Commonwealth Bank of Australia has reported an increase in cash profit to $9.8 billion for the 2017 financial year, while its Perth-based subsidiary, Bankwest, delivered a fall in profit as a result of increased home loan impairments.
Commonwealth Bank of Australia has reported an increase in cash profit to $9.8 billion for the 2017 financial year, while its Perth-based subsidiary, Bankwest, delivered a fall in profit as a result of increased home loan impairments.
Bankwest made a cash profit after tax of $702 million for the 12 months to June, down 10 per cent on the previous year, with an operating performance of $1.09 billion, down 1 per cent.
In a statement, managing director Rowan Munchenberg said the results reflected contrasting economic conditions on the east and west coasts.
“Given the challenging circumstances many of our customers are experiencing in Western Australia, this is a solid and resilient financial result,” he said.
“Due to these economic challenges, we’ve taken a more conservative approach to managing our business over the last financial year, which is reflected in our provisioning for loan impairment costs.”
Bankwest’s loan impairment expense increased to $89 million, on the back of increased home loan impairments – mostly in WA and regional areas – and lower run-off of its non-core book.
Bankwest’s parent company, CBA, also released its full-year results today, detailing a 5 per cent increase in cash profit to $9.8 billion along with plans to sell off its CommInsure life insurance business.
CBA said was is in talks with potential buyers of its Australia and New Zealand life insurance businesses.
"Commonwealth Bank's performance this year has again contributed to the financial wellbeing of our customers, shareholders, our people and the Australian economy," chief executive Ian Narev said.
"This is the result of our consistent focus on customer satisfaction, innovation and financial strength."
CBA declared a fully franked final dividend of $2.30 per share, up 8 cents on last year and taking its 12-month payout to $4.29.
The bank introduced a discounted dividend reinvestment program, which should help it build capital reserves to help meet the Australian Prudential Regulatory Authority's definition of "unquestionably strong".
Profit from its retail banking unit jumped nine per cent to $4.964 billion, while business banking was close behind with an eight per cent rise to $1.639 billion.
Mortgage repricing in response to regulatory intervention in the home loan market contributed to a second-half cash profit of $4.97 billion.
But higher funding costs and competition for mortgage customers more than offset those gains, pushing net interest margin down 0.03 percentage points to 2.11 per cent.
Statutory profit for the 12 months to June 30 rose 7.6 per cent to $9.93 billion.
Commonwealth Bank said third parties were interested in acquiring NZ insurance business Sovereign and local unit CommInsure, which had been beset by controversy.
The corporate watchdog in March cleared CommInsure of allegations its managers pressured doctors to alter medical opinions so it could deny claims but said some practices were "out of step with community expectations".
"CommInsure and Sovereign are strong businesses with scale, expertise, competitive products and access to attractive distribution channels," CBA said in a statement on Wednesday.
"While the discussions may lead to the divestment of those businesses, we will also consider a full range of alternatives, including retaining the businesses, reinsurance arrangements or other strategic options."
Big four rivals ANZ and National Australia Bank have already cut their exposure to wealth management.
Remuneration details for Mr Narev and his executive team will be included in next week's annual report.
