 6% on the prior corresponding period.
This strong half was supported by lending and deposit volume growth in its core businesses, which was partly offset by lower margins and higher operating expenses. The latter was primarily due to inflation and its continued investment in technology.
The bank's net interest margin was 2.04%, down four basis points on the prior half, as home lending competition and lower Treasury income weighed.
Credit quality improved, with loan impairment expense flat at $319 million and home loan arrears declining. Importantly, 87% of home loan customers are now ahead of their scheduled repayments. Provision coverage remains strong, and the bank continues to hold a buffer of around $2.8 billion relative to expected losses under its central economic scenario.
In light of its solid profit growth during the half, the CBA board declared a fully franked interim dividend of $2.35 per share. This is up 4% year on year and represents a payout ratio of 74%.
Management commentary
Speaking about the half and current trading conditions, CBA's CEO, Matt Comyn, said:
We have continued to execute our strategy with discipline, maintaining a strong focus on supporting customers while delivering sustainable outcomes for shareholders. A strong labour market and, until recently, easing interest rates, have provided some relief for borrowers, and our credit quality has improved. While conditions remain challenging for some customers, recent improvements in economic activity reinforce the resilience of the Australian economy.
Our history of long-term decision making has created a strong, resilient bank that supports our customers and communities and delivers for shareholders. This has allowed us to declare an interim dividend of $2.35 per share, fully franked.
Outlook
Looking ahead, CBA noted that economic growth strengthened during the half, but inflation is expected to remain above the Reserve Bank's target band for some time, potentially placing upward pressure on interest rates.
Nevertheless, Comyn is feeling positive about the bank's outlook. He said:
We are optimistic about the prospects for the economy and will play our part in building a brighter future for all.
