The Commonwealth Bank of Australia (ASX: CBA) share price has opened today’s trade up 1.77% at $73.68 per share, following the release of the bank’s first quarter FY21 trading update.
How did Commonwealth Bank perform in the first quarter?
For the 3 months ended 30 September, Commonwealth Bank posted an unaudited net profit after tax of $1.8 billion. This represented a fall of 16% from the prior corresponding period.
Volume growth rose across the business for the quarter versus the June period. Home lending increased by $5.6 billion, household deposits jumped to $15.8 billion and business lending lifted to $1.4 billion. This helped offset lower margins and interest rates experienced by the business through COVID-19.
Non-interest income grew 1%, driven by higher global markets trading income and insurance income from lower general insurance claims.
Operating expenses were 2% higher, excluding customer remediation provisions, to $5.2 billion. The outcome was attributed to increased investment spend and staff costs as a result of the pandemic.
The bank remains in a strong capital position. Net stable funding ratio (NSFR) stands at 125% and liquidity coverage ratio (LCR) at 146%, well above regulatory requirements.
Liquid assets totalled over $183 billion at the end of the quarter.
What did management say?
Commonwealth Bank CEO, Mr Matt Comyn, commented on the first-quarter result:
Disciplined execution of our strategy and strong operational performance continued to deliver good outcomes for our stakeholders during the September quarter.
This was highlighted in the quarter by the Bank achieving the number 1 ranking for Net Promoter Scores (NPS) in each of our core businesses (consumer, business and institutional) for the first time, while retaining our leading NPS ranking in digital banking.
He added:
Balance sheet settings remained strong, with loan loss provisioning coverage further strengthened and a CET1 capital ratio of 11.8%, up 20bpts in the quarter notwithstanding the payment of $1.7bn in 2H20 final dividends to our shareholders.
We continue to contact customers with a range of options as they approach the end of temporary loan repayment deferral periods.
About the Commonwealth Bank share price
As expected, the banking industry was hard hit by COVID-19, but has been slowly recovering. The Commonwealth Bank share price fell to as low as $53.44 during the first lockdown, prompting investor concerns. However, the bank has rallied the past few months, sitting just 10% below from where it was at the start of the year.
As Australia’s largest bank, CommBank has a price-to-earnings (P/E) ratio of 13.8.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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