This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla Inc (NASDAQ: TSLA) after markets closed Tuesday announced a planned five-for-one stock split, a move that could make the stock more attractive to price-sensitive investors.

Shares of Tesla have had an incredible run in 2020, up 229% year to date. The stock closed Tuesday at $1,374.39 apiece, well above its $211 52-week low. Although stock investing 101 teaches to ignore share price and instead rely on valuation metrics, some investors anchor in on share prices, tending to shy away from high numbers.

A stock split reduces the price of a stock without changing the value of the investment. In Tesla’s case, the company intends for holders as of August 21 to receive four additional shares for every one they own. At Tuesday’s closing price, each of those five shares (four additional + the original share held) would be worth about $274.88, for total consideration matching the current share price.

While the value of an investment in Tesla shouldn’t change due to the split, the lower price could attract new investors to the stock.

Shares of Tesla traded up 7% in after-hours trading, adding more than $15 billion to the company’s market capitalisation despite no change to the automaker’s fundamentals. For context, the market cap of fellow automaker Fiat Chrysler Automobiles (NYSE: FCAU) is currently $23 billion.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Transurban Group (ASX: TCL) share price will be on close watch this morning following the release of the company’s full year financial results.

Full year earnings decline driven by fall in traffic volumes

As had been widely anticipated by the market, Transurban’s full year financial performance was significantly impacted by the coronavirus pandemic.

Transurban saw its proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items fall by 6.4% to $1,888 million for the full year. Overall, Transurban recorded a statutory loss amounting to $153 million. Proportional toll revenue saw a more modest fall of 3.4% to $2,492 million during FY 2020.

The fall in revenue and earnings for Transurban was driven by a decline in average daily traffic (ADT) throughout the 12 month period. ADT fell 8.6% across all its operations.

In Sydney, proportional toll revenue increased by 2.8%, while it fell by 8.1% in Melbourne. Proportional toll revenue fell sharply by 13.9% in North America, due to harsher lockdown restrictions over there.

The second half of the financial year had seen operating conditions deteriorate, both locally and overseas for the toll road operator. However, Transurban did point out that a gradual improvement was recently evident across all its locations apart from Melbourne, due to tougher recent restrictions.

Long-term expansion strategy remains on track

Transurban remains confident about its long-term future expansion strategy. The toll road operator recently completed three major toll road projects. These include the New M4 tunnels, Logan Enhancement Project and 395 Express Lanes. A further eight major projects are now in the pipeline.

Chief Executive Officer, Scott Charlton, commented:

“Long-term and proactive management of our balance sheet and organisational capability means we are able to pursue the significant pipeline of opportunities in our existing markets. As always, this will be balanced alongside maintaining our strong investment-grade credit metrics and distributions for security holders.”

Final dividend announced

Transurban announced a final dividend distribution of 16 cents per share to be paid on 14 August 2020 for H2 FY 2020. This takes Transurban’s full year dividend distribution for FY 2020 to 47 cents per share, with 2 cents of this to be fully franked.

How has the Transurban share price performed recently?

The Transurban share price took a significant hit in the early phase of the coronavirus pandemic from February to mid-March. It fell from $16.33 on 11 February to $10.50 on 20 March. That was a decline of 36%. Since that time, it has recovered just over half of those losses and is currently trading at $13.93.

More reading

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• Is the Transurban share price a buy right now?
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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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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Xero Limited (ASX: XRO) as a top ASX growth share is hardly a secret. In fact, the Xero share price has jumped 13.3% higher this year and is up 534.9% in the last 5 years.

Some investors might be wary of Aussie tech shares in the current climate. However, here’s why I think Xero could be a ‘futureproof’ buy.

What does Xero do?

Xero is a New Zealand-based tech company that specialises in accounting software.

It is part of the ‘WAAAX’ group of ASX tech shares alongside the likes of Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU).

Xero has steadily grown its business with a number of high-profile small and medium enterprise (SME) clients.

That has catapulted the Xero share price higher and made it one of the top ASX growth shares in recent years.

