CBA 2009 Half Yearly Results
12 Février 2009 - 8:00AM
UK Regulatory
TIDMBN74
RNS Number : 2041N
Commonwealth Bank of Australia
12 February 2009
COMMONWEALTH BANK OF AUSTRALIA
DELIVERS SOLID RESULT IN DIFFICULT ENVIRONMENT
Interim dividend of $1.13 declared
Highlights of 2009 Interim Result
* Domestic and global environment has been challenging;
* Cash NPAT of $2,013 million declined 16 percent - due to a significant increase
in impairment expenses;
* Banking businesses underlying performance remained robust;
* Cost containment sees costs fall by 3 percent on the preceding half year;
* Good progress on all five strategic priorities;
* Interim dividend of $1.13, fully franked - final dividend will be assessed
against prevailing market circumstances;
* Capital (with Tier 1 at 8.75 percent), funding and provisioning strengthened;
and
* Group well positioned in deteriorating operating environment.
+----------------------------+------------------------------------------------------+--------------------------------------------------------------+
| | Dec | Dec |
| | 08 | 08v |
| | | Dec |
| | | 07 |
+----------------------------+------------------------------------------------------+--------------------------------------------------------------+
| Cash | 2,013 | (16)% |
| NPAT | | |
| ($m)* | | |
+----------------------------+------------------------------------------------------+--------------------------------------------------------------+
| Cash | 146.3 | (19)% |
| EPS | | |
| (cents) | | |
+----------------------------+------------------------------------------------------+--------------------------------------------------------------+
| Dividend | 1.13 | - |
| ($ per | | |
| share) | | |
+----------------------------+------------------------------------------------------+--------------------------------------------------------------+
| Return | 15.0% | (580) |
| on | | bps |
| Equity | | |
| - Cash | | |
| (%) | | |
+----------------------------+------------------------------------------------------+--------------------------------------------------------------+
* Unless otherwise indicated, all financial comparisons in this release are with
prior comparative period
(i.e. half year to 31 December 2007).
Sydney, 11 February 2009:The Group's Net Profit After Tax ("NPAT") ("statutory
basis") for the half year ended 31 December 2008 was $2,573 million, which
represents an increase of 9 percent on the prior comparative period. Included in
this result is a provisional estimate of the non-cash gain recognised on
acquisition of BankWest of $547 million after tax.
NPAT ("cash basis") for the half year was $2,013 million, which represents a
decrease of 16 percent on the prior comparative period. This result was impacted
by a significant increase in impairment expense during the half year.
The Board maintained a fully franked interim dividend of $1.13 per share. The
dividend is payable on 23 March 2009. Ex-dividend date is 16 February 2009.
Commenting on the Board's decision to maintain the interim dividend Group
Chairman, John Schubert said: "Your Board was particularly mindful of the needs
of our shareholders in reaching its decision to declare an interim dividend at
the same level as last year's interim. However, in the current uncertain
economic environment we cannot guarantee to maintain future dividends at past
levels."
The Group has also announced details of its Share Purchase Plan which will
provide shareholders with the opportunity to apply for up to $10,000 of ordinary
shares in the Group. Shares will be priced at the lower of $26.00 or the
average price of the Group's shares over the last five days of the offer period.
The offer will be open to eligible Australia and New Zealand shareholders with
a registered holding at 7:00 pm Sydney time on 10 February 2009.Acquired shares
will not carry an entitlement to receive the interim dividend.
Key components of the result include:
* Strong income growth in the banking business with total banking income up 21
percent;
* Solid growth in lending balances, particularly in home and business lending,
and domestic deposit volumes;
* A decline in funds under management in the Wealth Management business which
drove a corresponding decline in earnings;
* A subdued result from International Financial Services reflecting difficult
trading conditions for ASB Bank in New Zealand;
* Net interest margin declined 2 bps since December 2007;
* Continuing improvements in customer satisfaction across the Group;
* Operating expenses fell by 3 percent on the preceding six month period; and
* A significant increase in Impairment Expenses (to $1,607 million) as credit
quality deteriorated in line with difficult economic conditions.
In recognition of the uncertain economic outlook, the need to redeem Perls II
and the prospect of further growth in Risk Weighted Assets, the Group further
strengthened its capital with its Tier 1 capital ratio increasing to 8.75
percent. While wholesale funding remained expensive, the Group is well advanced
having already secured over 88 percent of its long term funding for the current
financial year. Liquidity levels were increased to $82 billion. The Group is
well provisioned with total provisions of $3,608 million, an increase of $2,228
million since December 2007.
