By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commonwealth Bank’s shareholders are set to enjoy a near $35m total dividend payout during the 2025 first half after setting a new annual profits record last year via a 29 percent bottom line improvement.

Tangela Albury, the BISX-listed lender’s chief financial officer, in a series of written replies to Tribune Business questions confirmed the $19.27m increase in total comprehensive income to a new all-time high of $85.9m for 2024 “exceeded” the bank’s expectations and “will be challenging” to repeat this year.

The profitability leap from $66.338m in 2023 was entirely driven by an almost 11-fold increase in reversals of provisions for non-performing credit and loans. These reversals, or write-backs of impairment charges previously taken, surged massively from just $2.339m in 2023 to $25.578m last year, and Ms Albury acknowledged this was “unlikely to be repeated at the same scale” during 2025.

However, she voiced confidence to this newspaper that “underlying growth in core banking operations” will still drive “strong results” for the current financial year, after $41m gross loan book growth for 2024 represented the first time Commonwealth Bank’s credit portfolio has expanded in successive years since 2016.

And, while the BISX-listed institution is closely watching the global economic turmoil and potential fall-out from Donald Trump’s tariff policy, Ms Albury asserted that it is well-positioned “to withstand external shocks” through a liquidity ratio and capital adequacy ratio that stand at 65 percent and more than 40 percent, respectively.

Commonwealth Bank’s impairment/loan loss provision reversals, while adding to the boost provided by net interest income and fee revenue increases in 2024, also more than offset the over $10m year-over-year increase in the bank’s general and administrative costs that acted as “a drag on profitability”.

These rose by 11.7 percent year-over-year, rising from $86.357m in 2023 to $96.453m, with Ms Albury attributing the increase to “core non-controllable costs” such as a doubling of deposit insurance premiums and a 35 percent jump in National Insurance Board (NIB) contributions as a result of the rate increases implemented last July 1 to ensure the social security system remains viable.

But, while warning that continued inflation and global economic events could produce further general and administrative expenses increases, the Commonwealth Bank finance chief said renewed focus on “cost containment” will seek to minimise the rate of future expense growth.

Commonwealth Bank, in its just-released audited financial statements for the 12 months to end-December 2024, confirmed that its shareholders have already received dividends totalling $14.8m during 2025 to-date with further payouts to come. That figure comprises both a quarterly and extraordinary dividend, worth three cents and two cents per share respectively, and totalling $8.9m and $5.9m.

They were paid at end-March and end-April 2025, respectively, and the audited financial statements disclose that another extraordinary dividend, this time worth four cents per share and a collective $11.7m, is due to be paid out to investors on May 30. Ms Albury said that, when these payouts are combined with the dividends distributed in 2024, the bank has generated a 74 percent effective dividend payout rate.

“These payments, totalling six cents per share or approximately $17.1m, demonstrate our commitment to delivering value to our shareholders,” she added. “Furthermore, the Board has sanctioned a regular dividend of three cents per share, a notable increase from the previous rate of two cents per share following the pandemic.

“In effect, shareholders received cash dividends of around $14.3m in March and April of 2025, with an additional $19.95m in dividends slated for distribution in May and June of this year. This underscores our dedication to fostering shareholder wealth and reflects our robust financial health.” 

Based on the figures contained in the financial statements, the $14.3m payout in March and April totals $14.8m. This places the total 2025 first-half dividend return to Commonwealth Bank shareholders at close to $34.8m as investors receive some of the fruits from 2024’s record performance.

“2024 marked the most profitable period in the bank’s history, with total profits reaching $85.9m, surpassing the $66.338m recorded in 2023 and $75.5m in 2022. We are proud to have delivered a return on equity of 26.22 percent, significantly above the 21.24 percent achieved in the prior year,” Ms Albury told Tribune Business.

“Our expectations were exceeded because, over the past three years, we focused on improving credit quality, delinquency management and targeted credit sales growth. We saw the benefits of the post-COVID-19 years reflected in improvements to the reassessment of the Bank’s loss given default (LGD).

“Essentially, LGD is the amount of money the bank expects to lose if a borrower fails to repay a loan, after accounting for any recoveries such as payments collected or assets like collateral that can be sold. We have worked to minimise these potential losses over the past three years, the results of which are a key measurement factor in determining the provision for expected credit losses.”

