Commonwealth Bank of Australia logs record profit

Commonwealth Bank of Australia (CBA) has announced a record full-year cash profit of A$10.25 billion (approximately US$6.69 billion) for the fiscal year ending June. This represents a 4.2% increase from the previous year’s A$9.84 billion. The bank also announced a record dividend payout of A$4.85 per share for the fiscal year. The increase in profit was largely driven by: 

• Strong lending growth: Home lending grew by 6% and business lending by 11%, both outpacing the overall market growth.
• Improved net interest margins: The bank’s net interest margin, a key measure of profitability, increased by 9 basis points to 2.08%. 

However, the positive profit news was tempered by several factors:

• Share price dip: Despite the record profits, CBA’s share price fell by close to 5.3% on Wednesday. This was largely attributed to the bank’s high valuation and investor concerns about potential future margin pressure.
• Concerns about economic outlook: The bank’s CEO, Matt Comyn, acknowledged that while consumer confidence has improved, households remain stretched and the broader environment is characterized by “a rise in global macroeconomic uncertainty, increased geopolitical risk and continued domestic competitive intensity”.
• Increase in home loan payment delays: Despite improving economic conditions, home loan payments delayed for more than 90 days increased by 5 basis points to 0.70%, the highest since at least 2018. 

Analyst opinions

• Largely in line with expectations: Analysts generally viewed the profit result as being largely in line with market expectations, but noted some “lower quality” factors that boosted the result, such as lower bad debt expenses and higher-than-expected trading income.
• Margin pressure expected: Analysts anticipate further pressure on CBA’s net interest margin in the coming year, with Bloomberg Intelligence forecasting a decline of 10-15 basis points in 2026 as falling benchmark interest rates in Australia impact margins across the industry.
• Overvalued shares: Analysts consider CBA’s shares to be materially overvalued, with a forward price-to-earnings ratio of around 26, a dividend yield of 3%, and a price-to-book ratio of almost 4 times.