It’s been the bubble that just won’t die. The CBA, ponderous utility with a dying business model, was misrepresented as some kind of new-age unicorn. This silliness handed it the most expensive multiple in world banking, and 50% above a peer group from which it is indistinguishable:
The problem is, with such a growth multiple, you’re supposed to grow:
There are 985 words left in this subscriber-only article.
Get your first month for $1
Australia’s biggest bank said its net interest margin was “considerably lower” over the quarter as it battled headwinds such as low yielding cash and bonds, sharp home loan pricing and a higher proportion of low fixed rate loans on its books.
The quarterly cash profit of $2.2 billion was 20 per cent higher than the $1.8 billion quarterly profit reported during the COVID-stricken first quarter in 2020 but 9 per cent lower than the quarterly average of the preceding half.
The main culprit was the crimping of CBA’s net interest margin – the difference between what it pays its depositors and what it can charge its customers – which fell from 2.04 per cent to a level that banking analysts believe is now below 2 per cent.
Nobody should be shocked by this. It’s exactly what whacked Westapac a few weeks ago. It is precisely what happens when your property ponzi-scheme runs into the zero bound and funding rates can’t go lower even as lending rates do.
And consider the public support just offered the banks! Zero cost money from the RBA. Property stimulants everywhere. Guarantees to everything. Any growth is still buggered.
This is structural at a zero cash rate and below. The European banks that have been there for years and haven’t grown for a decade:
That’s the future of the CBA, not some glorious disruptor of itself.