One questions whether CBA would have seen significant selling pressure even if the bank had missed the lofty expectations set by the market, given its yield was probably the trump card amid low credit growth (and therefore limited EPS growth). However, it seems that despite a PE nearly 10% above its four-year average and a price to book of 2.5x, the 1H numbers look solid. The dividend at $1.64 was 2 cents above the street and keeps the yield hunters happy and re-enforces the quasi-bond play for now, especially in a backdrop where we feel rates could fall 50 basis points (bps) this year. In terms of figures, cash earnings of $3.78 billion were around 3% ahead of consensus and really driven by better margins and solid numbers in trading income. It seems logical therefore to link the better earnings with a higher dividend; a sure stamp that the bank feels despite low credit growth, it is in a healthy position.
Net interest margins at 2.10% were 3bps above consensus, although down 2bps against the corresponding period. One questions if this could have positive ramifications on other banks. ROE at 18.1% was also healthy, as was its capital position. Narrative from the CEO looks quite upbeat, suggesting it sees improving consumer and business confidence domestically, in a backdrop where the global financial markets are stabilising. While the comments were upbeat, they were hardly a revelation to investors and traders. All-in-all a solid set of numbers and while there are areas of weakness such as institutional and corporate margins, on the whole the result should be taken well and should see the stock supported ahead of going ex-dividend next week.