What to Expect From CommBank's Upcoming Earnings Report

For the financial year's first quarter, CBA reported an unaudited cash net profit after tax (NPAT) of $2.5 billion, a result that reflects the group's focus on delivering good customer outcomes and consistent operational and strategic execution.

The latest quarterly performance remained consistent with the average of the second half of fiscal year 2023, showing a slight 1% increase from the first quarter. Operating income remained unchanged, with volume expansion and an additional 1.5 days during the quarter balancing out the effects of reduced net interest margins due to competition and a decrease in other operating income.

CBA's CEO, Matt Comyn, emphasized that the quarter's outcomes highlight the robustness of the group's balance sheet, which enables CBA to assist its clients during these difficult times and contribute to the strength and stability of the wider Australian economy.

From a balance sheet perspective, CBA remains 75 per cent deposit funded, with long term and short term wholesale funding representing 17 per cent and 8 per cent of total funding respectively.

The group finalized the acquisition of over $700 million in on-market shares to offset the impact of the dividend reinvestment plan for the second half of FY23 and initiated a $1 billion share buy-back program, which is subject to market conditions and other factors. CEO Matt Comyn expressed confidence in Australia's medium-term economic outlook, acknowledging resilience due to low unemployment and population growth, despite headwinds from rising interest rates affecting growth and spending.

In the first-quarter reports, CBA announced that the statutory after-tax profits stayed close to $2.5 billion, reflecting modest growth with a particular slowdown in the mortgage business. The bank reported reduced net interest margins, a 3% increase in expenses, and faced analyst scrutiny over potential 'wage price spiral' risks. Higher amortization costs were cited as contributing factors, although some losses were mitigated by productivity gains.

CBA's shrinking mortgage book "reflects a disciplined approach to pricing which ensures marginal shareholder returns remain above the cost of capital in a highly competitive market", the bank said in its limited first-quarter update.

On a broader economic scale, RBA Assistant Governor Brad Jones has issued a warning that 'the challenges we anticipate in the coming decade will be different from those we've encountered in recent years.' He highlighted the potential danger of rapid bank deposit withdrawals that could be exacerbated by social media and online banking platforms. Jones pointed to the recent Silicon Valley Bank failure as an example, where the institution experienced a loss of 30% of its deposits 'within just a few hours, with an additional 50% poised to be withdrawn the following day.'

• Commenting on the bank's stabilising home loan margins, E&P Financial analyst Azib Khan said that "it would be helping on this front that CBA has been willing to forgo market share".