Australia’s largest commercial bank has reported a drop in profit in the first half of the 2023-2024 financial year, citing the impact of inflation and challenging economic conditions. According to its latest performance report, the Commonwealth Bank of Australia (CBA) posted a cash net profit after tax (NPAT) of $5.02 billion (US$3.24 billion) between July 1 and Dec. 31, 2023. While the company’s revenue almost remained the same at $13.6 billion, its operating expenses were 4 percent higher ($6.01 billion) than the first half of the 2022-2023 financial year.
During the six-month period, the bank’s staff expenses rose by 6 percent, occupancy and equipment expenses by 5 percent, and information technology expenses by 8 percent. CBA chief executive Matt Comyn told shareholders that the company’s lower cash profit reflected inflation pressure on costs and a competitive operating environment, stating that the year was challenging for many customers due to increasing cost of living pressures.
CBA’s net interest margin, an indicator of profitability, slipped 11 basic points to 1.99 percent due to increased competition, customers switching to higher-yielding deposits, higher wholesale funding costs, and a lower contribution from its New Zealand subsidiary. The bank’s latest results were a big step down compared to the previous year, where it made a record profit after tax of $5.15 billion (up 9 percent) in the first six months of 2022-2023, following a series of interest rate hikes by the Reserve Bank.
In October 2023, the Financial Services Union alleged that CBA had a plan to cut 192 jobs for automation despite having a serious staff shortage. Mr. Comyn predicted that 2024 would be a challenging year for the bank amid the current economic conditions, with an expected uptick in arrears and impairments.
E&P Capital financial analyst Azib Khan also pointed out that while CBA’s cash profit was better than market expectations, the bank did not provide an outlook for its profit and loss in 2024. Nevertheless, Mr. Comyn was optimistic about the outlook of the Australian economy and the bank’s ability to cope with economic headwinds, stating that their balance sheet remains strong with high levels of provision coverage, surplus capital, and conservative funding metrics.