CBA shares drop despite strong first-half profit result and dividend boost

Investors appear to have been wanting an even stronger result from Australia's largest bank.

| More on:
A man holds his head in his hands, despairing at the bad result he's reading on his computer.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Commonwealth Bank of Australia (ASX: CBA) shares are on the slide on Wednesday morning.

At the time of writing, the big four bank's shares are down 1.5% to $159.81.

This follows the release of its half year results before the market open.

CBA shares fall despite strong result

For the six months ending 31 December, CBA delivered a 3% increase in operating income to $14.1 billion. This was supported by volume growth across its core segments, while its net interest margin (NIM) edged up to 2.08%. Management advised that competitive pressures on lending and deposit pricing were offset by stronger earnings from capital hedges and its replicating portfolio.

On the cost side, operating expenses climbed 6% compared to the prior corresponding period. This increase was largely due to higher staffing costs—driven by inflation and two additional working days—along with a ramp-up in technology investments, particularly in AI infrastructure and digital enhancements.

But despite these cost pressures, the bank still posted a 1% rise in pre-provision profit to $7.73 billion and a 2% lift in cash net profit after tax to $5.13 billion. Earnings per share came in at 307 cents, exceeding analyst expectations of 291 cents per share.

This allowed the CBA board to boost its fully franked interim dividend by 5% to $2.25 per share.

Expert opinion

Saxo Asia Pacific Senior Sales Trader, Junvum Kim, has been running the rule over the result this morning and appears to have been impressed. He told The Motley Fool Australia:

The Commonwealth Bank of Australia's results reflect a resilient stance amid economic headwinds, with a cash profit of AUD 5.13 billion aligning with expectations. Strong performances in home lending and business banking, alongside a net interest margin of 2.08%, showcase effective management in a competitive landscape.

Despite a 6% rise in operating expenses due to inflation and tech investments, the bank's decision to increase the interim dividend to AUD 2.25 per share signals confidence in its financial health. While cost of living pressures persist, CBA's solid CET1 ratio of 12.2% and favourable labour market conditions position it well for future growth, with an anticipated interest rate easing cycle in 2025 offering additional optimism.

However, it seems that some investors were needing an even stronger result from CBA to justify its sky high valuation.

Despite today's pullback, CBA's shares remain up approximately 39% since this time last year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Industrials Shares

Guess which ASX 200 stock is crashing 24% on results day

Investors were not impressed with this result. But why?

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »

A young man sitting at an outside table uses a card to pay for his online shopping.
Consumer Staples & Discretionary Shares

Why is the Kogan share price crashing 12%?

Profits are down at this ecommerce company during the second half.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Resources Shares

Guess which ASX 200 mining stock is sinking 7% following its quarterly update

Let's see how this miner performed during the third quarter.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

Up 50% in a year, are Xero shares a buy after Thursday's earnings results?

ASX investors reacted positively to Xero’s full-year earnings results on Thursday. Now what?

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Earnings Results

Xero share price higher despite FY25 earnings miss

The cloud accounting platform provider reported strong top line growth but its earnings fell short of expectations.

Read more »