The Group's long term credit ratings with Standard and Poor's and Moody's
Investor Services remained unchanged at AA and Aa1 respectively.
The Group's strong financial position and tightly focused strategy enabled it to
grow both organically and by acquisition. Acquiring BankWest at an attractive
price has provided a unique opportunity to expand in Western Australia. The
Group also secured a strategic stake in Australia's leading home loan mortgage
broker - Aussie Home Loans. Focus on customer service helped generate a strong
performance from its banking business. It also made good progress on its key
strategic priorities including the Core Banking Modernisation project which
remains on budget and ahead of schedule.
Commenting on the interim result, Chief Executive Officer, Ralph Norris said:
"While it is always disappointing to announce a decline in earnings, this is a
solid result given the difficult economic environment which prevailed over the
period. It was particularly pleasing to see our banking businesses delivering
good growth in operating earnings which is a testament to the strength of our
balance sheet and brand. Although many financial institutions' business models
are under pressure, we have remained open for business at a time when our
customers clearly need our support."
"The increase in provisioning follows a recently completed comprehensive review
of our lending portfolio with particular focus on our top 600 clients. This has
provided us with additional insights into our risk profile and has given us
comfort around the level of our provisioning. However, given volatility and the
uncertain environment loan impairment will be a continuing focus."
As the operating environment deteriorates we will need to adapt and we will look
for opportunities to reduce our cost base to accommodate the impacts of the
slowing economy on revenue. However, it is important that we do not lose sight
of our longer term strategic imperatives and we will seek opportunities to
strengthen our business."
Business Performance
Retail Banking Services' performed strongly over the half year ended 31 December
2008 with cash NPAT increasing by 15 percent on the prior comparative period.
The result was underpinned by a combination of strong income growth, disciplined
expense control and strategic business investment.
Home loan income increased by 11 percent to $801 million. The result was
supported by balance growth of 15 percent, which was significantly above market
growth of 8 percent and achieved without a relaxation of credit
standards. Deposit income increased 10 percent to $1,602 million. Financial
market uncertainty has seen deposit balance growth benefit from a flight to
quality. This resulted in strong balance growth of 22 percent compared to market
growth of 19 percent. Expenses were flat on the prior half reflecting sound
expense management. The expense to income ratio improved to 42.4 percent.
Premium Business Services' income increased 22 percent, underpinned by strong
performances across all business segments.Cash NPAT declined to $205 million, a
71 percent decrease on the prior comparative period. This result was impacted by
a significant increase in impairment expense. This included a $367 million write
off of listed notes issued by ABC Learning; growth in the collective provision
reflecting an increase in economic volatility; and a large increase in
individual provisions reflecting the economic difficulty being experienced by a
small number of Institutional Banking clients.
Operating expenses were down 2 percent relative to the prior half. The business
has continued to focus on operational efficiencies, resulting in an improved
cost to income ratio of 38.2 percent. Interest earning lending assets grew by 15
percent.
Wealth Management's underlying profit after tax decreased 16 percent on the
prior comparative period to $328 million. The Funds Management business was
impacted by continuing falls in investment markets with funds under
administration down 21 percent to $158 billion at 31 December 2008. CommInsure
achieved strong growth over the period with total inforce premiums up 26 percent
to $1.4 billion. Operating expenses of $580 million were flat on the prior
comparative period and down 7 percent on the prior half. Expenses have been
managed in line with current market conditions while continuing to invest in
strategic projects.
Cash NPAT for the Wealth Management business was down 56 percent on the prior
comparative period to $175 million, primarily due to unrealised negative mark to
market movements of $189 million in the annuities portfolio of CommInsure.
International Financial Services' cash NPAT was $278 million, a decrease of 4
percent. After removing the impact of realised gains and losses associated with
the hedge of the New Zealand operations and other foreign exchange movements,
the underlying increase was 3 percent. This result reflects the impact of
increased funding costs due to the dislocation of credit markets and the
recession in New Zealand, with higher impairment expense in ASB Bank and lower
banking income growth.
ASB Bank cash NPAT for the half year was $206 million. The result was achieved
in a very challenging environment for the New Zealand banking industry, with
strong competition placing downward pressure on margins.
