We examine the highlights from the bank’s full-year report, released on Wednesday, August 11.
CBA share price runs hot
Heading into today’s FY21 release, the Commonwealth Bank of Australia (ASX: CBA) share price spent the early-parts of this week flirting with all-time highs. Yesterday we mused that excellence got us there, while also wondering if excellence could keep the stock there.
The FY21 results the bank handed down were rather excellent, with the bank reporting firm earnings growth, an impressive capital position, and announcing a solid dividend and hefty buy-back program.
Despite running up before the results, the CBA share price would continue to rise on Wednesday – opening at $108.75 per share. At the time of writing CBA traded at $107.88 per share, up 1.24% for the session.
A mammoth buy-back
The headline result from the FY21 release really was CBA’s announcement that it would pursue a $6 billion off-market, share buy-back. Indeed, while analysts were expecting the announcement of such capital management initiatives – the quantum of the buy-back program looks to have come in ahead of expectations.
As analysts from Citi put it 'While the buy-back was slighlty larger than our forecast $5bn, it appears CBA's rationale for $6bn revolves around the $6.2bn of excess capital generated by divestments.'
CBA highlighted its strong operational performance as a building block of this buy-back, while the bank’s Chairman, Catherine Livingstone noted that ‘After careful consideration, [the CBA] Board has determined that the Buy-Back is the most efficient and value-enhancing strategy to distribute CBA's surplus capital and franking credits.'
The buyback program will see approximately 3.5% of CBA’s outstanding stock ‘taken offline’.
FY21 results in focus
Beyond the buy-back, the bank posted a solid set of full-year (FY21) results, reporting stronger profits, slightly higher revenues, and a robust dividend.
On the top-line, the bank reported total income of $24.15 billion, representing a year-on-year increase of 1.7%.
By comparison, across the full-year, CBA's net interest margin fell 4 basis points to 2.03%, as low rates continue to erode bank margins. While not company’s specific, management, in commenting on the outlook, said 'we expect a number of headwinds to impact Group NIM in the next financial years.'
Operational expenses also increased in FY21, gaining 3.3% to come in at $11.3 billion; while the bank maintained its ‘unquestionably strong’ capital position, reporting a CET1 ratio of 13.1%.
Off the back of all that, net profits experienced solid growth, with statutory NPAT hitting $8.84 billion (+19.7% year-on-year), while cash NPAT came in at $8.65 billion (+19.8% year-on-year).
Lastly, the bank declared a fully-franked Final dividend of $2.00 per share – taking CBA's full-year dividends to $3.50 per share. While CBA maintained good dividends throughout the pandemic – this final dividend in conjunction with the $6.0 billion buy-back program – will likely play well with income-inclined investors.
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Shane Walton | Financial Writer, Australia
11 August 2021