Commonwealth Bank (CBA) SNAPSHOT
Profile: Commonwealth Bank (CBA) is one of Australia’s major banking institutions. It has branches in Australia, New Zealand and major world centres throughout Asia, Europe and North America. Banking, insurance, securities and investment services are provided through brands including Bankwest, ASB in New Zealand, CommInsure and CommSec. CBA has approximately 48,000 staff, serving 17 million customers, and approximately 800,000 shareholders as at June 2019.
History: CBA was founded under the Commonwealth Bank Act in 1911 and began operating in 1912. It transferred its headquarters from Melbourne to Sydney in 1916. More recently, CBA completed the divestment of Sovereign in July 2018 for $1.3bn, resulting in a post-tax profit of $117m. It divested TymeDigital in November 2018 ($113m loss) and sold CFSGAM in August 2019 for $4.2bn ($1.7bn gain).
Earnings composition: $4.3bn (50%) of CBA’s FY19 cash net profit after tax (NPAT) came from Retail Banking Services. Business and Private Banking (B&PB) reported $2.7bn (31%), while Institutional Banking and Markets (IB&M) generated $1.1bn (13%) and the New Zealand (NZ) division reported $1.1bn (12%). Wealth Management (WM) generated $160m (2%). IFS & Other reported a loss of $714m (-8%).
Most recent result – 1H20: Cash NPAT was $4.5bn, down 4.3% on the prior corresponding period (pcp). Operating income, consisting of net interest income and non-interest income, was largely flat at $12.4bn. Interest income grew 1.7% to $9.3bn, driven by volume growth and relatively stable net interest margins. Non-interest income was down 4.6% to $3.1bn, impacted by bushfire-related insurance claims of $83m and the removal and repricing of wealth management fees. Operating expenses increased 2.6% due to wage inflation, IT, risk and compliance costs. Statutory profit was up 34% to $6.2bn, aided by the gain on sale of CFSGAM. Cash earnings per share (EPS) was down 4.6% on the pcp to $2.53. A dividend of $2.00 was declared for the half, in line with the pcp.
Company outlook: The divestment of CommInsure is scheduled to complete by end of CY20. The divestments of BoCommLife and PTCL are expected to complete by FY20. CBA announced the assisted closure of Financial Wisdom and cessation of CFP-Pathways by the end of FY20. It is conducting strategic reviews of its General Insurance business and Vietnam International Bank.
Important dates: Ex-dividend date is 19 February 2020. The payment date is 31 March 2020. Full-year results are scheduled for 12 August 2020.
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