Bloomberg News

Commonwealth Bank First-Half Profit Rises 1% on Retail Banking

February 12, 2013

Commonwealth Bank of Australia, the nation’s biggest lender, said first-half profit rose 1 percent as retail banking and wealth management earnings increased.

Net income climbed to A$3.66 billion ($3.77 billion) in the six months ended Dec. 31 from A$3.62 billion a year earlier, the Sydney-based bank said in an e-mailed statement today. That was in line with the A$3.72 billion median profit estimate of five analysts surveyed by Bloomberg News.

Chief Executive Officer Ian Narev boosted earnings from retail customers as the Reserve Bank of Australia cut benchmark interest rates to match a half-century low. While the central bank’s six rate cuts since November 2011 contributed to higher property prices last quarter, lenders are still coping with the weakest annual growth in outstanding home loans since 1977.

“Since reporting our full year results in August last year we have seen some improvements in the global macroeconomic environment,” Narev said in the statement today. “If the current stability continues, we believe it will translate into a slow but steady rebuilding of consumer and business confidence in Australia.”

Shares of Commonwealth Bank reached a record close yesterday, ending at A$65.52, taking their 2013 gain to 5.4 percent. That compares with the benchmark S&P/ASX 200 index’s 6.7 percent advance.

Australia’s biggest banks have cut their reliance on credit markets as local households save at close to the highest rate in a quarter century. Debt markets furnish about 40 percent of the funds they use for lending down from more than half three-years ago, central bank data showed.

Higher Margin

Commonwealth Bank’s net interest margin, a measure of the profitability of the bank’s lending business, rose 4 basis points to 2.1 percent from six months earlier, the bank said today. The margin declined 2 basis points from the same period a year earlier.

Wholesale funding costs have fallen. Last month the bank raised A$2.5 billion from five-year bonds, paying 95 basis points more than swaps. That compared with National Australia Bank Ltd.’s A$3 billion raising last year at almost double the spread, data compiled by Bloomberg show.

Retail banking services earnings climbed 13 percent from a year earlier to A$1.5 billion, while wealth management profit rose 10 percent to A$334 million, Commonwealh Bank said today.

Australian home-loan approvals fell in December for a third month and first-home buyers slumped to the lowest in eight-and- a-half years, the nation’s statistics bureau said in Sydney on Feb. 11.

Melbourne-based rival NAB said last week that cash profit climbed 3.6 percent in the three months ended Dec. 31 to A$1.45 billion. Australia & New Zealand Banking Group Ltd. is scheduled to report its first-quarter earnings on Feb. 15.

To contact the reporter on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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