Mercer actuary David Knox says the data used to determine the old age dependency ratio is “totally out of date” and overstates the severity of the problem.
From their inception, SMSFs have always attracted more than their fair share of criticism. Now it’s an ageing membership that’s being used to restrict their numbers.
Four takeaways from the CBA FY22 result
Commonwealth Bank of Australia (ASX: CBA) announced a $9.6 billion cash profit for FY22, an 11 per cent improvement on FY22. Here are four key takeaways from the result.
Targeting business
CBA effectively maintained its market share in residential lending, growing its mortgage book marginally slower than the rest of the sector. But the bank really took it up a gear in business, with loans growing 30 per cent and deposits 40 per cent above the system average.
New merchant facilities increased 32 per cent annually, in addition to business accounts up 10 per cent. The bank has made a conscious effort over recent years to improve its business offering, introducing new payment terminals and services.
Ready to weather the storm
When central banks rapidly rise rates, inflation is raging and a potential global recession is on the horizon banks typically perform poorly.
Fortunately, by global standards, Australian banks are extremely well capitalised. CBA ranks number on against a peer group of International peers, with ANZ, NAB and Westpac taking out the next three places. It currently has a Common Equity Tier 1 capital ratio (CET1) of 11.5 per cent, well above APRA’s improved requirement of 10.25 per cent.
Home loans more than 90 days in arrears are just 0.49 per cent of the loan book. Based on its own modelling, CBA has over provisioned by an extra $1.8 billion according to its base economic scenario.
Keep in mind the result is until June 30, and therefore won’t reflect cash rate increases in July and August. CBA published that 48 per cent of residential borrowers have repayment buffers of three months or less. Further pain is likely ahead, but CBA is well positioned to absorb any impacts.
NIM improvement on the horizon
CBA’s net interest margin (NIM), which measures the percentage difference between what it pays for deposits compared to what it receives in interest, contracted 18 basis points to 1.90 per cent.
The bank highlighted a greater share of fixed loans, increased liquid assets and high competition for home loans for the lower margins. Fortunately, the NIM is expected to expand in future periods, as cash rate increases are passed through. This should underwrite future profitability, albeit may result in a slowing in lending activity.
Dividends returning
CBA announced a $2.10 final dividend bringing the total dividends for FY22 to $3.85. With a share price of $100, the bank is trading a dividend yield of a fully franked dividend yield of 3.85 per cent.
It’s a 10 per cent improvement in FY21, but still below the $4.30 paid per year from FY17 to FY19.
