BN74 Hsbc Bk.26

    RNS Number : 3152B
  Commonwealth Bank of Australia
  14 August 2008
   
     

    COMMONWEALTH BANK OF AUSTRALIA DELIVERS SOLID RESULT IN CHALLENGING ENVIRONMENT

    Shareholders rewarded with record $1.53 final dividend

    Highlights of 2008 Result


    *     Net profit after tax on statutory basis increased 7 per cent to $4,791 million and on cash basis, 5 per cent to $4,733 million;
    *     All of the Group's business segments performed well;
    *     Significant progress was made on all five key strategic priorities;
    *     Strong capital with Tier1 at 8.17 per  cent - well above internal target range;
    *     Group well provisioned for uncertain times; 
    *     Record final dividend of $1.53 per share, fully franked taking total dividends for the year to $2.66, an increase of 4 per cent;
and
    *     Outlook for 2009 financial year cautious with slowing domestic economy and volatile capital markets likely to continue to impact
performance.

                               2008   2008 v
                                      2007 
 Statutory NPAT ($m)           4,791  7%
 Cash NPAT ($m)                4,733  5%
 Cash EPS (cents)              356.9  3%
 Final Dividend ($ per share)  1.53   3%
 Return on Equity - Cash       20.4%  (130)bpts





    Sydney, 13 August 2008.  The Commonwealth Bank of Australia delivered a statutory net profit after tax (NPAT) for the year ended 30 June
2008 of $4,791 million, up 7 per cent on the prior year.  Cash NPAT for the year was $4,733 million - an increase of 5 per cent.  

    Cash earnings per share (EPS) increased to 356.9 cents, up 3 per cent. The Board declared a fully franked final dividend of $1.53 per
share - an increase of 3 per cent on last year's final dividend.

    This solid result was achieved in a difficult environment with all of the Group's businesses performing well. Volatility in global
markets and a slowing in economic activity placed upward pressure on funding costs and caused an increase in loan impairment expenses. 
Despite these headwinds, the Group's capital position remains strong with the Tier 1 ratio of 8.17 percent - well above the Group's internal
target levels.  Liquidity and provisioning both increased during the year, placing the Group in a strong position entering a period of
ongoing uncertainty and volatility.

    Chief Executive Officer, Ralph Norris said:  "I am pleased with the financial performance of the Group in the 2008 financial year - it
has been a solid performance in what has been a challenging year for the global banking industry. We have also continued to make good
progress in delivering on our five strategic priorities which are key components in achieving our goal of becoming Australia's finest
financial services organisation through excelling in customer service.

    "It is particularly pleasing to see that at a time when many global financial institutions are under significant pressure we are
continuing to deliver better outcomes for customers which has been recognised by strong volume growth, increased market share and higher
customer service scores.  We have also been able to invest in the future with initiatives such as Core Banking Modernisation which will
drive significant benefits for our customers and improvements in productivity. In the same vein, the granting of advanced accreditation
status under the Basel II framework by APRA is an important acknowledgement of the Group's increased sophistication in risk measurement and
management.  

    "While not up to the profit growth levels achieved in previous years, I am pleased to say that this result recognises the balance we
have achieved between the needs of our customers and our shareholders."

    
 

    Business Performance

    Retail Banking Services maintained its solid performance over the year with cash net profit after tax increasing by 8 per cent. This
result was driven by strong volume growth in key product lines (particularly home loans and retail deposits), sound credit quality, tight
expense management and strategic business investment to promote profitable growth and increased efficiency. These factors helped to offset
some of the negative impact of higher funding costs due to the ongoing volatility in global credit markets. Continuing focus on customer
needs again delivered improvements in key customer satisfaction measures.

    Premium Business Services delivered double digit income growth of 16 per cent over the prior year.  This result was underpinned by a
good improvement in customer service scores, strong balance growth and strong gains in deposit market share. Solid underlying performance
helped the business to offset the negative impacts of higher funding costs and a slowdown in credit growth in the second half of the year.
Increased strategic investment spend (including the costs of integrating the IWL business and further expansion in the front line sales
force) together with higher loan impairment provisioning, resulted in a 2 per cent increase in cash net profit after tax. 

    Underlying profit after tax for the Wealth Management business increased by 38 per cent on the prior year - to $756 million. This
result, which included a $108 million pre-tax gain from the sale of assets, was driven largely by good revenue growth in the first half of
the year, with second half earnings impacted by deterioration in trading conditions and weakened investment markets. Funds under
Administration (FUA) increased 10 per cent to $185 billion, with positive net flows offsetting the falls in the value of Australian and
global equity portfolios. 

    Net funds flows for the year of $28.6 billion were driven by:

    Strong flows into the FirstChoice platform, particularly in the first half of the year; and
    Solid institutional flows generated by the CFS Global Asset Management business with strong international flows and short term cash
mandates from institutional investors.

