Australia's Commonwealth Bank H1 net profit jumps 8%

[SYDNEY] Australia's biggest company Commonwealth Bank on Wednesday posted an eight per cent rise in first-half net profit to A$4.53 billion (US$4.76 billion), while warning weak consumer confidence was starting to hurt business.

The bank's result for the six months to December 31 was up from A$4.21 billion in the same period the previous year. Cash profit, a measure often preferred by financial institutions, also jumped eight per cent to A$4.62 billion.

As investors focus on higher-yielding stocks in Australia's low interest rate environment, the bank announced an eight per cent rise in its interim dividend to $1.98 per share.

The bank's shares, which have soared more than 10 per cent in the past few weeks, ended 0.79 per cent lower at A$91.86 in a falling market.

Chief executive Ian Narev said the result from the country's largest lender was driven by solid revenue growth and low charges for bad debts.

"Our ongoing focus on long-term strategic priorities - people, technology, strength and productivity - continues to benefit our customers, our shareholders, our people and other key stakeholders," he said.

"The group's revenue momentum has continued, while our focus on productivity has delivered a further $300 million of cost savings over the last 12 months.

"We have also maintained the strength of the group's balance sheet in terms of capital, liquidity, deposit funding and provisioning." Among divisions, earnings from its core retail banking operation, which includes home lending, credit cards, and personal loans, jumped 12 per cent to A$1.99 billion, while revenue from its business banking arm rose eight per cent to A$743 million.

But while posting another encouraging result, Narev warned that weak confidence levels were threatening the Australian economy as it deals with the end of a mining investment boom and called on the government to do more.

"Weak confidence is a significant economic threat. Businesses need the certainty to invest to create jobs, and households need a greater feeling of security," he said.

"That requires implementation of a coherent long-term plan that clearly addresses target government debt levels and timeframes, infrastructure priorities, foreign investment, business competitiveness policies and, above all, job creation."

Australia's central bank last week cut its forecasts for economic growth and inflation this year and warned unemployment would likely rise as the economy makes a transition from its mining investment boom.

The Reserve Bank of Australia said gross domestic product would expand 2.25-3.25 per cent in 2015, compared with a November estimate of 2.50-3.50 per cent.

The Commonwealth bank's business year ends in June, compared with September for its main rivals - ANZ, Westpac and National Australia Bank.

AFP