First Impression: Commonwealth Bank (CBA) Interim Result

Good outcome, beat consensus – driven by 4% higher NIE (good volumes) and 7% higher other income (commissions, fees and trading and excluding Visa sale gain), although BDD charge was much lower (arrears low). Ticks all the right boxes, including controlled growth (loans +6%, deposits +8%), decent dividend, good cost control including positive 2% “Jaws”, slight drop in NIM (but with upside in 2H17 due to recent rate rises), improved ROE and sufficient prudential (capital, funding, liquidity and provisions). Shows the strength of the franchise and ability to push levers across the bank, especially costs | ROE 16.0% (BP 16.1%) vs. 15.7% in 2H16, 17.2% in 1H16 | Group NIM 2.11% (rebased, BP 2.12%) vs. 2.14% in 2H16, 2.15% in 1H16 | Group BDD charge $599m/17bp (BP $697m/19bp, consensus $690m/19bp) vs. $692m/20bp in 2H16, $564m/17bp in 1H16; and CET1 capital ratio 9.9% (BP 9.8%, consensus 9.7%). | Positive “Jaws” of 2% (BP ~1%) comprising 3% income growth and 1% cost growth. | Outlook: “For CBA: Focus on the long term; Supporting Australia through strength, investment and innovation.”