Besides the near-$26m loan impairment charges reversal, Commonwealth Bank also benefited from more modest growth in its core lending and other banking activities. Interest income rose by more than $5M year-over-year, improving to $143.185m in 2024 compared to $137.961m in the prior year, representing a 3.8 percent increase.

With interest expense slightly down, net interest income increased by a similar sum, rising almost $6m to $126.669m in 2024 compared to $120.766m in the prior year. This was a 4.9 percent year-over-year increase, while Commonwealth Bank’s fee revenue improved by almost $4m from $30.515m to $34.401m last year.

Ms Albury revealed that Commonwealth Bank’s entry into the merchant-acquiring services market generated some $2.2m in fee income for 2024, while the lender’s overall credit portfolio expanded by $41m. “In addition to the $25.6m reversal of impairment losses, the bank’s 2024 performance was fuelled by robust loan book growth, disciplined delinquency management and a sustained increase in transaction-based fee income,” she said.

“The introduction of merchant-acquiring services created a new revenue stream, while increased usage of the bank’s debit and credit card products enhanced non-interest income. Furthermore, improved credit quality and lower charge-offs supported profitability.

“These factors, along with favourable economic conditions, provided a strong foundation for performance. While the impairment reversal is unlikely to be repeated at the same scale in 2025, the underlying growth in core banking operations is expected to continue supporting strong results.”

Noting that loan delinquency rates fell from 9 percent to 7 percent in 2024, the Commonwealth finance chief told Tribune Business: “Our current focus is on increasing transaction-based fee income. This approach aims to enhance the usage of our services, and introduce new services that can generate additional transaction-based fees.

“For example, our entry into merchant-acquiring services contributed $2.2m in new fee income. Additionally, income from our credit life insurance product improved significantly, as it correlates closely with the growth of our loan book. Our current focus is on increasing transaction-based fee income.

“This approach aims to enhance the usage of our services, and introduce new services that can generate additional transaction-based fees. For example, our entry into merchant-acquiring services contributed $2.2m in new fee income. Additionally, income from our credit life insurance product improved significantly, as it correlates closely with the growth of our loan book,” Ms Albury said.

“Opportunities to grow include continued servicing of the demand for all types of personal loans, increased uptake of new credit card offerings, and enhancing the bank’s digital and merchant services footprint. The forward-looking strategy is oriented toward sustaining or exceeding current growth levels, while maintaining the credit quality and soundness of the loan book.”

Disclosing that high electricity and insurance costs also helped drive the ramp-up in general and administrative expenses, Ms Albury added: “Deposit Insurance premiums doubled year-over-year, National Insurance premiums rose by approximately 35 percent, and utility costs increased for most of 2024, resulting in a drag on the bank’s profitability.

“Additionally, insurance costs were impacted by the repricing of climate-related risks by global reinsurers operating in the region. In response, the bank’s focus has been on strategic investments in technology infrastructure to enhance efficiency, which will continue in 2025.

“Our investment in technology infrastructure resilience has seen a shift in our IT spend from a capital expenditure to an operational expenditure nature. However, we believe this investment will be most fruitful in the coming years,” she said.

“While some increase in general and administrative costs may continue due to inflation and the impacts of geopolitical events, the bank’s emphasis on cost containment and operational resilience should help manage the rate of growth going forward.”

With Commonwealth Bank starting to “prepare” for a reduced rate of economic growth amid the Trump tariffs fall-out, Ms Albury said: “The bank is closely monitoring the effects of economic uncertainty on both credit demand and borrower repayment capacity. As of the end of 2024, no significant signs of a slowdown had been detected; loan delinquency rates had declined, and credit performance remained strong.

“Nonetheless, the bank is taking a prudent approach by reinforcing its credit risk management practices, maintaining robust liquidity and capital buffers, and enhancing its portfolio diversification. It is well-positioned to withstand external shocks, owing to its high capital adequacy ratio of over 40 percent and liquidity ratio of 65 percent.”

Ms Albury said this will enable Commonwealth Bank to “pursue lending opportunities” while managing any negative impact, and added: “We aim to sustain profitability through organic loan growth, continued focus on credit quality  and delinquency control.

“We certainly acknowledge that matching or surpassing the record-breaking 2024 results will be challenging, particularly given the expected normalisation of economic growth and the non-repeatable nature of large impairment reversals.

“However, the bank is positioning itself to maintain strong financial outcomes through disciplined cost control, improved IT infrastructure to create operational efficiencies and remaining agile, because next to profitability we prioritise resilience, especially in the face of major 2025 external uncertainties.”