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Australia's Commonwealth Bank posts bumper H1 profit

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(Globalpost/GlobalPost)

Australia's largest lender Commonwealth Bank on Wednesday posted a one percent rise in first-half net profit to Aus$3.66 billion (US$3.77 billion), sending its shares to an all-time high.

The bank's result for the six months to December 31 was up from Aus$3.62 billion in the same period the previous year.

Commonwealth's cash profit, a measure often preferred by financial institutions, rose six percent to Aus$3.78 billion, slightly above analyst expectations.

The profit growth, due mainly to a stronger performance from its domestic and wholesale businesses, pushed its shares to a record high close of Aus$67.11, up 2.43 percent, having hit Aus$67.38 earlier in the day.

When the bank floated in 1991, its shares were Aus$5.40.

Chief executive Ian Narev described it as a "a strong result which continues to demonstrate the benefits of the group's consistent, long-term strategy".

This included "a focus on the customer, disciplined management of volumes and margin, a focus on productivity, and a willingness to invest in long-term growth, particularly through technology".

Narev said that since the bank reported its full-year results last August, the global economy had improved, which had helped the company, but he remained cautious.

"Of course, risks remain in the economy, and as a major financial institution we must remain cautious," he said.

"In particular, there is still no sustainable long-term plan for resolving sovereign indebtedness in Europe, and the US recovery remains fragile.

"And the long-term effects of the strategies of overseas central banks to restore stability are uncertain.

"But if the current stability continues, we believe it will translate into a slow but steady rebuilding of consumer and business confidence in Australia. And that is our base case for the 2013 calendar year."

Narev's remarks came as consumer sentiment surged to its highest level in more than two years in February, indicating that central bank interest rate cuts were having their desired stimulatory effect.

The lender declared an interim dividend of Aus$1.64, a 20 percent increase from the previous year, which analysts said was "a sure stamp that the bank feels, despite low credit growth, it is in a healthy position".

"Narrative from the CEO looks quite upbeat, suggesting it sees improving consumer and business confidence domestically, in a backdrop where the global financial markets are stabilising," said IG Markets analyst Evan Lucas.

"All in all a solid set of numbers and while there are areas of weakness such as institutional and corporate margins, on the whole the result should be taken well."

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http://www.globalpost.com/dispatch/news/afp/130213/australias-commonwealth-bank-posts-bumper-h1-profit