Why I think the Xero share price could be futureproof

It’s worth noting that I’m not alone in considering Xero a long-term buy.

The Kiwi tech group’s shares currently trade at a price-to-earnings (P/E) ratio of 4,194.5. That means there is a lot of expectation for future growth.

But I think Xero can live up to that expectation. In the short-term, I think the simplicity of Xero’s platform could be a good thing for client retention and acquisition.

The coronavirus pandemic has created headaches for many businesses accounting for the JobKeeper stimulus and other measures.

I think we’ll see demand for Xero products remain high despite some looming headwinds.

With the short-term outlook appearing OK, I’d turn my attention to the future.

I think the Xero share price reflects the fact that there is still huge growth potential.

This could be in the form of an expanded product offering for larger clients or in untapped offshore markets.

The obvious risk is from the competition side of the equation. However, Xero has successfully grown in the past decade and a half despite competition from the KKR-owned MYOB.

Is Xero in the buy zone?

The lofty valuation is a potential red flag for some investors. I think it’s quite clear that Xero is not one for those hunting value.

However, I think Xero has a good product and a strong growth trajectory.

I have no doubt there will be speed bumps along the way. But the strong growth profile protects against long-term value declines.

I’d expect the Kiwi group to continue to innovate in the space and capture additional market share.

Add to that the fact that there’s a large addressable market on offer if Xero can execute its strategy and it seems like a reasonable growth story.

That to me says that the Xero share price could be a futureproof buy as part of a wider diversified portfolio.

More reading

• Have $2,000 to invest? Try these 2 ASX growth shares today
• Why I would buy and hold Afterpay and Xero shares
• Why the Afterpay share price is yet to be impacted by Tencent’s US troubles
• These ASX tech shares could be strong buys right now
• 3 ASX tech shares to buy in FY 2021

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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A number of Kiwi companies are providing an update this morning as New Zealand tightens its coronavirus restrictions. The SKYCITY Entertainment Group Limited (ASX: SKC) share price is down 5.16% at the time of writing  after the gaming group provided an update on the operational impacts.

What did SkyCity announce?

SkyCity advised that its Auckland casino and entertainment facilities would be closed.

This comes as the New Zealand Government reinstates COVID-19 restrictions after four new cases popped up in Auckland. The government said late on Tuesday night that the new cases were likely to be from community transmission.

SkyCity’s Auckland hotels will remain open to accommodate existing guests currently staying in-house, pending further advice.

The SkyCity share price could be one to watch in early trade as investors react to the news.

Notably, SkyCity’s Adelaide Casino is unaffected by the latest targeted restrictions and remains open.

What does this mean for the SkyCity share price?

Further lockdowns can’t be good news for the SkyCity share price. While New Zealand managed 102 days without any known COVID-19 cases, that streak has now come to an end.

Shares in the Kiwi entertainment group are down 35.7% in 2020 largely thanks to the March bear market.

The big question for investors is just how long the latest restrictions will last. If New Zealand can quickly contain the outbreak, the earnings impact of the Auckland casino shutdown may be minimal.

What about other ASX entertainment shares?

It’s worth keeping an eye on some of SkyCity’s ASX peers this morning.

I think the Star Entertainment Group Ltd (ASX: SGR) share price could be one to watch.

Star Entertainment shares have fallen 41.0% this year as investors fear a long period of reduced foot traffic. That’s partly due to coronavirus capacity restrictions and also immigration restrictions preventing VIP visits.

Both the Star and SkyCity share prices are significantly underperforming the S&P/ASX 200 Index (ASX: XJO) which is down 8.2% in 2020.

More reading

• 5 things to watch on the ASX 200 on Wednesday
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. 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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Shares in Aussie media group News Corporation (ASX: NWS) are worth watching today after the company filed its latest regulatory filing. The News Corp share price could be on the move after the company announced a 919% fall in net income to a total US$1,269 million loss.

What did News Corp report?