    CommInsure Inforce Premiums increased by 22 per cent on the prior year to $1,250 million reflecting strong sales volumes and continued
progress of the Wealth Management cross-sell initiative.

    International Financial Services cash net profit after tax for the year was $589 million - an increase of 23 per cent. After removing
the impact of realised gains and losses associated with the hedge of the New Zealand operations and other foreign exchange movements the
underlying growth was 17 per cent. This strong profit performance was attributable to sustained growth in the New Zealand businesses,
complemented by the increasing contribution from Asian business, particularly the China banking investments.


    ASB Bank cash net profit after tax for the year was $428 million. Excluding the impact of realised gains on the hedge of New Zealand
operations, profit increased 11 per cent.  In a slowing economy, this was a good result where aggressive competition continued to place
downward pressure on margins. 

    Outlook

    The headwinds which the Australian banking industry experienced in the 2008 financial year are expected to dominate the outlook for
global banking for some time. Uncertainty and volatility in global credit markets will continue to place upward pressure on funding costs. 


    Commenting on the outlook Chief Executive Officer, Ralph Norris said:  "While the domestic economy remains reasonably resilient, credit
growth is expected to moderate as this slowing in the economy impacts our customers. While these broad trends are clearly evident, the
duration and extent of the slowdown is more difficult to predict. There are clearly a number of negatives at work in the Australian economy
but it is important that we recognise there are potentially a number of positive influences. These include the huge income boost from rising
commodity prices; respectable growth in the economies of our major Asian trading partners; tax cuts; positive demographic trends; and robust
business and infrastructure spending. The balance of these opposing forces favours continued modest economic growth with credit growth not
too far below the average of the past decade

    "We are cautious going into the new financial year and the Group will continue with its conservative stance until signs of improvements
in economic conditions are evident. The Group's capital position is strong with capital levels well above target ranges.  A prudent approach
has been taken to the management of credit and market risk and we are well provisioned given the current economic outlook. The Group is well
funded, very liquid and in a strong position relative to global and domestic peers. 

    "While it is clearly a time to be cautious, the current environment presents well managed banks, like the Commonwealth Bank of
Australia, with opportunities to grow even stronger.  Our robust financial position has enabled us to maintain the momentum behind our five
strategic priorities and we remain committed to further strengthening our core businesses should attractive, "on strategy", investment
opportunities arise."  

    ENDS

    Media contact:
    Bryan Fitzgerald
General Manager, Media 
Ph: (02) 9378 2663
Mobile: 0414 789 649 



 Highlights                      Full Year ended  Full Year ended  Jun 08 vs  Half Year ended  Half Year ended
                                     Jun 08           Jun 07        Jun 07        Jun 08           Dec 07
                                       $M               $M             %            $M               $M
 Retail Banking Services                   1,904            1,766          8              955              949
 Premium Business Services                 1,480            1,445          2              756              724
 Wealth Management                           740              627         18              351              389
 International Financial                     589              478         23              293              296
 Services
 Other                                        20              211       (91)              (7)               27
 Net profit after tax (cash                4,733            4,527          5            2,348            2,385
 basis)
 Net profit after tax                      4,791            4,470          7            2,420            2,371
 (statutory basis)
 Key Shareholder Ratios
 Earnings per share (cents)                356.9            347.1          3            176.2            180.7
 (cash basis - basic)
 Return on equity (%) (cash                 20.4             21.7  (130)bpts             19.9             20.8
 basis)
 Dividend per share (cents)                  266              256          4              153              113
 (fully franked)
 Dividend payout ratio (%)                  75.0             74.2     80bpts             87.3             63.0
 (cash basis)
 Other Performance Indicators
 Total lending assets (net of            369,597          319,786         16          369,597          351,208
 securitisation) ($M)
 Funds under administration -            191,305          177,071          8          191,305          207,702
 spot ($M)
 Net interest margin (%)                    2.02             2.08    (6)bpts             1.98             2.06
 Operating expense to total                 48.9             49.3        (1)             49.3             48.4
 operating income (%)

    Definitions:
    Net Profit after Income Tax ("Cash Basis") - Represents profit after tax and minority interests before gains on Visa Initial Public
Offering, investment and restructuring, defined benefit superannuation plan income/expense, treasury shares valuation adjustment and
unrealised gains and losses related to hedging and AIFRS volatility

    Net Profit after Income Tax ("Statutory Basis") - Represents profit after tax, gains on Visa Initial Public Offering, investment and
restructuring, minority interests, defined benefit superannuation plan income/expense, treasury shares valuation adjustment and unrealised
gains and losses related to hedging and AIFRS volatility. This is equivalent to the statutory item "Net Profit attributable to Equity
holders of the Bank".





This information is provided by RNS
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