From The Australian:
CBA (CBA) reported a good 1H15 result with strong momentum in underlying profit, says Watermark Funds Management investment analyst Omkar Joshi.
Cash earnings were 8% higher for the half and 1% ahead of consensus expectations, the net interest margin fell 2 basis points to 2.12%, but was 1 basis point above consensus estimates, and the dividend increased by 8% to $1.98, 4 cents above expectations, with the payout ratio staying at 70%.
“Pleasingly CBA has experienced positive jaws in the period with revenue growth of 5% vs cost growth of 3%,” Mr Joshi says. “The cost to income ratio has also continued to decline, coming in at 41.9%. Revenue benefited from stronger trading income in the half, although this is largely expected. Continued pressures on lending margins due to competition have weighed on the net interest margin and offset the benefits from lower funding costs.”
The bad debt charge improved to 14 basis points of average gross loans thanks to a benign environment for assets.
But Mr Joshi notes that CBA is issuing share on-market for the dividend reinvestment plan, rather than neutralising the DRP as they have done in prior periods, and is not implementing a discount for the DRP.
“This would suggest that the Board is increasing their focus on capital,” he says.
And from FIRE King, Ian Narev:
Weak confidence is a significant economic threat…Businesses need the certainty to invest to create jobs, and households need a greater feeling of security. That requires implementation of a coherent long-term plan that clearly addresses target government debt levels and timeframes, infrastructure priorities, foreign investment, business competitiveness policies and, above all, job creation.”
Witness RBA industry liason in action.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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