The huge drop in profit is largely due to impairment charges against the company’s Foxtel and North America Marketing segments.

It’s also worth noting that last week’s fourth-quarter earnings announcement provided a fair bit of detail to investors.

The media group reported that loss on weaker FY20 revenues which fell 11% to US$9,008 million. News Corp did not announce a final dividend, leaving the total dividend for Class B Common Stock at US 20 cents per share from the interim payment.

Net tangible asset backing per share totalled US$4.37 in FY20 which is down 6.6% from last year.

News Corp’s operations are divided into six reporting segments comprising Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media and Other.

News Media remains the company’s largest contributor by revenue, contributing 31.1% of total earnings. Subscription Video Services, including Kayo, comprised 20.9% while Book Publishing contributed a further 18.5%.

The company’s Digital Real Estate Services line consists of News Corp’s 61.6% interest in REA Group Limited (ASX: REA). Segment revenue edged 8% lower while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 9% to $345 million.

I think the News Corp share price is one to watch this morning as investors take in the latest numbers.

Free cash flow for the group fell 15.5% to US$180 million in FY20 with higher capital expenditure and lower operating cash flow weighing on the earnings figure.

Net assets fell 9.2% to US$14,261 million in FY20 as goodwill and receivables fell from FY19 levels.

COVID-19 impact

The News Corp share price has been hit hard by the coronavirus pandemic with management providing an update on COVID-19 impacts. Management noted economic volatility, uncertainty and disruption as key factors affecting its various business lines.

Some of the other COVID-19 risks highlighted by management included:

• Lower revenue and profitability as advertising revenues continue to fall
• Supply chain disruptions, particularly in printing and manufacturing
• Company efforts to manage COVID-19 impacts may not be successful, resulting in additional costs
• Adverse workforce impacts arising from the pandemic

Foolish takeaway

The News Corp share price is up 13.3% since the company’s fourth-quarter earnings release last Friday.

I think it’s worth watching the Aussie media share to see how investors react to this morning’s update.

More reading

• Why I would buy Goodman Group and these blue chip ASX shares
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• ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. 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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The SEEK Limited (ASX: SEK) share price could be on the move on Wednesday after the release of the job listings company’s full year results.

How did SEEK perform in FY 2020?

It has been a difficult year for SEEK due to the coronavirus pandemic and its negative impact on listing volumes.

For the 12 months ended 30 June 2020, SEEK delivered a 2.6% increase in revenue to $1,577.4 million. This growth was driven entirely by its SEEK Investments segment, which includes the China-based Zhaopin business. It posted a 15% increase in segment revenue to $947.8 million, which offset an 11% decline in AP&A revenue to $629.6 million. The AP&A segment includes the SEEK ANZ business, which recorded a 12% decline in revenue to $387.2 million in FY 2020.

SEEK’s reported earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $414.9 million, down 9% from $455 million in FY 2019. On this occasion, a 20% increase in SEEK Investments EBITDA to $151.7 million, wasn’t enough to offset a 17% decline in AP&A EBITDA to $295 million.

On the bottom line, SEEK’s reported net profit after tax (excluding significant items) was down 51% to $90.3 million. Those significant items relate to impairment charges of $198.4 million and funding related costs of $3.6 million. Including these significant items, SEEK recorded a net loss after tax of $111.7 million.

In light of this loss and current economic conditions, no final dividend was declared. Once economic conditions improve, management intends to resume the payment of dividends.

Outlook.

SEEK’s CEO and Co-Founder, Andrew Bassat, is cautious on the near term, but remains very positive on SEEK’s long term prospects.

He said: “The current macro outlook is highly uncertain. Our near-term profits will be impacted by COVID-19 but our focus is on executing and investing for the long-term. We are confident our investment and long-term focus is the right approach as SEEK’s revenue opportunity remains large and under-penetrated. If we invest and execute well, we can take advantage on improving conditions in the near-term but also a much larger longer-term revenue opportunity.”

Due to uncertain market conditions, SEEK is not providing any guidance, but has given investors an idea of what FY 2021 might look like.

