* CBA vying for “leading” position in business banking
* Strategy to leverage brand for new tech-backed products
* Balance sheet strong, A$10 bln excess capital
* Cash profit for 1H21 of A$3.89 bln vs expected A$3.76 bln (Recast with strategic aspirations, investor comment)
By Paulina Duran
SYDNEY, Feb 10 (Reuters) – Australia’s Commonwealth Bank , the country’s largest, on Wednesday said it would compete for the No. 1 business banking position and would focus on technology-driven products to boost revenue, as the nation recovers from the pandemic.
Beating market expectations with cash profit for the six months to Dec. 31 of A$3.89 billion ($3 billion), a 10% drop, CBA said business lending had grown 7.4%, the strongest in 4 years and over three times the market rate.
The Sydney-based bank would double relationship bankers at its branches by June as it hopes to take the No.1 spot for business lending from Melbourne-based peer National Australia Bank, which dominates about a fifth of the market.
“One of the key drivers looking forward is going to be a pick-up in business investment to see Australia recover,” Chief Executive Officer Matt Comyn told investors in a call.
“Which is why we want to play a bigger role in business banking,” he said, adding CBA would measure its success based on quality and pricing metrics and not just volume.
Australian banks, like their global peers, were hit severely in 2020 as low credit growth and near-zero interest rates and bad debt provisions due to the pandemic squeezed their margins.
However, the country’s ability to contain the spread of COVID-19, together with unprecedented levels of fiscal and monetary support, had helped drive employment and a surge in demand for new homes.
As the economy recovers, another priority will be investing more in technology to create new “reimagined” products and services to boost revenue, such as its “Neo” card which comes with low or no charges depending on consumption.
The bank will spend on developing digital tools to facilitate faster decision-making for smaller business customers and will hire more business bankers, Comyn said.
CBA’s upbeat tone – it expects better unemployment and economic growth this year than the central bank – reflects a good position from which to benefit from the recovery, investors said.
“CBA’s technology base is superior to its peers and they have the biggest customer base, so they are going to use that and grow in other areas,” said Rhett Kessler, a senior fund manager at Pengana Australian Equities Fund.
“They’ve got the scale and the brand, it makes a lot of sense to try and monetise that with more products.”
CBA also raised its dividend to A$1.50 per share, reflecting a payout ratio of 67% of earnings, still below its self-imposed target of between 70% and 80%.
The bank’s balance sheet was “the strongest it’s ever been”, Comyn said, with A$10 billion of extra capital above the regulator’s minimum requirement, a sign shareholders might see some of that capital returned in the near future.
“Although the outlook is positive, there are a number of health and economic risks that could dampen the pace of recovery,” Comyn said in a statement. “The low interest rate environment will continue to put pressure on our revenue.”
($1 = 1.2927 Australian dollars) (Reporting by Paulina Duran in Sydney and Shriya Ramakrishnan in Bengaluru; Editing by Sam Holmes and Stephen Coates)