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CBA posts in-line $2.4bn 3Q17 cash profit

Nicholas Grove  |  09 May 2017Text size  Decrease  Increase  |  

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Commonwealth Bank of Australia (ASX: CBA) on Tuesday announced a $2.4-billion cash profit for the third quarter of fiscal 2017, in line with market expectations, and which the lender attributed to income growth, continuing cost discipline, and sound credit quality.

Unaudited statutory net profit stood at approximately $2.6 billion for the quarter, CBA said in a statement to the ASX.

Morningstar head of Australian banking research, David Ellis, said while the cash profit result was softer than he had expected, his long-term fundamental view on the bank was unchanged.

"Our base-case assumptions are intact--we see credit growth slowing but remaining positive, loan quality remaining sound despite modestly higher loan losses as interest rates normalise, tight expense control supporting improved operational efficiency, higher regulatory capital requirements pressuring returns on equity, and dividend payout ratios moderating," Ellis said.

"Our positive long-term view is underpinned by further efficiency improvements with our Commonwealth Bank earnings per share forecasts growing an average of 3 per cent a year until fiscal 2021."

The bank's charge for bad loans of $202 million in the quarter equated to 11 basis points of gross loans and acceptances, down from 17 basis points in the first half of fiscal 2017.

While not providing a specific figure, the bank said net interest income increased on the same quarter in the prior year thanks to volume growth in key markets.

However, net interest margin in the quarter was down slightly on the first half of fiscal 2017, the bank said.

Growth in home lending growth continued to be underpinned by strong proprietary channel performance, the bank said. However, growth in business lending remained subdued.

In wealth management, average assets under management and funds under administration rose by 6 per cent and 7 per cent respectively thanks to stronger investment markets, but this was partly offset by exchange rate movements, CBA said.

The bank said its New Zealand-based subsidiary, ASB, saw lending rise 10 per cent and deposits increase 8 per cent for the 12 months to March 2017.

CBA said it maintained strong funding and liquidity positions during the quarter, with deposit funding at 67 per cent of the total.

CBA's Common Equity Tier 1 (CET1) capital buffer stood at 9.6 per cent on an Australian Prudential Regulation Authority basis, and 15.2 per cent on an internationally comparable basis.

Insurance income impacted by weather events during the quarter, including Cyclone Debbie, the bank said.

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Nicholas Grove is a Morningstar journalist.

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