This is based on a number of assumptions such as ANZ and Asia job ad volumes recovering during FY 2021 but remaining below FY 2020 peaks. It also assumes gradual improvements in online billings for the Zhaopin business in the first half, before growing in the second half.

Based on this, SEEK has suggested FY 2021 could see revenue of ~$1,470 million, EBITDA of ~$330 million, and a reported net profit after tax of ~$20 million. This represents declines of 6.8%, 20.5%, and 77.85%, respectively, on FY 2020’s result.

Mr Bassat commented: “SEEK’s short-term results will be negatively impacted by the challenges of COVID-19. Over the longterm, our strategy and overall revenue opportunity remain intact albeit COVID-19 will likely impact the timeframe to achieve our A$5b revenue aspirations. We are confident in our strategy and growth prospects, and as a result we will continue to invest across ANZ, Asia, Zhaopin, OES and ESVs.”

“When labour markets return to more normal conditions, we expect to generate a high ROI given our market leadership and track record of generating strong returns from investing in product, technology and data. The near-term will continue to pose challenges, but we will remain agile to take advantage of new growth opportunities as they arise. If we invest and execute well, we expect SEEK to emerge a stronger and better business from this challenging period,” he concluded.

More reading

• 5 things to watch on the ASX 200 next week
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• Where to invest $20,000 into ASX shares right now
• ASX 200 up 0.1%: Big four banks tumble, Flight Centre sinks, SEEK cancels final dividend

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. 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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The A2 Milk Company Ltd (ASX: A2M) share price has been a top ASX share for a long time. In fact, the Kiwi dairy share is up 34.5% in 2020 and 2,556.3% in the last 5 years.

However, I think the unveiling of a new CEO could be a good sign for further growth.

Who is the new A2 Milk CEO?

A2 Milk on Tuesday announced its new leader with Geoffrey Babidge having been serving in an interim capacity since December 2019.

The new man for the job is Hanesbrands’ president of innerwear, David Bortolussi.

Mr Bortolussi will join the Kiwi dairy company in early 2021 with a base salary of $1.75 million.

The A2 Milk share price edged 1.20% lower on Tuesday following the news but I believe it could climb higher in the medium-term.

Why is that good for the A2 Milk share price?

I think this represents a step in the right direction for A2 Milk and its corporate governance controls.

CEO announcements are a hot topic for A2 Milk after former CEO Jayne Hrdlicka lasted just 18 months in the top job. 

Ms Hrdlicka was gifted rights to 600,000 A2 Milk shares upon signing in July 2018.

Those rights were sold almost as quickly as they were granted to net the former CEO a tidy profit without much risk in the company’s performance.

That’s why I think the latest appointment could be good news for the A2 Milk share price.

That seems to be the sentiment shared by prominent investors interviewed for an article in the Australian Financial Review (AFR).

Importantly, Mr Bortolussi will not be able to sell any shares until he owns the equivalent of one year’s salary.

That to me says that the A2 Milk board has learned its lesson. I like that the board is looking to re-align executive remuneration with shareholder interests.

Stronger corporate governance and a CEO with “skin in the game” can only be a good thing for the A2 Milk share price.

There are some challenges ahead, particularly with frosty Australia-China relations, but I’m quietly confident for 2021.

More reading

• 5 quality ASX shares to buy in August
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
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• A2 Milk Company share price on watch after naming its new CEO
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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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The Kogan.com Ltd (ASX: KGN) share price has surged more than 495% from its lows in mid-March.

Despite the bullish momentum, many investors would be questioning how much further the Kogan share price can keep going. Here’s what has led to the boom in the Kogan share price and what the future looks like for the online retailer.

Lockdown fuelling Kogan’s growth

Earlier this week, Kogan provided the market with an update on the company’s performance during July 2020. As at 31 July 2020, Kogan has reported an active customer base of 2,309,000, with the online retailer adding an additional 126,00 customers in July.

