The Commonwealth Bank of Australia (ASX: CBA) share price is charging higher on Wednesday morning.
At the time of writing, the big four bank's shares are up 1.5% to $134.59.
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Why is the CBA share price charging higher?
Investors have been bidding the company's shares higher this morning after it released its FY 2024 results and revealed better than expected number.
For the 12 months ended 30 June, Australia's largest bank reported flat operating income of $27.174 billion and a 2% decline in cash net profit after tax to $9.836 billion.
As a comparison, Goldman Sachs was forecasting the bank to post a 3.5% decline in cash earnings from continued operations to $9.716 billion, whereas the consensus estimate stood at $9.783 billion. CBA's profit has comfortably beaten both estimates.
Also getting investors excited and boosting the CBA share price was its dividend. The bank's board declared a fully franked final dividend of $2.50 per share, which brought its total dividends for FY 2024 to $4.65 per share. This represents a 3% year on year increase and is ahead of the consensus estimate of $4.55 per share.
CBA's full year dividend represents a payout ratio of 79% of cash NPAT, which is at the upper end of its target range.
CBA's CEO Matt Comyn commented:
We have retained strong loan loss provision coverage, with surplus capital and conservative funding metrics. Our disciplined approach to managing our balance sheet settings positions us with flexibility and capacity for a range of economic scenarios, while continuing to deliver sustainable returns. We have declared a final dividend of $2.50 per share, fully franked, resulting in a full year dividend of $4.65.
Broker response
Analysts at Goldman Sachs have been running the rule over the result and have seen positives and negatives. They commented:
CBA's FY24 cash earnings (company basis) from continued operations fell by -2% yoy to A$9,836 mn, and was +1% higher versus GSe and Visible Alpha consensus expectations (VAe). PPOP was +1%/in line vs. GSe/VAe, largely on account of higher NIM. Versus GSe, the BDD charge was broadly in line but -11% lower than VAe, and while balance sheet settings remain conservative, there were some early signs of asset quality deterioration, which we explore in more detail within the note.
In respect to the asset quality deterioration, the broker adds:
Troublesome and impaired assets came in at A$8.7 bn, vs A$7.1/6.9 bn in Jun-23/Dec-23, representing 63 bp of total committed exposures, albeit this remains well below the 91 bp average since Aug-08 and the 72 bp in Jun-19 (pre-Covid). The increase appears largely due to a small number of single names in Commercial Property, Wholesale Trade and Manufacturing.
Goldman also highlights that the bank's dividend was larger than expected, which is likely to have been a boost to the CBA share price today. It said:
The final ordinary DPS of A250¢ was higher than GSe/VAe (A240¢), and implies a 2H24 payout ratio of 87% (GSe: 86%). We note that the DRP will be done with no discount, with new shares to be neutralized by an on-market buyback. CBA's FY24 CET1 ratio of 12.3% (19.1% on an internationally comparable basis) came in 20 bp better than our expectations.
