The Commonwealth Bank of Australia Ltd [ASX:CBA] shares are trading at $107.88 per share, up 1.24% at the time of writing
This comes after CBA posted strong FY21 results for the year ended 30 June, 2021.
The bank also announced a $6 billion share off-market buy-back.
The stock has been in a solid uptrend for over 12 months, with CBA stock up 44% over the period.
Overview of CBA FY21 performance
CBA’s FY21 performance was above expectations as the bank secured a solid position in each business segment.
Let’s look at the key financials.
Statutory net profit was up 19.7% to $8,843 million while cash net profit increased 19.8% to $8,653 million.
The overall net profit was high primarily due to improvements in economic conditions and outlook resulting in a lower loan impairment expense.
Speaking of loan impairment expenses, they decreased to $554 million.
Due to strong volume growth and improved fee income offset by a lower net interest margin, the operating income was up 1.7% to $24,145 million.
The net interest margin, on the other hand, was 2.03%, down 4bpts due to higher liquid assets.
This brings us to operating expenses, which were up 3.3% to $11,359 million. If you exclude the remediation costs this percentage stands at 2.4%.
Lastly, the final dividend of $2.00 per share took the full year dividend to a whopping $3.50 per share, fully franked.
Source: Commonwealth Bank
CBA announces $6 billion off-market shares buy-back
Due to CBA’s solid capital position, the bank said it is now in a place to return a portion of its accrued excess capital to shareholders.
CBA announced that they will conduct an off-market buy-back of up to $6 billion of CBA ordinary shares.
Source: Commonwealth Bank
CBA Chairman Catherine Livingstone gave the key reason behind this:
‘CBA’s strong capital position and our progress on executing our strategy mean that we are well placed to continue to support our customers and manage ongoing uncertainties, while also returning a portion of surplus capital to shareholders.
‘After careful consideration, your Board has determined that the Buy-Back is the most efficient and value-enhancing strategy to distribute CBA’s surplus capital and franking credits.’
The buy-back will be conducted by way of an off-market tender process which will open on Monday, 30 August.
Furthermore, the buy-back will be open to eligible shareholders who are registered holders of shares on the buy-back record date, and who have a registered address in Australia or New Zealand.
CBA share price outlook
The market reacted well to CBA’s strong FY21 performance along with the announcement of $6 billion shares buy-back.
Today’s release continues the bank’s streak of solid results over the last 12 months, with the market steadily bidding up CBA shares.
Apart from CBA’s steady performance, the bank’s resilience during the COVID uncertainties of 2020 has meant the bank is now in a position of offload some excess capital to shareholders.
This brings us to the second reason why some investors are bullish on the stock — CBA’s healthy dividend yield paired with the company’s blue-chip nature.
Now, if you’re interested in dividend stocks like CBA that have the potential to provide additional income via dividends, then I suggest checking out our free dividend report for 2021.
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