Outlook
With domestic and global economies slowing or in recession, sentiment continues
to deteriorate. While key indicators such as credit growth and unemployment
remained reasonably benign, conditions are expected to become more difficult in
the second half.
Impairment Expenses increased significantly with much of this increase driven by
exposure to a limited number of high profile corporate customers whose business
models have been under pressure for some time. While there has been no evidence
of a systemic deterioration in credit quality in the commercial portfolio, it is
clear that customers are being increasingly impacted by the slowing in the real
economy. Arrears rates in the consumer portfolio have begun to trend upwards,
although they still remain at low levels. As economic activity slows and
unemployment rises, pressure on retail customers is expected to grow.
Forecasting exactly how the economy will perform and what impact this will have
on the Group and its customers is extremely difficult. What is clear, however,
is that both domestic and global financial markets will continue to be dominated
by uncertainty and volatility for at least the next twelve months.
The Group is fortunate to be operating in a well regulated economy which has a
strong banking industry and where the Government and the Reserve Bank have been
willing and able to move quickly to address the country's economic challenges.
In this environment, the Group remains cautious and will continue to manage its
businesses prudently. The Group's top priorities will be to maintain an
appropriate level of capital, ensure continued access to a broad funding base,
retain high levels of liquidity and maintain a conservative approach to
provisioning. This will also allow the Group to take advantage of attractive
opportunities that may arise.
ENDS
Media contact:
Bryan Fitzgerald
General Manager, Media
Ph: (02) 9378 2663
Mobile: 0414 789 649
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Highlights | Half Year | Half Year | Half Year | Dec 08 v | Dec 08 v |
| | ended | ended | ended | Jun 08 | Dec 07 |
| | Dec 08 | June 08 | Dec 07 | % | % |
| | $M | $M | $M | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Retail Banking Services | 1,119 | 936 | 975 | 20 | 15 |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Premium Banking Services | 205 | 785 | 707 | (74) | (71) |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Wealth Management | 175 | 343 | 394 | (49) | (56) |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| International Financial | 278 | 292 | 289 | (5) | (4) |
| Services | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Other | 236 | (8) | 20 | large | Large |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Net profit after income | 2,013 | 2,348 | 2,385 | (14) | (16) |
| tax (cash basis) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Net profit after income | 2,573 | 2,420 | 2,371 | 6 | 9 |
| tax (statutory basis) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Key Shareholder Ratios | Half Year | Half Year | Half Year | Dec 08 v | Dec 08 v |
| | ended | ended | ended | Jun 08 | Dec 07 |
| | Dec 08 | June 08 | Dec 07 | % | % |
| | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Earnings per share | 146.3 | 176.2 | 180.7 | (17) | (19) |
| (cents) (cash basis - | | | | | |
| basic) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Return on equity (%) | 15.0 | 19.9 | 20.8 | (490)bps | (580)bps |
| (cash basis) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Dividend per share - | 113 | 153 | 113 | (26) | - |
| fully franked (cents) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Dividend payout ratio (%) | 83.6 | 87.3 | 63.0 | - | - |
| (cash basis) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Other Performance | Half Year | Half Year | Half Year | Dec 08 v | Dec 08 v |
| Indicators | ended | ended | ended | Jun 08 | Dec 07 |
| | Dec 08 | June 08 | Dec 07 | % | % |
| | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Total lending assets (net | 449,861 | 369,597 | 351,208 | 22 | 28 |
| of securitisation) ($M) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Total assets held and | 158,026 | 184,970 | 199,834 | (15) | (21) |
| funds under | | | | | |
| administration ($M) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Net interest margin (%) | 2.04 | 1.98 | 2.06 | 6bps | (2)bps |
+---------------------------+------------+-------------+---------------+-------------+-------------+
| Group expense to income | 44.3 | 49.3 | 48.4 | (10) | (8) |
| (%) | | | | | |
+---------------------------+------------+-------------+---------------+-------------+-------------+
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| |
| Definitions: |
| Net Profit after Income Tax ("Cash Basis") - Represents profit after income tax and minority interests, before defined benefit superannuation plan income/expense, treasury shares valuation adjustment and one off AIFRS mismatch. |
| Net Profit after Income Tax ("Statutory Basis") - Represents profit after income tax, gains on Visa Initial Public Offering, investment and restructuring, minority interests, defined benefit superannuation plan income/expense, treasury shares valuation adjustment and one off AIFRS mismatch. This is equivalent to the statutory item "Net Profit attributable to Equity holders of the Group". |
| |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
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