Mac Bank offers an alternative view of the CBA result:
CBA ‘s FY13 result came in a little better than expectations at $7.8bn vs MRE$A7.7bn (consensus – $A7.6bn). Majority of the beat was on impairment (17bp vs. our expectation of 23bp) which was driven by a better outcome in BankWest where there were some provision releases, despite 90 days past due in personal loans/credit cards increasing at a Group level. The margin was also stronger than we were expecting with margins helped by a 3bp “portfolio mix” impact. Capital generation was a little softer than expected helping to ensure that there was no special dividend this time around.
Impact
- Cash profit beat our expectations; Dividend disappointed: 2H13 cash profit came in at $A4b (FY13 cash profit $A7.8b) compared to MRE 2H13 estimate $A3.9b (FY13, $A7.7b) and consensus 2H13 $A3. 8 b (FY13, $A7.6b). 2H13 DPS came in at 200cps below MRE of 208cps due to the lack of a special dividend however above consensus of 197cps, payout ratio equates to 80% of 2H13 cash profits.
- Operating revenue growth came in at 2.6% HoH below our expectations – Margins good, Non NII a little soft: Revenue growth of 2.6% HoH came in below MRE of 3.2% HoH (7.1% YoY). Although margins improved, revenue growth disappointed because of lower than expected asset growth and lower Non NII.· Cost growth came in at 2.0% HoH broadly in-line with our expectations: Cost growth of 2.0% came in broadly in-line with MRE of 2.1% HoH (4.5%YoY).
- NIM increased 7bps from 210bps to 217bps assisted by better margins from Bankwest, NZ and a change in the loan portfolio mix into higher margin loans e.g. personal loans,
- Asset growth disappointed coming in at 1.7% HoH growth compared to MRE 2.8% HoH (4.2% YoY).
- Non NII also came in below our expectations with -2.3% growth compared to MRE of 3.2% HoH (7.8% YoY). This was driven by lower trading income, falling 5% HoH and Other income falling due to debt buybacks. The area of strength however was Funds management growing 8% HoH due to higher levels of FUA.
- Impairments beat our expectations with 17bps helped by some provision releases: BBD expenses came in at 17bps (Impairment/GLAA) beating our
MRE of 21bps and improving from 1H13 at 22bps. This was driven by lower levels of pre-acquisition provisions for Bankwest, lower expenses across both Business and Private Banking as well as Institutional Banking and Markets. There appears to have been some provision releases out of BankWest as higher risk portfolios continued to run off. The area of potential weakness going forward could be personal loans and credit cards with 90 days arrears continuing to increase. - Capital generation a little light improved due to IRRB: CBA generated 10bp (BIII basis) of CET1 HoH to be sitting at 8.2%, up from 8.1% 1H13 and broadly in-line with our forecasts. It appears that IRRB has become a drag, deducting around 10bp from capital this time around.
Some of this is sour grapes. Not issuing a special dividend was a very good idea in the developing circumstances. The stock is down $1 today.