Kogan reported a 110% increase in gross sales for July on a year-on-year basis. The company also saw a 130% surge in year-on-year gross profit for the period, with EBITDA for July reported at $10 million.

The continued growth in Kogan epitomises how consumer behaviour has changed during the coronavirus pandemic. With more Australians confined to their homes, online retailers have benefited from consumer spending that was originally meant for travel and other activities.

Brokers neutral on Kogan

Broker Credit Suisse recently released a note on the Kogan share price. The note highlighted Kogan’s strong trading in July, however analysts were cautious in their outlook. Analysts noted that elevated online transaction and substitutions of spending due to the COVID-19 pandemic has allowed Kogan to gain substantial market share.

However, analysts also highlighted that the Kogan share price may have peaked in the short term. They cited that the company’s trading performance in FY21 and beyond remains uncertain in terms of the investment required to drive further growth. The research note also forecasts that in the near term, Kogan will produce lower EBITDA per month in comparison to July 2020.

As a result, analysts retained a neutral rating on the Kogan share price and slapped a valuation of $19.49 on the company’s shares. Kogan’s shares closed yesterday’s trading session at $20.87.

Has the Kogan share price peaked?

In my opinion, I think that the Kogan share price may have peaked in the short term. Analysts from Credit Suisse have echoed this point by highlighting the increased costs needed to sustain growth in the near term.

However, I am also of the belief that the coronavirus pandemic has accelerated the shift to online retail. For this reason, I think that companies like Kogan have a promising long-term future. In addition, Kogan has planned for future growth with the company acquiring furniture and homewares retailer Matt Blatt in May.  

Kogan is set to announce its results for FY20 next Monday 17 August.

More reading

• ASX reporting season reveals some upside surprises
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• Are ASX retail shares buys right now?
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• Why Adairs, Coles, Kogan, & Tyro shares are storming higher

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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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Yesterday Moneyme Ltd (ASX: MME) announced it had reached a lending milestone of $500 million, and that it was launching a new payments processing service. Consequently, the Moneyme share price shot up and finished the day 20.47% higher. The crux of the announcement was not that the company was launching a payments processing service, but that it would offer a buy now, pay later (BNPL) function at the point of sale. A business move headed up by former Zip Co Ltd (ASX: Z1P) sales professionals.

I believe this exposes two core truths about the Australian fintech sector in 2020. First, the BNPL sector, or pay by instalments, is no longer revolutionary in Australia. And second, all of this and more is due to the failure of the big four Australian banks.

The failure of the big four

The big four banks are fundamentally mortgage providers, with business loans and digital payments thrown in. They have been woeful at defending their turf. For instance, by population Australia is a small country, dominated by four large banks protected by legislation. So how on earth did Tyro Payments Ltd (ASX: TYR) become the fifth largest merchant acquiring bank, after the big four, by number of terminals? Moreover, bank lending to households via credit cards has been falling significantly since 2002. The Australian aversion to consumer debt has been growing for almost two decades. So why didn’t any of them come up with Afterpay Ltd (ASX: APT)? 

The Moneyme share price isn’t the only one to benefit by being more accessible, user friendly and offering cheap pricing. To paraphrase Paul Keating, every pet shop galah has an opinion on fintech shares these days. Companies like CML Group Ltd (ASX: CGR) provide cashflow solutions to small and medium sized companies through innovative debtor finance platforms. Additionally, lenders such as WISR Ltd (ASX: WZR) provide short term personal finance, while RAIZ Invest Ltd (ASX: RZI) is helping the public to save money.

It is almost like watching the death of Borders Bookstores again after the rise of Amazon.com (NASDAQ: AMZN). Consequently, given that the big four banks have allowed these spaces to open up, what does this mean for Moneyme?

Is the Moneyme share price sustainable?

In my view, there is not a chance that the company’s share price is sustainable. Not in the medium term anyway. It announced it had acquired 55 merchants. Zip Co has 23,600. Moreover, its most similar payments competitor, Tyro, has 32,000 Australian merchants. Not only that, but a BNPL service is something Tyro could quickly open up at the point of sale.

