CBA yesterday announced to the Australian Securities Exchange an eight per cent increase in statutory net profit after tax (NPAT) to $7.677 billion and a 10 per cent increase in cash NPAT to $7.819 billion for the 12 months to 30 June 2013.
Morningstar analyst David Ellis described the earnings as “robust”.
“Cash profits exceeded consensus of $7.6 billion and our forecast of $7.7 billion,” he said.
“Strong growth in core profits (cash profit pre-provisions and tax) highlights the high quality of the result. Solid revenue growth (up seven per cent) exceeded the four per cent increase in operating costs,” he added.
CBA reported a 23 per cent increase in funds under administration for its wealth management business to $240 billion. Insurance in-force premiums were up 10 per cent to $2 billion.
Retail life insurance income increased 12 per cent due to strong growth in retail bank network sales, CBA stated.
“Retail advice lapse rates increased over the year, though this trend moderated in the second half,” the bank stated.
The group’s funds management income increased 10 per cent to $2.146 billion, which the bank said was due to a 13 per cent increase in average funds under administration from positive net flows and improved markets.
There were no costs in the 2012/2013 financial year related to the acquisition of Count Financial, with all retention, advisory and other related costs, with $43 million in expenses in the prior year, the bank stated.
The year included $1.237 million worth of “ongoing investment in long-term growth”, relating to “a tightly managed set of initiatives focusing on technology, productivity and risk”. This was slightly less than was spent on similar initiatives in the prior year.
The group also pointed to increased costs relating to implementing regulatory changes.
“Spend on risk and compliance projects increased as systems are implemented to assist in satisfying new regulatory obligations, including Stronger Super and Future of Financial Advice reforms,” the bank stated.
The bank announced a final dividend of $2 per share and total fully franked dividend of $3.64, up nine per cent on the prior period.
Mr Ellis said the dividends were among the “standouts” from the results, along with improved net interest margin, which increased four basis points to 2.13 per cent, and an 18.4 per cent return on equity (ROE).
“This is an impressive performance all round,” Mr Ellis said.
“We remain confident the bank's low risk, conservative business settings will produce further earnings and dividend growth despite generally limp economic conditions. Earnings momentum and CEO Ian Narev's relatively positive outlook supports our long-argued position that the major banks can deliver solid dividend growth despite moderate credit growth and soft economic conditions,” he said.
Mr Ellis noted cost growth was held at four per cent, with the cost to income ratio improving to 45 per cent from 46 per cent in 2012.
“We are confident fully franked dividends are sustainable and, without capital management initiatives, ROE will decline below internal minimums over the next few years. Despite the increasing capital base, the strong increase in profits saw the ROE ease only slightly,” he said.
Group chief executive Ian Narev said the group had “maintained a careful balance between volume growth and margin, strengthened our balance sheet and continued our focus on building a high integrity and collaborative culture”.
Mr Narev said the group’s outlook for the global economy remains similar to six months ago.
“Our primary areas of economic focus are the level of confidence of Australian business and households, the impact of economic conditions in China on the demand and price for resources, the value of the Australian dollar and the resultant impact on export-sensitive parts of the Australian economy and the stability of funding markets,” he said.
He also expected competition to remain strong in all the group’s businesses from traditional financial services competitors and new technology-enabled business models.
“Overall, we believe the underlying conditions for our business in the 2014 financial year will be similar to those we have experienced in the recently completed year. However, we are well positioned to meet the needs of our customers should the economy rebound more quickly than anticipated."
