Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 17 February 2017

CBA half-year result

CBA reports 'positive jaws'

This probably isn't the time or place for an in-depth analysis of Commonwealth Bank's (ASX: CBA) half-year results - most of what need to be said has already been said - but here are a few interesting points nonetheless.

CBA recorded an interim cash profit of $4.89 billion, up 2 per cent, while the statutory profit was also $4.9 billion to be up by 6 per cent. 

The interim dividend was nudged 1 per cent higher to $1.99, while the cash return on equity declined to 16 per cent. 

The record half-year profit was driven by an increase in home lending - lots of leverage! - while bad debts remained relatively benign, although the net interest margin was trimmed by 4bps on higher funding costs to 2.11 per cent. 

CBA reported that it would be increasing the mortgage rate for housing investment loans forthwith, having increased its market share of late with very competitive lending rates.

Consumer arrears generally remained at a low level, although there were clear signs of increased home loan stress in Western Australia (WA). 

Source: CBA

The loan impairment expense (LIE) was low at 17 basis points of gross loans and acceptances.


Looking in a bit more detail at mortgage arrears, we can see that there was a slight increase in owner-occupied loans in arrears. 

At the state level, it becomes clear that most of the increase in serious or 90+ day mortgage arrears was seen in Western Australia, where dwelling prices declined through 2016.

Arrears have broadly doubled in WA since 2014.

Source: CBA

Queensland has had historically higher rates of mortgage arrears following widespread flooding in the state in 2011, but there have been some signs of deterioration in the sunshine state too, doubtless driven by struggling resources regions.

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