Insights

CBA (ASX:CBA) share price on watch after FY21 results & $6bn buyback

Australia’s largest bank has just announced its results…
The post CBA (ASX:CBA) share price on watch after FY21 results & $6bn buyback appeared first on The Motley Fool Australia. –

All eyes will be on the Commonwealth Bank of Australia (ASX: CBA) share price on Wednesday.

This follows the release of the banking giant’s highly anticipated full year results this morning.

CBA share price on watch after announcing $6 billion share buyback

Net profit after tax up 19.7% year on year to $8,843 million
Cash earnings up 19.8% to $8,653 million (versus analyst consensus estimate of $8,464 million)
Loan impairment expense and provisions down 78% to $554 million
Net interest margin down 4 basis points to 2.03%
CET1 ratio up 150 basis points to 13.1%
Fully franked final dividend of $2.00 per share declared. Full year dividend up 17% to $3.50 per share
$6 billion off-market share buy-back, which is expected to reduce its share count by ~3.5%.

What happened in FY 2021 for CBA?

The CBA share price could be on the rise today after Australia’s largest bank delivered a result ahead of the market’s expectations.

For the 12 months ended 30 June, the bank reported cash earnings of $8,653 million. This was 19.8% higher year on year and driven by an improvement in economic conditions and its outlook. This led to lower loan impairment expense and a strong contribution from volume growth in all core markets. The analyst consensus estimate was for cash earnings of $8,464 million in FY 2021.

This strong form was driven by growth across business lending, home lending, and household deposits. Business lending grew over 3x system, home lending was 1.2x system, and household deposits grew 1.2x system.

Holding back its profit growth slightly was a 3.3% increase in operating expenses to $11,359 million. This was driven by its investment in the franchise, higher volumes, and remediation costs. Excluding the latter, operating expenses would have been up 2.4% year on year.

Management also advised that its net interest margin was 2.03%, down by 4 basis points. This was due to higher liquid assets, with the impact of the low-rate environment largely offset by management actions, lower wholesale funding costs, and favourable funding mix.

One positive that could boost the CBA share price today was its loan impairment expense, which fell 78%. The bank has, however, maintained a strong provision coverage ratio of 1.63%. This reflects the economic uncertainty from the continuing impacts of COVID-19.

What did management say?

Commonwealth Bank’s Chief Executive Officer, Matt Comyn, was pleased with the bank’s greatly improved performance during FY 2021.

He said: “The continuing strength of our businesses, combined with a focus on customer needs, digital engagement and consistent operational excellence has contributed to a strong financial result this year.”

“A highlight of the result is our continued balance sheet strength and very strong capital position that has allowed us to support our customers while delivering strong and sustainable returns to shareholders. As a result, a final dividend of $2.00 per share, fully franked, has been determined, with shareholders receiving a full year franked dividend of $3.50.”

“Strategic divestments have generated $6.2 billion in excess capital since 2018. Today we have announced an off-market buy-back of up to $6 billion of CBA shares as the most efficient and appropriate way to commence the return of surplus capital, as shareholders will benefit from a lower share count that will support return on equity and dividends per share,” he added.

What’s next for CBA?

Mr Comyn acknowledges that the pandemic continues to have an impact on the Australian economy. Nevertheless, he believes the bank is prepared for a range of scenarios.

He explained: “As the past 18 months have shown, Australia has a very strong, stable and secure financial system. This includes well-capitalised and strong banks like the Commonwealth Bank, which together with the support of the federal and state governments, regulators and the broader industry, have helped the country through the worst pandemic in living memory.”

“We are prepared for a range of different economic scenarios and are well placed to support our customers. We’re committed to new and ongoing support measures for those most impacted by COVID-19 and other events. We will continue to work closely with our retail and business customers to understand their needs.”

The Chief Executive revealed that this uncertainty won’t stop the bank from investing to strengthen its offering and leadership position.

Mr Comyn concluded: “Looking ahead, we anticipate ongoing economic impacts and earnings pressure from lower interest rates. We will continue to invest in the business to reinforce our product offering to our retail and business customers and extend our digital leadership. Through disciplined execution and our people’s care and commitment, we will continue to deliver for our customers, community and our shareholders as we build tomorrow’s bank today.”

CBA share price outperforms in 2021

Prior to today, the CBA share price was up 27% since the start of the year. This is more than double the ASX 200’s return over the period. Shareholders will no doubt be hoping today’s result and buyback announcement will be enough to extend the CBA share price outperformance on Wednesday.

The post CBA (ASX:CBA) share price on watch after FY21 results & $6bn buyback appeared first on The Motley Fool Australia.

Should you invest $1,000 in CBA right now?

Before you consider CBA, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and CBA wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of May 24th 2021

More reading

5 things to watch on the ASX 200 on Wednesday

The ASX reporting wrap-up: Challenger, Megaport, James Hardie

Is now a good time to buy Bendigo and Adelaide Bank (ASX:BEN) shares?
How did the CBA (ASX:CBA) share price respond last earnings season?
Why the CBA (ASX:CBA) share price will be on watch today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!