SYDNEY: Australia's biggest company Commonwealth Bank on Wednesday posted a modest two percent rise in first-half net profit to Aus$4.62 billion (US$3.26 billion) and said it was well placed to ride out global instability.
The result came as nervous investors exited bank stocks in Australia for a second day, with lenders spooked by a global banking share rout on fears of worsening credit quality.
The Commonwealth was the exception, gaining 1.83 percent to close at Aus$74.20 but off its daily high.
"It seems having revenue and loan growth and a very compelling yield means little when there is a solvency issue in European banks and a consistent flattening of the US yield curve, leading to concerns over US banks' margins," said IG Markets' Chris Weston, commenting on the share price.
Cash profit for the six months to December 31, a measure often preferred by financial institutions, rose four percent to Aus$4.80 billion, slightly higher than analyst expectations.
The Commonwealth is the first of the country's big four banks to report its half-yearly earnings, helping investors judge their ability to withstand a slowdown in the Chinese economy and lower commodity prices.
Chief executive Ian Narev emphasised the bank's balance sheet strength in positioning the country's largest lender to handle economic instability.
"All our stakeholders rely on our stability, particularly when markets are volatile," he said.
"Our Aus$5.1 billion capital-raising through an entitlement offer for all shareholders (last year) further bolstered our capital adequacy, and positions us even higher in the top quartile of banks internationally.
"Our liquidity, funding and provisioning positions are similarly strong."
The bank raised Aus$5.1 billion in the second half of last year to meet tougher regulatory requirements.
New rules set by the Australian Prudential Regulation Authority demanded the biggest banks hold more reserves as a buffer against mortgages -- part of a global effort after the 2008-9 financial crisis.
With shareholder returns hit recently by rising bank funding costs and tougher capital rules, one focus ahead of the result was whether the Commonwealth would maintain its progressive dividend policy.
It declared a flat interim dividend at Aus$1.98.
The bank said revenue fell four percent to Aus$21.9 billion, although operating income rose six percent to Aus$12.36 billion.
Narev said the solid result, driven by growth in mortgage and business lending, reflected the Australian economy's rocky transition from a dependence on mining.
"These results show that through the latter part of 2015, the Australian economy continued its steady transition from a resource-dependent economy to a more diversified one," he said.
"The transition is still in its early stages. So global volatility concerns our customers and presents challenges here in Australia.
"We must be cautious, but also remain focused on the long-term to ensure that Australia remains a great place to live and to invest."
Comments
Comments are closed.