Commonwealth Bank profit tops $10 billion but analysts say it's not enough to justify 'lofty valuation'

Australia's biggest company, the Commonwealth Bank, has posted a $10.13 billion net profit but billions were wiped off the bank's share price, as analysts say the stock was "priced for perfection".

The bank's CEO Matt Comyn said he would not "worry too much about the near-term movements in the share price".

"Commonwealth Bank is owned by 13 million Australians … directly or indirectly, there's a lot of interest in the share price for us," Mr Comyn told ABC's The Business program.

"[The] most important thing to do is to execute our strategy consistently, deliver a great proposition for our customers."

The nation's largest lender reported a 7 per cent rise in statutory profit over the past financial year. Its preferred measure of cash profit rose 4 per cent to a record $10.25 billion.

CBA shareholders will receive a final dividend of $2.60 per share, taking the total dividend payout for the year to $4.85, up 4 per cent from a year earlier and its highest on record.

The bank's net interest margin — the difference between the interest earned by the bank on lending and interest paid out on deposits — went up 0.09 percentage points to 2.08 per cent.

Lending volumes grew 5.3 per cent, led by growth in business and institutional lending, adding to an overall increase in operating income.

The bank also reported higher income from markets trading, a segment of its business that benefits from share market volatility.

"We think the market might be disappointed around guidance for [the current financial year] and the lack of signs of acceleration in the key retail segment."

CBA reported a 0.6 per cent increase in its share of net interest income earned by the big four banks (CBA, Westpac, NAB and ANZ) compared to a year earlier, to $438 million.

It accounts for more than 31 per cent of the total net interest income of the four major banks, compared to around 25 per cent for its nearest peer.

Record profit still not enough to justify 'lofty valuation'

Despite the bumper profit result, the stock price took a heavy hit and dragged the broader ASX 200 index down with it, after trading at a premium difficult to justify.

At 12:30pm AEST, Commonwealth Bank shares had fallen 4.4 per cent, to $170.91.

That still leaves the stock just shy of 30 per cent higher over the past 12 months.

Michael Haynes, an equities analyst at Atlas Funds Management (which is a CBA investor) said shareholders were likely taking profit following the result.

"The underlying business has been operating soundly, but the shares remain very expensive and are priced for perfection," he told Reuters.

IG market analyst Tony Sycamore headlined his note on Wednesday's stock price slump, 'when a $10 billion profit just doesn't cut it anymore'.

"The falls come as the market continues to question its lofty valuation and as the RBA's rate cutting cycle reduces the ability of the bank to leverage its large deposit base and as margins are compressed," Mr Sycamore wrote.

He noted that after hitting a high of $192 in late June, "it's been mostly one way traffic lower for CBA and the other big banks, as investors rotate out of the big banks and into the big miners with their more attractive valuations".

What will Matt Comyn bring to the economic reform roundtable? 

When asked about next week's federal government's economic reform roundtable, which Mr Comyn is attending, he said he would touch on a series of important topics, such as housing affordability and the energy transition, but would save specific details for the roundtable. 

"One of the most important from our perspective — housing affordability is really important," he said. 

"I think that's a really important topic, both financial and non-financial resilience, for Australia."

In a submission to the Productivity Commission ahead of the roundtable, the bank argued "uncapped superannuation concessions appear to be unsustainable".

In his interview with The Business, Mr Comyn said any cap should be set at a level that gives retirees a comfortable retirement and keeps them off the Age Pension, but people holding very large super balances should not receive the current level of tax concessions.

However, Mr Comyn declined to put a dollar figure on his preferred level for a super cap ahead of the summit.

An existing federal government policy proposes changes to tax on superannuation balances over $3 million, imposing additional levies on those large balances.

Mr Comyn highlighted that proposals coming out of the summit should be for the long-term, over the next decade, not just focus on the next three years. 

"It's a good opportunity to at least contribute [and] to hear other people's views, and hopefully there'll be a consensus in a number of important areas," he said.

Mr Comyn said the CBA would invest another $300 million on technology, including artificial intelligence (AI), in this financial year, on top of a $2 billion investment it has already committed to.

When asked about what effect AI will have on jobs, the CEO said it was hard to predict over the long term.

"I think we're going to be really conscious that there will be impacts to certain job roles," he said.

"I think the full potential of AI, to the extent that we even understand how that can be done, is one that is many years away. 

"Ultimately, what we've been able to say before is that people have migrated to higher value work."

Mr Comyn said the bank had hired around 2,000 extra staff recently, although conceded that many of those roles have been added in India as the bank in-sources and expands its technology team there.