The Commonwealth Bank of Australia (ASX: CBA) share price is under the spotlight after the ASX bank share reported its HY25 result.
CBA HY25 result highlights
Here are some of the main numbers from the bank’s half-year result compared to the FY24 first-half result:
- Underlying net interest margin (NIM) up 2 basis points (0.02%) to 2.08%
- Operating expenses grew 6% year on year to $6.37 billion
- Pre-provision profit up 1% year on year to $7.7 billion
- Loan impairment expense of $320 million, down 23%
- Cash profit up 2% year on year to $5.1 billion
- Statutory net profit up 6% year on year to $5.1 billion
- Interim dividend up 5% to $2.25 per share
The NIM tells investors how much profit a bank is making on its lending, including the interest rate on its loans and the cost to fund those loans (such as savings accounts).
The NIM was “broadly stable” with the effects of competitive pressures on deposits and lending pricing offset by “higher earnings on capital hedges and the replicating portfolio”. I think the NIM is key for the CBA share price in the coming years because it’s an indicator of competitive pressures.
Pleasingly, the bank said the loan impairment expense decreased because of its “disciplined credit origination and underwriting practices, rising house prices and lower expected losses within consumer finance”.
Consumer arrears remained “broadly stable, supported by tax refunds and changes to income tax rates and thresholds”.
Overall growth was helped by 4.1% lending volume growth, with 3% growth of home loans and 8% growth of business loans. This helped operating income grow 3.3% to $14.1 billion. The business continued its profit growth from the first quarter of FY25.
Expenses grew faster than revenue mainly due to staff expenses because of inflation and two additional working days, as well as investment in its technology infrastructure, including enhancing its AI capabilities and data infrastructure. Investment spend increased 11% to $1.1 billion.
Commonwealth Bank dividend
The ASX bank share’s HY25 interim dividend of $2.25 was 5% higher year on year. It represents 73% of cash net profit after tax, or around 75% if normalised for long-run loan loss rates.
Outlook for the CBA share price
CBA noted the Australian economy has slowed considerably, with cost of living pressures “continuing to weigh on customer demand and younger customers in particular making real sacrifices”. Private sector growth is “weak” and immigration is “starting to slow”.
However, the bank also pointed out underlying inflation is now moderating towards the target range and it expects Australia to start cutting interest rates in 2025 which should “provide some relief to many households and improve business confidence”.
Considering the challenging economic environment, CBA’s profit growth was commendable. However, 2% year on year cash profit growth isn’t much to justify the big price rise since the start of 2024.
CBA is a great bank, and I’d be happy if I were a long-term shareholder, but I wouldn’t choose to invest today. There are other ASX dividend shares that appeal more.
