On 7 November 2018, Commonwealth Bank of Australia (ASX: CBA) held its Annual general Meeting and provided its September quarter trading update to its shareholders. Following the release of the update, CBA’s shares uplifted by 0.421 percent as on 7 November 2018 (12:35 PM AEST).
In the September quarter, CBA earned an unaudited statutory net profit of approximately $2.45 billion and unaudited cash net profit of approximately $2.50 billion. Compared to the previous quarter, the operating income was up by 1% in September quarter. The operating expenses in the September quarter were down by 7 percent due to timing of investment spend and software impairments in the comparative period. CBA was able to maintain a strong balance sheet in September with customer deposit funding at 68%, NSFR at 113%, LCR at 133% and the CET1 (APRA) ratio at 10.0%.
The credit quality of the Group’s lending portfolios remained sound in September quarter with loan impairment expense of $216 million in the quarter equated to 11 basis points of Gross Loans and Acceptances, compared to 15 basis points in FY18. The troublesome and impaired assets increased from $6.5 billion at June 2018 to $6.6 billion in September, due to an increase in home loan impaired assets and a small number of individual corporate impairments.
The funding and liquidity positions of CBA remained strong in September quarter with customer deposit funding at 68% and the average tenor of the long-term wholesale funding portfolio at 5.0 years and CBA also issued $8.8 billion of long-term funding in the quarter. While there was a moderate improvement in home loan arrears, some households continued to experience difficulties with rising essential costs and limited income growth due to which consumer arrears were seasonally lower in the quarter.
According to the Company’s CEO Mr. Matt Comyn, CBA continued to show resilient business performance in the first quarter of FY 2019 and the fundamentals of CBA’s business remained strong, highlighted by the continued deposit growth, sound credit quality and balance sheet strength. He further informed about the recently announced sale of CBA’s global asset management business, Colonial First State Global Asset Management and divestments and the demerger of CBA’s wealth management and mortgage broking businesses which represents another important milestone in CBA’s strategy to focus on its core banking businesses and to create a simpler, better bank.
In September, the Royal Commission delivered an Interim Report which focused on the causes of misconduct across the financial services sector, and what can be done to prevent such conduct. CBA acknowledged the Royal Commission’s criticism that, too often, a focus on profitability disadvantaged some of its customers and agree that this imbalance is not acceptable.
In the last six months, the share price of CBA decreased by 5.17 percent as on 6 November 2018, and traded at a PE level of 12.900x. CBA’s shares traded at $69.24 with a market capitalization of $122.06 billion as on 7 November 2018 (AEST 12:35 PM).
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