CBA’s first-half profit beats estimates on strong asset quality, lending volume growth

COMMONWEALTH Bank of Australia’s (CBA) first-half cash earnings beat estimates on Wednesday (Feb 12), as lending volume growth and lower provisions for bad debts offset higher technology costs.

Shares of the company fell 0.9 per cent in early trading as analysts said the results raised questions about the lofty valuation of Australia’s top lender.

CBA shares are up more than 5 per cent year to date after a 37 per cent rally in 2024.

“Overall, the result might appear optical strong, it remains a result that has met market expectations,” analysts at Citi said.

“Expectations have run hard into this result and we do not see anything to justify the recent share price run.”

Cash profit for the Sydney-headquartered company was A$5.13 billion (S$4.4 billion) for the six months ended Dec 31, compared with A$5.02 billion a year earlier, and beating a Visible Alpha consensus estimate of A$5.06 billion.

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CBA’s loan impairment expense for the first half decreased 23 per cent to A$320 million.

“Loan impairment expense decreased reflecting our disciplined credit origination and underwriting practices, rising house prices, and lower expected losses within consumer finance,” it said.

CBA, which controls a quarter of the country’s A$2.2 trillion mortgage market added that its home-lending portfolio “remains well-secured” and that the majority of its customers are ahead on scheduled repayments.

Citi analysts said the asset quality trends looked resilient through the half.

The company said costs for the six months increased 6 per cent to A$6.37 billion, as it poured additional capital to improve its technology infrastructure and enhance its generative AI and data infrastructure capabilities.

The lender’s net interest margin, a key profitability metric defined as the gap between loan interest and the interest paid to depositors, rose two basis points from last year to 2.08 per cent.

CBA said the effects of competitive pressure on deposits and lending pricing were offset by higher earnings on capital hedges and the replicating portfolio.

It declared an interim dividend of A$2.25 per share – its highest first-half payout ever. REUTERS