Interim Results
15 Febbraio 2006 - 8:00AM
UK Regulatory
RNS Number:4318Y
Commonwealth Bank of Australia
15 February 2006
COMMONWEALTH BANK DELIVERS STRONG RESULT
Another record Interim Dividend declared
Overview
The Commonwealth Bank of Australia today announced a statutory net profit after
tax (NPAT) for the six months to 31 December 2005 of $1,999 million, an increase
of 18 percent on the prior six month period. Cash NPAT was up 17 percent, to
$2,061 million.
Excluding the one-off impact from the $145 million profit on the sale of the
Bank's Hong Kong based insurance business, cash NPAT was up 9 percent on the
prior period and 11 percent on the prior comparable period to $1,916 million.
Cash earnings per share, again excluding the impact of the Hong Kong sale,
increased 13 percent to 149.5 cents per share.
A fully franked dividend of 94 cents per share was declared, an increase of 11
percent on the 2005 interim dividend of 85 cents per share. The dividend will
be paid on 5 April 2006.
Commonwealth Bank Chief Executive, Ralph Norris said: "This is a strong result.
The earnings momentum from the prior fiscal year has been maintained despite
some slowing in economic activity, particularly in consumer credit growth. We
remain on track to deliver earnings per share growth for the 2006 fiscal year
which equals or exceeds the average of our peers."
"In a competitive market, we focused on profitable growth and all our businesses
performed well. A combination of solid volume growth, effective margin
management and tight cost control have all contributed to this excellent result.
It is pleasing to note that in this very competitive environment, we have been
able to maintain a high degree of margin stability for the last four halves."
"We experienced good growth and stable margins in home lending, despite the
slowing in retail system credit growth. In business banking, our volume growth
was ahead of the market while our funds management business attracted strong
inflows. ASB again outperformed in a competitive market."
"Which new Bank is not only on track to deliver financial benefits ahead of our
estimates but will also provide a solid platform for future profitable growth.
If we are to meet our aspiration of being Australia's finest financial services
organisation, however, we must engage our people more effectively and
demonstrate to our customers that we can provide them with the service they
deserve. Our priority is to deliver these outcomes."
"The Bank's financial position is strong, we have positive earnings momentum and
credit quality remains good. These factors leave us with a strong capital base
which allowed us to increase the interim dividend by 11 percent. "
The previously announced $500 million on market buy back, scheduled to complete
on 28 April 2006, has been extended to complete on 28 October 2006.
Business Performance
The underlying NPAT from the banking business was $1,589 million, up 5 percent
on the prior half and 13 percent on the comparable period last year. This
performance was underpinned by solid volume growth, a stable net interest margin
and disciplined cost control programmes.
The retail banking operations performed well with strong revenue growth and
further productivity gains. The increase in retail deposits growth was
particularly pleasing, with the Bank responding to increased price-based
competition through segmented product offers, including the launch of NetBank
Saver in June.
Asset growth was lower over the half consistent with the general softening in
system credit growth. Home loan market share was down slightly but margins were
maintained, as the Bank elected not to match the aggressive discounting of some
competitors. Unsecured credit growth was also lower, reflecting more subdued
consumer demand and competition from low rate credit cards.
In Premium Business Services, the global markets business delivered a strong
result, primarily due to good capital markets performance. The working capital
services business maintained its leading position in transaction banking and
merchant acquiring, despite increased competition. Business lending market share
improved 27 bpts on June 2005.
ASB's operating environment was impacted by the New Zealand Reserve Bank's
decision to increase the official cash rate twice during the period.
Notwithstanding this monetary tightening, house sales and the lending market
remained buoyant. ASB again achieved above market growth across its loan
portfolio, despite intense competition.
During the half year, the Bank acquired a 19.9 percent interest in Hangzhou City
Commercial Bank (HZB) for $102 million. HZB is one of China's top five city
commercial banks by assets. This investment further supports the Bank's
existing business strategy in China with both banks delivering performances
which exceeded expectations.
