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CBA logged a record cash profit of A$10.16 billion (A$1= $0.6533) for the year to June 30, compared to A$9.60 billion last year. The bank cited improved lending margins, thanks to higher interest rates, and also declared a final dividend of A$2.40 a share- its biggest ever.
Australia’s biggest bank also announced a stock buyback of up to A$1 billion.
CBA’s shares jumped 2% after the results, while those of smaller peers ANZ Group Holdings Ltd (ASX:ANZ), Westpac Banking Corp (ASX:WBC) and National Australia Bank Ltd (ASX:NAB) rose between 0.4% and 1.2%. The broader ASX 200 index was flat.
Strong results from CBA indicate a similar trend for its peers, who are set to report quarterly earnings later in the month. Interest rate increases by the Reserve Bank of Australia, through the past year, has seen local lenders log better margins on their loans.
But CBA also warned that higher interest rates were also drying up credit activity, and that it was likely to face increased competition in the coming year.
Consumer demand is expected to moderate, while economic growth is expected to slow in the coming months amid pressure from higher interest rates, which in turn is expected to dent CBA’s margins after a record year, CEO Matt Comyn said in a statement.
This was already reflected in the first six months of 2023, with CBA’s net interest margin slipping 5 basis points from the June-December period to 2.05%.
Still, positive results from CBA helped Australian bank stocks dodge a decline in their global peers, after ratings agency Moody’s (NYSE:MCO) downgraded 10 U.S. banks and warned it could cut the credit ratings of six others.
Broader sentiment towards bank stocks was also hit by the Italian government announcing a shock 40% windfall tax on local banks.
