Final Results
14 August 2006 - 5:00PM
UK Regulatory
RNS Number:6030H
Commonwealth Bank of Australia
14 August 2006
COMMONWEALTH BANK DELIVERS 15 PER CENT EARNINGS PER SHARE GROWTH
Shareholders rewarded with $1.30 final dividend, up 16 per cent on prior year
Sydney, 9 August, 2006: The Commonwealth Bank of Australia delivered a
statutory net profit after tax (NPAT) for the 12 months to 30 June 2006 of
$3,928 million - an increase of 16 per cent on the prior year. Cash NPAT also
grew 16 per cent to $4,053 million with cash return on equity increasing from
18.8 per cent to 20.6 per cent.
Excluding the one-off gain of $145 million from the sale of the Bank's Hong Kong
based insurance business, cash earnings per share were up 15 per cent to 304.6
cents per share. Over the past three years, the Bank has delivered earnings per
share growth (excluding the profit on the Hong Kong sale) at an annual compound
rate of 14 per cent, exceeding the initial Which new Bank earnings target.
The Board has again declared a record final dividend of $1.30 per share - a 16
per cent increase on last year's final dividend. The final dividend, which is
fully franked, will be paid on 5 October 2006. This will take total dividends
for the year to $2.24 per share - up 14 per cent on last year. Over the last
three years dividends have grown at an annual compound rate of 13 per cent.
Other highlights of the result include:
* Strong growth in banking income, underpinned by profitable growth
across all major product lines;
* A substantial increase in Funds under Administration, to $152 billion,
reflecting robust inflows and continued strength in investment markets;
* Increases in insurance premiums, operating margins and a favourable
claims experience;
* Strong growth in earnings from ASB in the competitive New Zealand
market;
* Sound expenses management and continued productivity improvement; and
* Continued strength in credit quality across the portfolio.
Commonwealth Bank Chief Executive, Ralph Norris, said "This is a very good
result. Our continuing focus on profitable growth in a competitive market has
delivered solid financial returns with all our businesses performing well. We
have maintained the momentum in our business and preserved our credit quality,
despite some slowing in economic activity."
"It was also very pleasing to see that we have begun to make progress around our
four strategic priorities of customer service, business banking, technology and
operational excellence and trust and team spirit. The organisational changes we
introduced during the second half have successfully aligned the organisation
with these strategic priorities."
"In particular, we have had a significant focus on new activities relating to
customer service. This has included increases in customer facing staff numbers
and an extension of our business banking footprint; the addition of a range of
competitive retail and business banking products and more flexible trading hours
in bank branches. We are already having some successes from these actions with
second half improvements in our home loan performance through the branches, a 40
per cent reduction in the level of customer complaints, and significantly better
employee lost time injury rates. These initiatives have clearly signalled our
determination to transform the Commonwealth Bank into Australia's finest
financial services organisation."
Business Performance
The full year underlying NPAT of $3,227 million for the banking business
represents an increase of 11 per cent on the prior year. This performance was
underpinned by continued volume growth in home loans, improvements in business
lending volumes and good expense control. Credit quality remained sound with
bad debts as a proportion to risk weighted assets stable.
The Australian retail banking business performed well with underlying NPAT up 13
per cent. Highlights for the year included strong revenue growth, good margin
and expense control and further productivity gains. Home loan revenues in
particular, were up 16 per cent on the prior year driven, in the second half, by
an improvement in the performance of our proprietary channels. The personal
lending and credit cards segments of the market, where the low rate "Yellow"
Card was launched in the second half, remained competitive. Deposit balances
grew with Netbank Saver continuing to attract good inflows with approximately 63
per cent being new funds to the Bank.
Premium, Business and Corporate and Institutional businesses delivered a solid
result driven by moderate revenue growth and good expense control. Demand from
the corporate sector drove an increase of 18 per cent in lending and finance
assets during the period. Commsec continued to trade well, confirming its
position as the country's leading online broker.
In the competitive New Zealand banking market, ASB again significantly
outperformed its major competitors delivering underlying NPAT growth of 16 per
cent to NZ$440million. ASB achievements included its fifteenth straight year of
market share growth in home loans, strong commercial lending and continued
productivity improvement. Credit quality remained sound.
Funds Management produced an outstanding result. Underlying net profit before
tax increased 23 per cent over the prior year to $563 million. Underlying NPAT,
which was up 14 per cent, was impacted by one-off costs and an increase in the
effective tax rate from 21.9 per cent to 28.4 per cent due to the phasing out of
transitional tax relief. Funds under Administration grew by 23 per cent to $152
billion as a result of strong net fund flows and favourable investment markets.
First Choice maintained its retail support base attracting over 25 per cent of
retail inflows in the platform market. First Choice has now exceeded $25
billion in funds under administration in less than four years.
