How Did CBA Boost Profit 8% Amid Rising Costs and Tech Investments?

Strong Financial Performance Despite Economic Headwinds

Commonwealth Bank of Australia (CBA) has delivered a solid full-year financial performance for the year ended 30 June 2025, with net profit after tax attributable to equity holders rising 8% to $10.116 billion. This growth was underpinned by a 5% increase in revenue to $28.29 billion, reflecting steady lending volume growth and a stable net interest margin that improved by 9 basis points to 2.08%.

The bank’s results come amid a backdrop of global macroeconomic uncertainty and heightened geopolitical risks, yet CBA has maintained a prudent balance sheet and continued to invest in its technology infrastructure, including accelerated adoption of artificial intelligence capabilities.

Dividend and Capital Strength

In line with its commitment to shareholder returns, CBA declared a fully franked final dividend of 260 cents per share, bringing the total dividend for FY25 to 485 cents per share. The dividend payout ratio on a cash basis stands at 79%, near the upper end of the bank’s target range, signaling confidence in sustainable earnings and capital management.

The bank’s Common Equity Tier 1 (CET1) capital ratio remains robust at 12.3%, comfortably exceeding the Australian Prudential Regulation Authority’s (APRA) minimum requirement of 10.25%. This strong capital position supports ongoing lending and investment activities, while also providing a buffer against economic volatility.

Operational Highlights and Investment Focus

Operating expenses increased 6% to $13 billion, driven primarily by inflationary pressures and a strategic ramp-up in technology investment. CBA’s investment spend rose 14% to $2.3 billion, with significant allocations toward modernizing legacy systems, enhancing digital customer experiences, and expanding AI-driven capabilities to improve operational efficiency and risk management.

Loan impairment expense declined 9% to $726 million, reflecting improved credit quality despite some increases in arrears linked to cost-of-living pressures. The bank continues to maintain strong provisioning coverage and prudent risk settings.

Divisional Performance and Market Position

All major business divisions contributed to the positive earnings momentum. Retail Banking Services saw a 2% increase in cash net profit after tax, supported by home loan growth slightly above system levels and strong deposit inflows. Business Banking profit rose 8%, driven by lending growth across diversified industries and higher equities trading income through CommSec.

Institutional Banking and Markets reported a 9% profit increase, benefiting from higher trading volumes and favorable derivative valuations. New Zealand operations remained stable, with cash net profit after tax flat year-on-year in local currency terms.

Ongoing Legal and Regulatory Matters

CBA disclosed ongoing legal proceedings and regulatory investigations, including class actions related to superannuation and financial advice, as well as compliance programs following prior enforcement actions. While provisions have been made where appropriate, the ultimate financial impact of these matters remains uncertain.

The bank also highlighted its continued focus on financial crime compliance, investing heavily in systems and controls to combat fraud, scams, and cyber threats, reflecting the evolving risk landscape.

Share Buy-Back and Strategic Divestments

CBA extended its on-market share buy-back program by 12 months, having completed $300 million of the announced $1 billion buy-back. The timing and scale of further purchases will depend on market conditions.

During the year, the bank completed divestments of its remaining interests in Bank of Hangzhou and Vietnam International Commercial Joint Stock Bank, reflecting a strategic focus on core markets.