Commonwealth Bank has reported a 20 per cent rise in unaudited first quarter cash profit to $2.2 billion driven by above system growth in key markets but it has not been nearly enough to save it from a savage sell-off prompted by margin fears.
CBA CEO Matt Comyn said the bank remained tightly focused on supporting its staff and customers during the quarter as the recovery continued while delivering on its strategic agenda of developing more in-depth relationships driven by technology.
“Our focus on operational execution ensures we are well-placed to provide this support as activity restrictions continue to ease. This was reflected in strong, above-system volume growth in core markets in the first quarter of 2022, continued sound portfolio credit quality and balance sheet strength” Mr Comyn said in a statement.
The bank said provisions were “broadly unchanged” during the quarter, but the net interest margin was “considerably lower” driven by higher liquid holdings, fierce home loan competition and continued switching by borrowers switching to fixed rate loans.
The market was spooked by the deteriorating margins and the shares were sold off sharply in the opening minutes of trade falling much as 6 per cent following a stronger session on Wall Street. Traders sliced as much as $10 billion from the bank’s market capitalisation in just a few minutes in a sign the stock had run too hard after CBA shares touched a record $110.19 a share earlier this month.
The 20 per cent rise in quarterly cash profit at Australia’s largest bank compares with a 16 per cent fall reported 12 months ago, with a $300 million increase in provisions for bad debts taken at the time weighing on the result and reflecting the uncertain outlook. Today’s first quarter result is a weaker performance than the average of the previous half by 9 per cent, however, which was bolstered by a $604 million write-back.
CBA said household deposits were up $20.4 billion over the quarter or 1.1 times system, home lending was up $10.1 billion over the quarter or 1.2 times system and business lending was up $3.1 billion over the quarter or 1.5 times system.
Evans and Partners analyst Matthew Wilson said the bank appeared to be a key beneficiary of ongoing woes at Westpac but expressed concerns about its ability to maintain operational excellence while pursing its ambitions of becoming a platform.