This morning, CBA delivered a solid FY26 result, with cash earnings modestly ahead of expectations, margins holding up better than feared and returns improving. The numbers reinforce why CBA continues to trade at a premium to the other major banks.
Key results:
- Cash profit from continuing operations of A$10.98 billion, up 7.1% and around 1% ahead of the A$10.85 billion expected.
- Revenue of A$30.15 billion, up 6.6%.
- Net interest margin of 2.05%, in line with consensus and down modestly from 2.08% a year ago.
- Cash ROE of 14.0%, ahead of the 13.9% expected and up from 13.5%.
- CET1 capital ratio of 12.0%, broadly in line with the 12.1% expected.
- Final dividend of A$2.70 per share – up from $2.60 last year
- Operating expenses of A$13.76 billion, broadly in line with the A$13.73 billion expected.
The second half was particularly solid. Cash profit of A$5.54 billion was around 3% ahead of consensus, while NIM improved to 2.06% from 2.04% in the first half. Retail banking profit increased 4.9% half-on-half, although New Zealand remained softer and institutional earnings eased.
RE housing, they said activity had slowed from a high base and arrears have ticked higher, with home-loan arrears at 0.73% and personal-loan arrears at 1.72%. Encouragingly, management noted that home-loan application volumes have stabilised in recent weeks, while credit provisioning remains conservative, with CBA carrying a A$2.7 billion buffer relative to losses under its central economic scenario.
Costs are also still rising, driven by inflation and technology investment, with FY27 investment spend expected to remain around A$2.4 billion. The existing A$1 billion buyback will not be extended beyond its current expiry, while the bank continues to target a 70–80% payout ratio and maximise the use of franking credits.
MM’s view: This was another high-quality result from CBA. Earnings beat modestly, margins improved in the second half and ROE remains sector-leading, while credit quality is still broadly sound despite some deterioration in arrears. The issue is not the quality of the bank, but the price investors are being asked to pay for it. CBA continues to execute very well, but with the stock trading on a substantial premium to both domestic and global peers, further upside increasingly relies on that premium being sustained rather than a material acceleration in earnings growth.
MM is neutral on CBA ~$174
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