In the Funds Management business, underlying profit before tax of $261 million
represented an increase of 22 percent over the prior comparative period and was
up 7 percent compared to the prior half year. After tax growth was adversely
impacted by a significantly higher effective tax rate (due mainly to the loss of
transitional tax relief). Funds under administration grew 11 percent to $137
billion, which outpaced underlying market growth. This was the result of
favourable investment markets and continued improvements in net funds flow.
The insurance business delivered strong profit growth with underlying NPAT of
$103 million, up 54 percent on the prior comparative period and 16 percent on
the prior half year. This was achieved through solid income growth in both
Australia and New Zealand.
Outlook
The Australian economy performed well in the second half of the 2005 calendar
year, despite some loss of momentum. Business credit growth has been solid,
supported by infrastructure and capacity expansion while consumer credit growth
has moderated.
The overall environment for financial services businesses is expected to remain
highly competitive and as a result margin pressure will continue. Domestic
credit quality, high employment levels and business confidence are strong and
provide a positive outlook. Offshore, economic growth is likely to remain solid
although oil prices and the rate of growth of the Chinese economy are two
factors which are particularly likely to influence the domestic economy.
In February 2005, the Bank increased its expected compound annual growth rate in
cash earnings per share for the period 2003 to 2006 from exceeding 10 percent
per annum to exceeding 12 percent per annum. Subject to market conditions, the
Bank is reconfirming that it remains committed to at least achieving this goal.
Seven months into the 2006 fiscal year, the Bank remains confident that the
momentum within the business will ensure that the Bank delivers EPS growth which
equals or exceeds the average of its peers. As a consequence, the Bank expects
dividend per share for the second half of the year to further increase, subject
to the factors considered in its dividend policy.
ENDS
Media contact:
Bryan Fitzgerald
General Manager, Media and Issues Management
Communication, Community and Reputation
Commonwealth Bank of Australia
Ph: (02) 9378 2663
Mobile: 0414 789 649
Highlights 31/12/05 30/06/05 31/12/04 Dec 05 v Dec 05 v
$m $m $m Jun 05 Dec 04
% %
Banking 1,589 1,509 1,404 5 13
Funds Management 183 181 170 1 8
Insurance 103 89 67 16 54
Net profit after tax (underlying 1,875 1,779 1,641 5 14
basis)
Add profit on sale of the Hong 145 - - - -
Kong Business
Add Shareholder Investment 41 66 111 - -
returns (after Tax)
Less WnB expenses - (86) (19) - -
Net profit after tax (cash 2,061 1,759 1,733 17 19
basis)
Less AIFRS non cash items (62) (71) (21) - -
Net profit after tax (statutory 1,999 1,688 1,712 18 17
basis)
Key Shareholder Ratios 31/12/05 30/06/05 31/12/04
Earnings per share (cash basis - 160.9 132.7 132.1 21 22
basic)
Return on equity (%) (cash 21.7 18.8 19.0 290bpts 270bpts
basis)
Dividend per share (fully 94 112 85 (16) 11
franked)
Dividend payout ratio (%) (cash 58.8 84.9 64.8 - -
basis)
Other Performance Indicators 31/12/05 30/06/05 31/12/04
Total lending assets (net of 254,947 235,862 224,220 8 14
securitisation) ($m)
Total assets held and funds 466,950 437,509 419,578 7 11
under administration ($m)
Net interest margin (%) 2.41 2.44 2.43 (3)bpts (2)bpts
Banking expense to income (%) 48.1 50.7 50.5 5.1 4.8
Funds management expense to 0.70 0.71 0.73 1.4 4.1
average FUA (%)
Insurance expense to average 40.5 46.6 44.9 13.1 9.8
in-force premiums (%)
Definitions:
NPAT ("Cash Basis") - Represents profit after tax and minority interests before
superannuation plan expenses and treasury shares valuation adjustment.
NPAT ("Underlying Basis") - Represents NPAT ("Cash Basis") excluding WnB
initiatives, shareholder investment returns and profit on sale of the Hong Kong
business.
NPAT ("Statutory Basis") - Represents profit after tax, minority interests,
defined benefit superannuation plan expenses and treasury shares. This is
equivalent to the statutory item "Net Profit attributable to Members of the
Group".
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