Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
A glowing CBA result is bringing a huge smile to retirees’ faces
If your retired golf partner with a self-managed super fund has had an extra spring in their step in the past week, it’s a fair bet they hold CBA shares.
While banking analysts and broking houses have been ringing the bell on the Big Four bank shares, with the CBA heading the list, for being overpriced, it seems it’s advice that many SMSFs have been happy to ignore, with 37 per cent of the more than 625,000 SMSFs holding this stock in their portfolios.
Certainly, their faith in chief executive officer Matt Comyn (pictured) and his team to continue delivering the strong results that make it Australia’s pre-eminent bank stock are more than justified based on the first half results to December 31, 2024.
Despite cost pressures, it delivered a one per cent rise in pre-provision profit to $7.73 billion, a two per cent lift in the cash net profit after tax to $5.13 billion and earnings per share at $3.07, comfortably ahead of analyst expectations. And the five per cent lift in the fully franked dividend to $2.25 a share might explain that extra round of drinks at the 19th hole.
Not surprisingly, Comyn’s statement to announce this result downplayed this sterling performance. When bank bashing is always just a PR misstep away – the public and political outcry over its proposed $3 withdrawal fee just before Christmas would still be ringing in the bank’s ears – his audience was customers and Canberra, knowing full well shareholders don’t need reminding just how well they’re travelling.
“During the half, we continued to focus on supporting our customers, investing to protect the community and providing strength and stability for the broader economy, knowing many Australians are continuing to deal with cost-of-living pressures,” he said.
“This half, we maintained our focus on engaging with our customers on a range of support options and provided more than 65,000 tailored payment arrangements for those most in need of support and helping more than three million customers each month better manage their finances through our digital money management tools.”
He was also quick to emphasise that the bank had invested $450 million in the first half in customer protection against fraud, scams and financial and cyber-crime – always a sensitive issue with seniors – and happily announced a 70 per cent reduction in scam losses over the past two years. Even regional banking got a favourable nod with the comment that the bank had kept its promise to keep all its regional branches open to support communities and jobs in the bush.
But none of this can hid the commercial reality that the CBA is outperforming its three major rivals, especially in the competitive home loan market where it snared a larger slice of the market and boosted loan volumes faster than the broader banking system while keeping the underlying net interest margin.
While not the complete answer, it can be partly attributed to the fact CBA has opted to sell most of its loans via its own proprietary channels (66 per cent), so much so it now writes 45 per cent of all home loans outside of the mortgage broking channels.
Self-evidently, proprietary mortgages have a profitable edge compared with broker loans where the commission must be split, with the bank estimating it’s between 20 per cent and 30 per cent.
Today, more than a third of Australians have a relationship with CBA, it boasts the strongest deposit and lending franchise, is the IT leader in the financial sector and has left behind all the bad headlines from the Hayne Royal Commission. Well, almost.
It all adds up to a compelling investment story, a fact that hasn’t been lost on those SMSFs that have been a contributing factor to the CBA buying that has pushed the share price up nearly 50 per cent in the past year.
That’s a hefty gain in anybody’s language, leaving some analysts more than a little red-faced. That said, it might be time to lighten the portfolio of CBA scrip and lock in some of that capital gain. At the very least it will cover a round of drinks (or two) at the golf course.
