CBA profit underlines strength of big banks, Australian economy

CBA continues to show its strength as one of the world’s most profitable banks, with shareholders and customers sharing the spoils.

CBA CEO Matt Comyn. Picture: Jane Dempster/The Australian.

Commonwealth Bank CEO Matt Comyn has unveiled what can only be described as a ‘spread the good news all around’ profit.

There was something in, so to speak, CBA’s $9.8bn profit for just about everybody.

Shareholders, obviously, got a higher dividend. And a share price which didn’t tank - from its ‘robustly’ high level - as so often happens these days on profit announcements.

That again was helped by the surging precede from Wall St overnight - with all sectors on the Street continuing their recovery from the recent unpleasantness.

There was good news for CBA borrowers, as Australia’s premier bank transitioned former fixed-rate ones to variable-rate loans relatively smoothly; while meeting - up to a point - the competition.

The same applied to CBA depositors, with CBA now getting a staggering 77 per cent of its funding from - relatively - low cost and ‘sticky’ depositors, both consumer and business.

An interesting table in the CBA presentation showed banking fees and charges up just 4 per cent since 2019 - and making zero contribution to the CPI inflation numbers over that period.

Set that against the 23 per cent surge in housing costs, the 21 per cent leap in food costs, the 26 per cent increase in tobacco and alcohol - no wonder, ‘we’ are drinking and smoking more.

Who’s going to nominate the big four banks for Australian of the Year next January?

There were no signs in the detail of the CBA numbers of two very, very important ‘cliffs’.

The first is the so-called ‘mortgage cliff’: all those borrowers who locked in low-rate fixed interest loans when rates were zero and have been transitioning to much higher-rate variable loans.

Those CBA borrowers have managed the shift to much higher loan repayments, pretty much in line with all the other CBA borrowers, who had already copped the higher interest rates.

No higher defaults, broadly, amongst them; no higher arrears; no higher stress.

Which actually, really shouldn’t be a surprise: after all, thanks to then-RBA governor Philip Lowe, they had hundreds of thousands of dollars of ‘free money’ for three or so years.

Importantly, and instructively, CBA had an aggressive assistance dynamic for those borrowers who did get into difficulty.

CBA provided 132,000 - yes, that’s well over one hundred thousand - “tailored payment arrangements” for those customers most in need of support.

And it also provided up to as many as 6 million customers up to $2000 in no-interest credit and no monthly fee as a safety net.

Two big points.

It was able to do all that precisely because it’s a strong conservatively managed financial institution. Weak banks couldn’t.

And even while doing that, while also meeting the competition from especially ANZ and Westpac, it came out of 2023-24 as almost literally the world’s most profitable major bank.

It will be very, very interesting to see the results of the other three big banks when they report after their September balance dates.

But as of the CBA’s June balance date - and indeed into the new financial year - it saw no sign at the banking coal-face of any ‘cliff’ for the economy overall.