Commonwealth Bank’s first-half profits are down by 10.8% as the firm reported its half-year earnings report for FY2021 earlier today. Record low interest rates have resulted in shrinking profits despite a growth in loan volumes for CBA. The record low interest rates will continue to hinder this industry at least until 2024, according to the RBA.
After today’s announcement, Commonwealth Bank of Australia’s share price is $86.12 after the stock price declined 1.2%. Here is a quick snapshot of the key aspects from today’s announcement:
▪ Net Profit after Tax declined 20.8%.
▪ Net Profit after Tax declined 10.8%.
▪ Net Interest Margin at 2.01% following a decline of 10 basis points.
▪ Common Equity Tier 1 capital ratio at 12.6%.
▪ Interim dividend payout at $1.5 – 67% payout ratio.
Despite the increase in volumes, the net profits have declined as expenses increased and the low interest rates mean low profit margins for CBA. This theme is expected to be the same across all the big 4 banks in this month’s reporting season.
Dividends however are back as APRA lifted the capital management restrictions that were imposed on the banks during the crisis.
Given how one in two Australians are using commonwealth bank accounts, the firm’s outlook will closely resemble the general state of Australia’s economy in 2021. There are headwinds and tailwinds for sure, and it is critical to consider the macroeconomic factors that will play into the performance of Commonwealth Bank and the share price.
Our research team have already dissected the earrings report and published their latest take on Commonwealth Bank of Australia today along with a recommendation. Members can click here to be directly taken to the report.
Income stocks are potentially one of the hardest to pick as there are a lot of factors that need to be considered – from industry tailwinds to financial health of the individual stocks, and a lot of little things in between them. Several ASX listed stocks have also cut dividends in light of the challenges posed by the pandemic.The low interest rate environment brings income stocks to the forefront for most investors. Shares in Value research team have picked their top 3 ASX income stocks to buy and it can be downloaded for free!