The Commonwealth Bank of Australia (ASX: CBA) share price is in focus after the major ASX bank share announced its FY25 first quarter update.
CBA FY25 first quarter update
The bank reported that it generated statutory net profit of approximately $2.5 billion for the three months to 30 September 2024.
Cash net profit generated was also $2.5 billion, which was flat year on year. However, it represented an increase of 5% on the FY24 second half’s quarterly average (or up 3% on a day-weighted basis).
The bank said that operating income growth of 3% was helped by there being one additional day in the quarter, as well as profitable volume growth across its core lending and deposit products, and the timing of dividends received from its investments.
CBA said its underlying lending margin was “broadly stable” in the quarter.
However, operating expenses rose by 3% due to wage inflation, increased spending on investing and one additional day in the quarter.
CBA’s loan impairment expense was $160 million, with collective provisions “slightly higher”. The portfolio credit quality “remained sound” with home lending arrears remaining stable, with a “modest” increase in unsecured consumer arrears in line with seasonal trends. CBA also said its troublesome and impaired assets were marginally higher.
In terms of its lending, CBA said its home lending grew by 4.5% (1.3x the overall Australian loan systems), or $8.6 billion, and the business lending grew by 9.9% (1x the system), or $2.1 billion. Household deposits grew by 6.5% (1x the system), or $14.9 billion.
In its business bank it grew the number of business transaction accounts by around 29,000 in the quarter, reaching 1.27 million accounts (an increase of 9% year on year).
Management commentary
The CBA CEO Matt Comyn said:
These results demonstrate ongoing focus on delivering for our customers, and disciplined operational and strategic execution.
Many Australians continue to be challenged by cost of living pressures. We have continued to support our customers, invest in our franchise, and provide strength and stability for the broader economy.
We have maintained strong balance sheet settings. Our CET1 capital ratio remains well above the minimum regulatory requirement. We have maintained provision coverage levels.
Inflation is moderating, but at a slowing pace, and global geopolitical tensions are creating uncertainty. Growth in the Australian economy remains slow, as higher rates continue to weigh on consumer demand and bring inflation back to the target range.
We remain optimistic on the overall outlook and the Australian economy remains fundamentally sound. We remain focused on supporting our customers, investing for the future, generating sustainable returns for our shareholders, and providing strength and stability for the broader economy to achieve a brighter future for all.
Final thoughts on the CBA share price
CBA is the leading bank in Australia and its stable profit proves its loan book is performing well despite the headwinds of the current economic environment.
However, a flat profit wouldn’t excite me enough to want to pay the current high valuation of the current CBA share price. For investors wanting returns, I think there are better opportunities out there for both dividends and growth.
There are quite a few other ASX dividend shares I can think of I’d rather buy first.
