Commonwealth Bank of Australia reported a 5% increase in statutory net profit after tax to $5.367 billion for the half year ended December 2025, supported by lending growth and improved credit quality despite margin pressures and higher expenses. The bank declared a fully franked interim dividend of $2.35 per share.
- 5% rise in statutory net profit after tax to $5.367 billion
- 6% revenue growth driven by lending and deposit volume increases
- Operating expenses up 5% due to inflation and technology investments
- Loan impairment expense slightly decreased reflecting credit quality improvements
- Strong capital and liquidity positions maintained with CET1 at 12.3%
Solid Profit Growth Despite Margin Pressure
Commonwealth Bank of Australia (CBA) has reported a 5% increase in statutory net profit after tax (NPAT) to $5.367 billion for the half year ended 31 December 2025. This result reflects a continuation of the bank’s disciplined execution of its strategy, with revenue rising 6% to $15 billion, underpinned by growth in lending and deposit volumes across its core businesses.
Net interest income increased 6%, supported by an 8% expansion in average interest earning assets to $1.23 trillion. However, net interest margin (NIM) declined slightly by 4 basis points to 2.04%, primarily due to competitive pressures in home lending and lower Treasury and Markets income. The bank’s underlying margin was broadly stable when excluding the impact of liquid assets and institutional reverse sale and repurchase agreements.
Rising Costs and Strategic Technology Investments
Operating expenses rose 5% to $6.72 billion, driven by inflationary pressures and increased investment in technology, including enhancements to artificial intelligence capabilities and cyber security. Staff expenses increased due to wage inflation and additional hires, particularly in technology and lending teams. Despite this, productivity initiatives helped to partially offset cost growth, with the cost-to-income ratio improving slightly to 44.7% on an underlying basis.
The bank’s investment spend reached $1.2 billion, up 10% on the prior year, focusing on modernising technology infrastructure, digital innovation, and risk and compliance enhancements. Capitalised software balances grew 23% year-on-year, reflecting ongoing platform upgrades and digital channel improvements.
Credit Quality and Loan Impairment
Loan impairment expense edged down marginally to $319 million, reflecting improved credit quality amid a resilient Australian economy and easing interest rates. Home loan arrears improved, with 87% of home loan customers now ahead of scheduled repayments. The bank maintains a strong provision buffer of approximately $2.8 billion above expected losses under its central economic scenario.
Capital and Liquidity Strength
CBA’s Common Equity Tier 1 (CET1) capital ratio remained robust at 12.3%, well above the Australian Prudential Regulation Authority’s (APRA) minimum requirements. The bank’s liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) stood at 132% and 117% respectively, comfortably exceeding regulatory minimums. Customer deposits accounted for 79% of total funding, highlighting a stable and diversified funding base.
Divisional Performance and Outlook
Divisional profits were mixed, with Retail Banking Services and Business Banking delivering modest profit growth, while Institutional Banking and Markets also improved earnings. New Zealand operations saw a decline in profit due to hedging and accounting volatility. The bank declared a fully franked interim dividend of $2.35 per share, representing a payout ratio of approximately 72% on a cash basis.
Looking ahead, CBA remains cautiously optimistic despite inflationary pressures and economic uncertainties. The bank continues to invest in technology and customer support while navigating ongoing regulatory investigations and litigation matters, including class actions and remediation programs.
Bottom Line?
CBA’s resilient profit growth and capital strength position it well, but investors should watch regulatory developments and margin pressures closely.
Questions in the middle?
- How will ongoing regulatory investigations and litigation impact future earnings and capital?
- Can CBA sustain net interest margins amid intensifying competition and evolving economic conditions?
- What is the expected return on recent technology and AI investments in terms of cost efficiency and customer experience?