CBA’s Comyn says recovery ‘simply pushed back’ as bank splashes cash

Commonwealth Bank boss Matt Comyn is betting on a strong economic rebound from lockdowns in the final quarter of 2021, stressing the importance of vaccines as the bank unveiled a $6 billion share buyback and sharply higher profits.

In a sign of optimism from the country’s biggest bank, CBA on Wednesday raised dividends and slashed charges for soured loans, as cash profits rose by a fifth to $8.65 billion for the financial year.

CBA CEO Matt Comyn said buying back its shares was the most efficient way to start returning capital to investors.Credit: Alex Ellinghausen

Mr Comyn said CBA stood ready to assist customers struggling due to recent lockdowns, but the roughly 400 requests a day for loan deferrals it was receiving were a fraction of the peaks seen last year.

Citing the experience of last year, Mr Comyn predicted business and consumer confidence would quickly recover from the current lockdown-induced slump. The lockdown may take some of the heat out of the housing market, he said, but argued this would be good news when annual price growth was near 20 per cent.

“While Australia faces near-term challenges due to the lockdowns, we expect growth will simply be pushed back by six months with the economy rebounding in late 2021 and growing strongly in 2022,” Mr Comyn said.

Even so, he also acknowledged the high level of uncertainty, saying the bank was considering a wide range of scenarios that changed almost daily.

Almost seven weeks after Sydney went into lockdown, Mr Comyn backed the government’s official policy of suppressing the virus until vaccine coverage was higher, but said beyond that point “eradication” of the virus would not be possible.

“There’s clearly a lot of work under way to accelerate the rollout. The next few months are going to be critical and hopefully the [COVID-19] numbers will come down, and in parallel the vaccination numbers will continue to increase,” he said.

Managing director of White Funds Management, Angus Gluksie, said CBA’s upbeat view on the economy could be too optimistic, given some experts’ view that restrictions may be needed even with high vaccine coverage. “It’s a bit wishful but it’s very much predicated on a vaccine strategy getting us to a point of normality,” Mr Gluskie said.

Mr Comyn’s remarks came as CBA joined National Australia Bank and ANZ Bank in announcing a  share buyback, saying it had sufficient capital to support customers while also returning some excess capital to shareholders.

Investors welcomed the cash bonanza, with CBA shares rising 1.5 per cent to close at a new record of $108.17, after hitting a peak of $109.03 during trade.

CBA is expected to continue amassing capital and Mr Comyn said it was likely to have a $7.5 billion capital surplus at the end of the year, even after the buyback. Mr Comyn would not speculate on whether more buybacks were on the cards, but said the strong capital generation within the bank would give the bank “some flexibility into the future.”

The bank’s annual report on Wednesday also showed Mr Comyn’s pay had increased to $5.2 million, up from $3.9 million last year, as he received a larger long-term bonus.

CBA’s profits were driven sharply higher by a $554 million fall in its charges for impaired loans – a benefit that goes straight to the bottom line. It also increased its market share in the key markets of business lending, mortgage lending, and household deposits.

CBA’s net interest margin – which compares funding costs with what the bank charges for loans – declined 4 per cent to 2.03 per cent compared to last year, and CBA forecast more pressure on margins due to the effect of very low interest rates.

While the size of the buyback beat most market expectations, Citi analyst Brendan Sproules said most of the bank’s revenue growth had come from the mortgage market and New Zealand. Mr Sproules said its revenue outlook appeared “more challenged” than expected.

CBA will pay a final dividend of $2, which will be fully franked and paid on September 29. It is more than double the payment of 98¢ last year, when dividends were capped by the regulator due to COVID-19.

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