CommBank’s Share Price Falls Despite Bumper Dividend

The share price of Australia’s largest bank Commonwealth Bank of Australia Ltd [ASX:CBA] has fallen today on the announcement of its half-year results.

The promise of an interim dividend resembling those paid before the global pandemic doesn’t seem to be enough for investors as CBA’s share price fell 1.26% to $86.32 per share.

ASX CBA Share Price Chart - Commonwealth Bank

Source: Tradingview

While investors should be delighted with the return of their beloved dividend, the ongoing pandemic has triggered extra provisions putting pressure on CBA’s profits.

And with the bank’s share price nearing its pre-COVID level, CBA said it needed to be prepared for the uncertainty which remains in the market.

Were investors expecting a miracle?

Statutory net profit fell 20.8% to $4.877 billion from $6.16 billion in the previous corresponding period following a one-time gain from the sale of CFS Global Asset Management.

Though, CBA said its 10.8% fall in cash profit to $3.886 billion was a better measure as it shows the bank’s underlying strength in a period of ultra-low interest rates and COVID-19 provisions.

But despite the drop in profits CBA CEO Matt Comyn said shareholders will receive a $1.50 per share dividend, fully franked.

However, today’s results were far from expectations.

Analysts has CBA pegged for cash profit of just over $4 billion and a dividend around $1.45 a share.

And there’s more positive than negative in the bank’s outlook.

CBA pointed to a resilient Australian economy as it recorded strong growth in residential housing and business lending, along with deposits.

Business lending increased by $4 billion, around three times the average system credit growth.

While home lending increased more than $13 billion, or 1.5 times the level of the system.

And as a sign of the broader economy improving, frozen home loans plummeted by more than 80%, from to just 25,000 loans worth $9 billion.

This is down from 145,000 loans worth $51 billion on 30 June.

Second-half momentum builds

While there is still plenty of uncertainty in the market, particularly among the aviation and entertainment, leisure and tourism sectors, CBA said it is not concerned about lending standards deteriorating.

The bank said it had been applying tighter serviceability assessments since April, including limiting lending in high-risk areas such as those reliant on tourism.

In fact, CBA managed to strengthen its balance sheet during the half, recording a very strong common equity tier 1 (CET1) ratio of 12.6%, up from 11.6%.

A result that enabled it to lift its dividend.

And with the Australian economy well on the road to recovery, that means other companies could follow CBA and also lift their dividends. In our special report we give you the rundown on five Aussie superstars paying top dividends and set to thrive in the post-pandemic era. Claim Your Free Report Now.


Lachlann Tierney
For The Rum Rebellion

Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

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