One question made the CBA boss flinch – and it wasn’t about profit

Chief executives of major companies such as the Commonwealth Bank are rigorously schooled in dealing with the media, with rehearsed answers at the ready. But CBA boss Matt Comyn was clearly thrown when asked what he thought of Matildas star Sam Kerr’s overnight not guilty verdict.

Kerr’s legal mess and eventual acquittal is a prickly and polarising issue that Comyn was understandably viewing as kryptonite. “I think that it’s good that it’s been resolved” was as far as he wanted to go.

For those who may have forgotten, the Australian national women’s football team’s full name is the CommBank Matildas since the bank became its official partner in 2021.

The Matildas’ success was marketing gold for CBA and its chief Matt Comyn – until it wasn’t. Credit: Jessica Hromas

When the Commonwealth Bank latched onto the rising star of Australia’s beloved Matildas and watched them contest the World Cup campaign in 2023, it was marketing nirvana.

It was as close to brand perfect as any company could dream of – young, talented, wonderful women involved in a team sport that had captured and inspired a nation.

For the CBA, these women were marketing gold.

At the outset, I will declare that my views on the merits of the Kerr case echo those written by human rights barrister and former UK judge Geoffrey Robertson this week. He said it should never have gone to trial. And I wonder at how mixed-up the system has become when a woman of colour can be accused of racism for calling someone white.

But I readily understand that this is not representative of the public at large, and that the response to Kerr’s behaviour and treatment by the British legal system has been polarising.

The CBA’s customer base is a broad church, and the Matildas marketing halo illuminating the bank has dimmed.

But the bank’s share price hasn’t, hitting a new all-time high on Wednesday.

CBA investors’ focus on Wednesday was the bank’s half-year profit and any signs that the drought had broken and it had returned to profit growth.

To Comyn’s credit, CBA performed a little better than expected, having grown its first-half profit by 2 per cent and increased its dividend.

A couple of elements fed into this result – the first of which was stronger than anticipated lending for mortgages and to business customers. In both these divisions the bank captured some decent market share. The second element was a particularly benign loan impairment expense, which was a positive for the bank and was delivered despite significant pain being experienced by some mortgage borrowers. But this is a tick for CBA, which has managed its loan exposures quite judiciously.

CBA’s ability to move into profit in a sluggish economy, where intense industry competition is still putting pressure on margins, is a credit.

The disconnect here is why a company with sluggish profit growth is experiencing such a strong share price – even if it is the best house on Bank Australia Street.

But let’s not get carried away here. A 2 per cent rise in profit does not look like a company brimming with growth. Of course, it won’t stop some politicians and the peanut gallery from declaring a profit of $5.13 billion obscene, but there’s an election looming, which makes all large companies fair game.

And while the odds on the Reserve Bank delivering an interest rate cut later this month are good, this is not a given. Nor is a rate cut this month likely to light up the economy sufficiently to deliver Australian banks hockey stick earnings growth this year.

So the disconnect here is why a company with sluggish profit growth is experiencing such a strong share price – even if it is the best house on Bank Australia Street.

It’s a point made on Wednesday by global investment manager VanEck, but numerous investment bank analysts are in the same camp.

“CBA’s gravity-defying rally has been the subject of much conjecture over the last year. Despite stagnant earnings growth, it’s currently trading at an all-time high of 27 times the 12-month forward earnings, which is higher than the growth-oriented S&P 500,” VanEck noted.

CBA’s share price juggernaut has been a career crimper for plenty of well-credentialed analysts who placed a sell or hold recommendation on it a year ago. Since then, it has risen by more than 40 per cent.

VanEck’s senior portfolio manager Cameron McCormack calls CBA’s share price the Cinderella story that is approaching midnight.

That call is understandable – and dangerous. So many experts have been burnt making similar predictions.

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