Matt Comyn rouses sleeping Commonwealth Bank giant

Commonwealth Bank of Australia CEO Matt Comyn (right) and CFO Alan Docherty.

CBA boss Matt Comyn put his foot on the accelerator last half and aggressively grew home loans, exploiting the bank’s market power to boost profits.

Amid the banking royal commission it was seen as politically correct to report dud profits, but this pretence has now been dropped, with Comyn confirming his profit was boosted by exploiting his 25 per cent share of the home loan market.

CBA reported a return on equity of 12.7 per cent and a cost of capital of 10 per cent, underlining its ability to exploit the power that market share gives it.

The profit surprised on the upside in part because last year, when the RBA cut interest rates, the cuts were passed on immediately to depositors, while borrowers had to wait three weeks.

The bank pocketed the difference, and partly as a result, the net interest margin was up one basis point to 2.11 per cent for the half.

This may not appear to be huge, but when you consider net interest margins have fallen in recent times it is actually a rather large development.

Comyn had flagged big falls in margins this half.

CBA lent $535.1 billion in home loans last half, growing loans by 1.5 times system, which is epic, given its already monstrous market share.

One reason CBA can do this is that it is executing well. It means it is providing better service. In addition, 42 per cent of its loans are sold through mortgage brokers, and they choose the lowest-cost and most efficient lenders.

CBA satisfies both criteria.

Its stock price rose 3.3 per cent to $87.49 on this latest result, which is also impressive because at some 18.4 times forecast earnings, CBA is already the most expensive stock of any bank in the developed world.

That’s a lot of momentum for a bank which not so long ago was the bad boy of the industry with governance snafus by the day, being forced to be the first to overhaul its management and reform its culture.