Commonwealth Bank of Australia – First quarter 2021 trading update

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Commonwealth Bank of Australia (ASX: CBA) is Australia's leading provider of financial services, mainly providing retail, business and institutional banking services. Their operations are conducted primarily in Australia and New Zealand. CommBank has a market capitalisation of around A$163 billion.




What are the key features of CommBank’s first quarter 2021 trading update?

CommBank reported cash net profit after tax of around $2.2 billion in the first quarter FY22. This is higher than for the same period last year (up 20%), but lower than the 2H21 average (down 9%), which benefited from the release of collective provisions. CommBank’s CET1 Ratio is 12.5% as of 30 September 2021. This is up 19 basis points in the quarter after allowing for $3.5 billion in 2H21 final dividend payment.

Household deposits have increased by 12% ($20.4 billion), home lending has increased by 7.6% ($10.1 billion) and business lending has increased by 13% ($3.1 billion) (September 2021 vs September 2020). Home lending growth was driven by strong proprietary fundings and continued consumer demand for fixed-rate loans (typically 3-year fixed-rate home loans). It can be expected this growth may begin to decline since the RBA has scrapped its yield target on 3-year government bonds of 10 basis points. This should increase the interest rate on 3-year fixed-rate mortgages, as the 3-year government bond yield (risk-free rate) is the reference point for these other relevant interest rates. Business lending increased across multiple sectors mainly driven by low-interest rates. Overall total lending growth was around $17 billion in the quarter.

What is the outlook for CommBank?

CommBank’s management did not provide any specific guidance or outlook for the company. However, in the short term (FY22), it can be expected CommBank’s NIM (net interest margin) may remain somewhat the same or slightly decline. Factors such as continuing low-rate environment, price competition across both lending and deposit products, unfavourable mix impacts of customers switching to fixed-rate home loans, and higher rate deposits and higher liquids may put some pressure on CommBank’s NIM. Looking to the longer-term outlook, once the RBA begins to raise interest rates (RBA outlook is around 2023), it can be expected lending growth will begin to decline, but this could be offset by an increase in CommBank’s NIM.


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

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