Commonwealth Bank of Australia (ASX: CBA) has reported a strong financial performance for the first half of FY25, despite ongoing economic headwinds. The bank’s results highlight its disciplined approach to operational execution, a robust balance sheet, and continued investment in technology and customer support initiatives.
Financial Performance
CBA delivered a statutory net profit after tax (NPAT) of $5.14 billion, up 6% on the prior corresponding period (1H24), while cash NPAT came in at $5.13 billion, marking a 2% increase. The results were supported by volume growth across core businesses and a lower loan impairment expense, although higher operating costs—driven by inflation and strategic investments—acted as a partial offset.
Pre-provision profit rose 1% to $7.73 billion, reflecting solid operational performance across CBA’s various business lines. The bank maintained a stable net interest margin (NIM) at 2.08%, excluding the impact of lower liquidity and pooled facilities.
Capital Management and Shareholder Returns
CBA declared an interim dividend of $2.25 per share, fully franked, representing a 5% increase on 1H24. This equates to a payout ratio of 73% of cash NPAT (or approximately 75% when normalizing for long-run loss rates). The bank’s Dividend Reinvestment Plan (DRP) remains in place, with share purchases expected to be satisfied on-market.
CBA also continued its capital return program, completing $300 million of its previously announced $1 billion on-market share buyback. The remaining $700 million is expected to reduce the bank’s Common Equity Tier 1 (CET1) capital ratio by approximately 15 basis points. Even with these distributions, CBA’s CET1 capital ratio stood at a strong 12.2%, well above the regulatory minimum of 10.25%.
Return on equity (ROE) increased to 13.7%, driven by higher profits and capital management initiatives. Since FY22, CBA’s ongoing buybacks have contributed approximately 77 cents per share in additional dividends.
Cost and Investment Strategy
Operating expenses rose 6% year-on-year to $6.37 billion, reflecting higher staff costs due to inflation and two additional working days. CBA also ramped up investment spending to $1.1 billion—an 11% increase on 1H24—to accelerate technology infrastructure upgrades, enhance Gen AI capabilities, and bolster data security. While these costs weighed on margins, productivity initiatives helped partially offset the impact.
Credit Quality and Funding Position
CBA reported a loan impairment expense of $320 million, translating to a loan loss rate of 7 basis points. This represents a 23% decrease compared to 1H24, supported by disciplined credit underwriting, rising house prices, and lower expected losses in consumer finance. Home loan customers remain largely ahead of scheduled repayments, and provision coverage remains strong at 1.62% of credit risk-weighted assets, providing a $2.4 billion buffer against expected losses under CBA’s central economic scenario.
On the funding side, the bank maintained a stable deposit funding ratio of 77%, with customer deposits continuing to be the most reliable funding source. Long-term wholesale funding accounted for 68% of total wholesale funding, with an average maturity of 5.1 years, ensuring a conservatively positioned funding base. Liquidity and funding ratios remained well above regulatory requirements, with a net stable funding ratio (NSFR) of 116% and a liquidity coverage ratio (LCR) of 127%.
Economic Outlook
CBA acknowledged the challenging macroeconomic environment, with slowing economic growth, persistent cost-of-living pressures, and weak private sector expansion. Younger consumers, in particular, are feeling the strain, while immigration levels are beginning to moderate. Geopolitical uncertainties also continue to weigh on the broader outlook.
However, the bank sees reasons for optimism. Underlying inflation is moderating toward target levels, and CBA expects Australia to follow global trends with an easing cycle beginning in 2025. A resilient labor market and ongoing public sector infrastructure investment should also provide support to the domestic economy.
Looking ahead, CBA remains focused on supporting customers, investing in its franchise, and navigating economic cycles with a disciplined and strategic approach. With a strong balance sheet and a commitment to digital innovation, the bank is well-positioned to continue delivering sustainable returns for shareholders.
