Commonwealth Bank customers who increasingly struggle to find a branch aren’t mistaken, with the financial giant’s latest profit results revealing its nationwide network has been slashed by more than 300 over the past three years.
The big four bank on Wednesday booked a more than 20 per cent rise in both statutory and cash net profit for the six months to December 31, with Australia’s improving economic conditions slashing its losses from customer loans.
CBA said it had made “significantly higher” provisions for loan losses, expecting the economy would not have performed as well as it had, and reported a near $1bn plunge in loan impairment expenses.
“We expect the Australian economy to have a strong year in 2022 despite early challenges from the Omicron strain of Covid-19,” the bank said.
“Both the unemployment rate and the underemployment rate are at the lowest since 2008, with high participation rates.
“Australian households have accumulated savings and stronger wage growth is expected.”
That buoyant labour market was evident in CBA’s results, with the bank reporting a 13 per cent increase in staff expenses, but real estate and equipment costs fell 16 per cent as it closed branches and “optimised” ATMs.
CBA now has 875 branches compared with 1134 in February 2020 when it trumpeted having Australia’s largest branch network, down from 1192 in February 2019 before the pandemic took hold.
It had 4118 ATMs in 2019, falling to 3597 in 2020 and now says it has more than 2000 ATMs.
The shrinkage is set to continue, with the bank saying it continues to consolidate its property footprint.
Australian Prudential Regulation Authority data released in October showed total bank branch numbers around the nation – not including “other face-to-face” levels of service – had fallen from 5816 in mid-2017 to 4491 in June last year.
Over the same period, ATMs had plunged from 13,814 to 7757.
But eftpos terminals jumped from 801,502 to 849,588 as cash fell out of favour.
CBA shares took off after the better than expected results, rising more than 4 per cent in intraday trade, but experts questioned if the stock’s lofty price was justified.
CBA shares axjmtzywre by far the most expensive of the big four banks, punching through $110 last year but have since pulled back, opening at $99.01 on Wednesday.
Macquarie Research said the results firmly beat expectations. Citi agreed but said the bank’s fall in net interest margin was disappointing.
“CBA is performing better than peers (which continue to score own goals),” Macquarie Research said.
“CBA is trading at a 34-44 per cent premium to peers, and while we recognise the attractiveness of the franchise, the current multiple is difficult to justify in our view.”
But it was “not the result needed to justify derating”, Macquarie Research said.
It has a price target on CBA of $88.50 and an underperform rating, while City has $94.30 and a sell rating.