Furthermore, the Commonwealth Bank of Australia (ASX: CBA) is already doing so slowly via its part ownership of Klarna, the world’s largest BNPL company. To illustrate further just how competitive this sector is now, the Splitit Ltd (ASX: SPT) model of working with the large credit cards, to break down payments into instalments, is also likely to eat into market share. 

Foolish takeaway

The Australian buy now, pay later sector has become crowded to the point of normalcy. Accordingly, I believe the spike in the Moneyme share price is irrational optimism, not a sustainable valuation. Additionally, this is without considering the impacts of inevitable Australian regulation, and a raft of unlisted companies.

I think there are plenty of other growth opportunities in the fintech sector generally. However, within the BNPL sector, I believe it is now a race for the United States market. The startup companies that can establish a beachhead in that $5 trillion retail market are the ones that will survive this modern day gold rush.

More reading

• CBA delivers $7.3bn cash profit and declares 98 cents per share final dividend
• 5 things to watch on the ASX 200 on Wednesday
• Have $2,000 to invest? Try these 2 ASX growth shares today
• Flight Centre and Zip Co were among the most traded shares on the ASX last week
• Why this reporting season is different, and now’s a great time for ‘buy to hold’ investors in ASX shares

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and ZIPCOLTD FPO and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon. 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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The Commonwealth Bank of Australia (ASX: CBA) share price will be in focus this morning following the release of its full year results.

How did Commonwealth Bank perform in FY 2020?

For the 12 months ended 30 June 2020, Commonwealth Bank reported operating income of $23,758 million, up 0.8% on the prior corresponding period. This reflects volume growth in home lending and deposits, which offset a 2 basis point decline in its net interest margin to 2.07%.

Management advised that home lending grew at 1.3x system growth due to strong operational execution. Household deposit balances grew 9.8% year-on-year, and spot transaction account balances were up 25%.

The bank’s statutory net profit after tax including discontinued operations was $9,634 million, up 12.4% on FY 2019. This statutory result includes significant gains on the sale of businesses.

Whereas the company’s cash net profit after tax from continuing operations was down 11.3% to $7,296 million. This was driven largely by higher COVID-19 loan impairment expense.

Commonwealth Bank dividend.

As was expected, Commonwealth Bank has cut its final dividend down materially following recent guidance by APRA.

It has declared a 98 cents per share fully franked final dividend, which represents a dividend payout ratio of 49.95% of second half statutory earnings. This was in line with APRA’s guidance that banks should retain at least 50% of earnings

This final dividend brings Commonwealth Bank’s full year dividend to $2.98 per share, which is down 31% on FY 2019’s dividend.

At the end of the period, Commonwealth Bank’s CET1 ratio stood at 11.6%. This is up 90 basis points year on year and comfortably ahead of APRA’s ‘unquestionably strong’ benchmark of 10.5%.

COVID-19 loan deferrals.

Commonwealth Bank also provided the market with an update on its COVID-19 loan deferrals.

As of the end of July, COVID-19 related home loan deferrals stood at 135,000 home loans. This represents 8% of total accounts and is down from a peak of 154,000 home loans.

Approximately 59,000 business loans are currently being deferred. This represents 15% of its total balance and is down from 86,000 business loans at the peak.

Management commentary.

Commonwealth Bank’s Chief Executive Officer, Matt Comyn, was pleased with the company’s performance in a challenging environment.

He said: “Despite the challenging environment, operational performance in the business remains strong. Combined with our strong balance sheet and capital position, this enables us to continue supporting customers and the economy. Using our strengths in customer service, technology and data we will check-in regularly with customers to assess their financial needs and to support their recovery.”

“The next few months will be critical and some sectors will take longer to recover than others, however, we remain positive about Australia’s long-term prospects. We will also continue to work with government, regulators and our industry peers to support initiatives that stimulate economic activity and jobs,” he concluded.

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Motley Fool contributor James Mickleboro 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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