CBA profit jumps to record

By AAP and staff writers

February 14, 2007 09:11am

COMMONWEALTH Bank's first-half earnings have jumped 10 per cent to a record level while customer service has improved, the bank said today.

Commonwealth Bank today reported a record first-half net profit of $2.191 billion for the half year ended December 31, up from $1.999 billion last year.

The bank also said its earnings performance could exceed the earnings performance of its peers this year.

CBA's cash net profit was $2.271 billion, up 19 per cent after excluding proceeds from the sale of its Hong Kong insurance business in the prior corresponding half.

The cash result was above analysts' expectations of a result around $2.154 billion.

Bank chief executive Ralph Norris said CBA had improved customer service by opening new branches, refurbishing existing branches and extending banking hours.

"This is another good result and I am pleased that our disciplined approach to targeting profitable growth has again delivered double digit earnings growth and a record interim dividend,'' Mr Norris said.

"We have achieved this in a competitive environment, without relaxing our high credit standards.''

"Given the positive outlook for growth and the diversity of the group's income streams, the group remains on track to deliver cash earnings per share (EPS) growth which meets or exceeds the average of its peers," the bank said.

The bank said its result were underpinned by strong performances from all of its businesses.

As well as again delivering double digit earnings growth, CBA said it generated a significant improvement in its return on equity, up 60 basis points to 22.3 per cent.

The banking business performed well, with underlying net profit of $1.867 billion, up 17 per cent.

"In a competitive environment, the Australian retail banking business delivered strong volume growth in home loans and domestic deposits but lost share in credit cards where it elected not to compete for short term unprofitable business.''

CBA said business lending was also very strong with the bank benefiting from growth in the Australian and New Zealand syndicated loan market.

The funds management business delivered an underlying net profit of $232 million, up 27 per cent.

Funds under administration increased 11 per cent to $168 billion over the six months, driven by strong investment performance.

The CBA said the domestic economy had maintained a good level of growth during the first half of fiscal 2007.

"Looking forward growth is likely to remain below the levels experienced in recent years due to capacity constraints and the impact of the drought on the economy,'' it said.

But business credit growth remained solid and consumer spending had been resilient in a rising interest environment.

"The Australian financial services industry continues to be highly competitive,'' the bank said.

CBA also said its net interest margin, a key measure of profitability, was at 2.22 per cent at the end of the half year, down slightly from 2.29 per cent at the end of June 2006.

It declared an interim dividend of $1.07, up from 94 cents in the previous corresponding half year.

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