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Earnings season wrap-up: 13 February

Nicholas Grove and Christine St Anne  |  13 Feb 2013Text size  Decrease  Increase  |  

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Nicholas Grove is a Morningstar journalist and Christine St Anne is Morningstar's online editor.


Companies covered in this report:

• Commonwealth Bank of Australia (CBA)

• CSL Limited (CSL)

• Leighton Holdings (LEI)

• WorleyParsons (WOR)

• Stockland (SGP)

• Boral Limited (BLD)

• Computershare (CPU)


CBA's 1H result "delivers in spades"

Commonwealth Bank of Australia (CBA) on Wednesday announced a 6 per cent increase in cash profit to $3.76 billion for the half year ended 31 December 2012, exceeding Morningstar's expectations.

The bank is also on track to meet Morningstar's full-year profit forecast of $7.55 billion.

CBA declared a fully franked dividend of $1.64 a share, up 20 per cent on the same half in the previous year. The dividend payout ratio was 70 per cent, up from 61 per cent in the previous corresponding period. Return on equity was 18.1 per cent.

The bank's half-year numbers represented a "cracker result that delivers in spades with higher dividends," according to Morningstar head of financial services Asia Pacific David Ellis.

"Australia's largest bank continues to prosper due to better margins, higher trading income, a recovery in wealth management and productivity improvements," Ellis said.

Bad debts increased 13 per cent to $616 million for the half, due to higher expenses in Bankwest and business banking.

Net interest margins increased 4 basis points to 2.10 per cent compared to the second half of 2012, due to loan repricing and hedging.

"CBA benefits from attractive fundamentals - a healthy balance sheet, high return on equity, improving funding dynamics, technological advantages, a high market share and a positive growth outlook. Surplus capital continues to build," Ellis said.

The bank's dividend reinvestment plan (DRP) will continue to operate, but with no discount. "Importantly, shares issued under the DRP will be purchased on market to neutralise the dilution impact," Ellis said.

Momentum also continued across all the bank's businesses, delivering a 6 per cent increase in profit on the back of a 5 per cent lift in revenue.

"Earnings momentum is gaining traction due to the diverse income stream, improved productivity, technology advantages and dominant market positions in retail banking," Ellis said.

"Pleasingly, there are no material adverse surprises in the interim result, with the outlook consistent with our long-term positive view on Australia's four major banks," he said.

CBA chief executive Ian Narev said the strong result continued to demonstrate the benefit of the group's consistent long-term strategy, which included a focus on productivity, customers and technology, and a disciplined management of volumes and margin.