The Insurance business delivered a 38 per cent increase in underlying NPAT to
$215 million. The result was underpinned by solid inforce premium and operating
growth in Australia and New Zealand positive experience variations and good
expense control.
Outlook
The Australian economy performed well in 2006 fiscal year, despite some loss of
momentum. Business credit growth has been solid, supported by infrastructure and
capacity expansion while consumer credit growth has moderated.
The overall environment for the financial services industry is expected to
remain highly competitive and as a result margin pressure will continue.
Domestic credit quality, high employment levels and business confidence are
strong and provide a positive outlook. Economic growth is likely to remain
solid although higher oil prices, increasing domestic and international interest
rates, geopolitical instability particularly in the Middle East and the health
of the Chinese economy are all factors which could potentially impact the
Australian economy.
Commenting on the outlook for the Bank, Ralph Norris said "I am very happy with
our progress in the 2006 fiscal year. The business has performed well and this
result has set a benchmark for the industry. We are confident going into the
new financial year that we will be a tougher competitor and continue to deliver
both revenue growth and productivity improvements. We have earnings momentum
and our credit quality is good. We have a clear vision of where we want to go
and what we must do to deliver."
"Taking these factors into account, and in the absence of any exogenous shocks,
I expect to see good profit growth for the 2007 fiscal year with the Bank
delivering earnings per share growth which meets or exceed the average of our
peers."
ENDS
Media contact:
Bryan Fitzgerald
General Manager, Media
Ph: (02) 9378 2663
Mobile: 0414 789 649
Highlights Full Year Full Year June 06 v's Half Year Half Year June 06 v's
ended ended ended ended Dec 05
June 06 June 05 June 05 June 06 Dec 05 %
$M $M $M $M
Banking 3,227 2,913 11 1,638 1,589 3
Funds Management 400 351 14 217 183 19
Insurance 215 156 38 112 103 9
Net profit after 3,842 3,420 12 1,967 1,875 5
tax (underlying
basis)
Add profit on sale 145 - - - 145 -
of the Hong Kong
Business
Add Shareholder 66 177 (63) 25 41 (39)
Investment returns
(after tax)
Less WnB expenses - (105) - - - -
Net profit after 4,053 3,492 16 1,992 2,061 (3)
tax (cash basis)
Less AIFRS non (125) (92) (36) (63) (62) (2)
cash items
Net profit after 3,928 3,400 16 1,929 1,999 (4)
tax (statutory
basis)
Key Shareholder June 06 June 05 June 06 v's June 06 Dec 05 June 06 v's
Ratios June 05 Dec 05
% %
Earnings per share 315.9 264.8 19 154.9 160.9 (4)
(cash basis -
basic)
Earnings per share 304.6 264.8 15 154.9 149.5 4
(cash basis -
basic) -excluding
the sale of Hong
Kong
Return on equity 20.6 18.8 180bpts 20.8 20.1 70bpts
(%) (cash basis) -
excluding the sale
of Hong Kong
Dividend per share 224 197 14 130 94 38
(fully franked)
Dividend payout 73.7 74.9 - 83.7 63.2 -
ratio (%) (cash
basis) -
excluding the sale
of Hong Kong
Other Performance June 06 June 05 June 06 v's June 06 Dec 05 June 06 v's
Indicators June 05 Dec 05
% %
Total lending 266,096 235,862 13 266,096 254,947 4
assets (net of
securitisation)
($M)
Total assets held 499,824 437,509 14 499,824 466,950 7
and funds under
administration
($M)
Net interest 2.34 2.43 (9)bpts 2.29 2.39 (10)bpts
margin (%)
Banking expense to 47.7 50.6 6 47.4 48.1 1
income (%)
Funds management 0.71 0.72 1 0.72 0.70 (3)
expense to FUA (%)
Insurance expense 36.7 45.5 19 33.6 40.5 17
to in-force
premiums (%)
Definitions:
NPAT ("Cash Basis") - Represents profit after tax and minority interests before
defined benefit superannuation plan expense and treasury share adjustment.
NPAT ("Underlying Basis") - Represents NPAT ("Cash Basis") excluding WnB
initiatives and shareholder investment returns and profit on sale of the Hong
Kong business.
NPAT ("Statutory Basis") - Represents profit after tax, minority
interests, defined benefit superannuation plan expense and treasury shares.
This is equivalent to the statutory item "Net Profit attributable to Members of
the Group".
Paste the following links into your web browser to download the PDF documents
related to this announcement:
CBA Profit Announcement 06
http://www.rns-pdf.londonstockexchange.com/rns/6030h_1-2006-8-14.pdf
Analyst Presentation Full Year 2006 by CEO_CFO
http://www.rns-pdf.londonstockexchange.com/rns/6030h_2-2006-8-14.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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