Commonwealth Bank Reports $5.13bn Cash NPAT, CET1 at 12.2%

Financial Performance and Capital Strength

Commonwealth Bank of Australia (CBA) has reported a solid financial performance for the half year ended 31 December 2024, with cash net profit after tax (NPAT) increasing by 2.3% to $5.13 billion. This growth was driven by disciplined volume growth in lending, particularly in business banking and home loans, alongside stable underlying margins. The bank’s capital position remains robust, with a Common Equity Tier 1 (CET1) ratio of 12.2%, comfortably above regulatory minimums, reflecting prudent risk management and organic capital generation.

Operating income rose 3.3% to $14.1 billion, supported by a 4.1% increase in lending volumes and a 9 basis point improvement in net interest margin (NIM). Operating expenses increased by 6%, primarily due to inflationary pressures and strategic investments in technology and frontline services, including a $450 million spend on fraud, scam, and cybercrime prevention initiatives.

Customer Engagement and Digital Leadership

CBA continues to lead the Australian banking sector in customer engagement, boasting the highest Net Promoter Scores (NPS) across retail and business segments. The bank’s digital ecosystem remains a key differentiator, with 8.8 million active users of the CommBank app and over 6.4 million customers engaging with the CommBank Yello rewards program. The launch of AI-powered messaging services and enhanced digital tools has further deepened customer relationships and improved operational efficiency.

Home loan growth was steady, with the bank maintaining a 34.6% market share in retail Main Financial Institution (MFI) customers and a 26.5% share in business MFI. The proprietary home loan channel accounted for 54% of the portfolio, with approximately 70% of applications auto-decisioned on the same day, reflecting streamlined digital processes.

Credit Quality and Risk Management

Credit quality remains sound, with loan impairment expense declining by 23% to $320 million. Home loan arrears were broadly stable, supported by higher savings buffers and improved dynamic loan-to-valuation ratios (DLVR). The bank’s provisioning coverage remains strong at 1.62% of credit risk weighted assets, with forward-looking adjustments reflecting cautious optimism amid economic uncertainties.

Business lending grew 8% over the half, outpacing system growth by 1.3 times, with a focus on sustainable lending and risk discipline. The commercial property portfolio showed signs of recovery with increased trading activity and stable valuations, while sectors such as agriculture and entertainment remain closely monitored but well provisioned.

Capital Management and Shareholder Returns

CBA returned $4 billion to shareholders through dividends and share buy-backs, benefiting over 13 million Australians including superannuation investors. The interim dividend was increased by 5% to $2.25 per share, with a payout ratio of approximately 75% on a normalised basis, consistent with the bank’s commitment to sustainable returns.

The bank is well positioned for upcoming regulatory changes, including APRA’s phase-out of Additional Tier 1 capital by 2027, with a strong buffer of Tier 2 capital and CET1. Ongoing capital management balances reinvestment in growth initiatives with disciplined shareholder distributions.

Economic Outlook and Strategic Focus

While the Australian economy faces headwinds such as inflationary pressures and geopolitical uncertainties, CBA notes some relief for households through tax cuts and improving real disposable incomes. The bank’s strategy remains focused on leadership in Australia’s recovery and transition, reimagining products and services, and delivering global best digital experiences.

Investment in AI and technology infrastructure continues to accelerate, underpinning operational efficiencies and enhanced customer experiences. The bank’s conservative balance sheet and strong liquidity position provide resilience amid evolving market conditions.