On Wednesday morning, the CBA board declared it would allocate a fully franked interim dividend of $1.50 to the delight of shareholders, while its cash profit fell by 10.8 per cent from the prior corresponding period.
The payout for the first half of the 2021 financial year had significantly risen from the previous half’s dividend of 98 cents, bouncing back towards earlier payments around $2 and higher.
It had also come after APRA eased its previous prescription for the banks limiting their dividends, in favor of reserving capital through the COVID crisis.
But CBA’s new dividend is a strong indicator that recovery in the banking sector is on the way, following a rocky period through the COVID crisis, according to Peter Gardner, portfolio manager at Plato Investment Management.
“In 2020 bank dividends were cut 60 per cent on average, so a 53 per cent dividend increase from CBA is no doubt a much-needed income boost for shareholders,” Mr Gardner said.
“Importantly, the bank’s common equity tier 1 capital ratio has increased by another 1 per cent from its August result to 12.6 per cent which leaves plenty of room for future dividends or capital management.”
The dividend is in line with Plato’s expectations that bank dividends will move towards more normal payout ratios of 70-80 per cent, however Mr Gardner warned pre-COVID dividends may still be another 24 months away.
The major bank also released its ninth and 10th reports into the independent review of its progress for the remedial action plan on Wednesday morning, alongside its financial results.
As at 31 December, it had completed work on 169 of the 177 milestones and 39 out of 45 recommendations across factors such as its culture, governance and accountability.
The independent review ruled that accountabilities have been sharpened, there is clear and committed leadership from the top in managing non-financial risk, the voices of risk and compliance are being elevated and challenging leaders in meetings and forums is welcomed.
But chief executive Matt Comyn acknowledged the bank still has a way to go.
“While we remain on track and are pleased with our progress, we recognize there is still a lot left to do to fully embed and sustain the changes made,” Mr Comyn said.
Importantly, the report noted the remaining recommendations are “where the core challenges faced by the program are the most concentrated and where CBA is, therefore, likely to find it the most difficult to achieve the outcomes envisaged”.
In response to CBA’s progress, APRA reduced the operational risk overlay imposed on the bank in November, from $1 billion to $500 million.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
