What's new? Bank-bashing season is in full flight and the Commonwealth Bank has painted a big target on its crest for daring to announce a 7 per cent increase in its half-yearly profit.
But this is an investment column, not a political tirade. We think the Commonwealth Bank has delivered a result that shareholders who put up the equity capital for the business will be quietly pleased about given the "unpredictable environment", as described by the bank.
Its new boss, Ian Narev, has piled up the sandbags and delivered a conservative set of numbers in his first outing as chief executive.
The group has increased its level of liquidity to $133 billion and he says the bank is "holding the right levels of capital".
As with all banks, the higher cost of funding has been a main reason behind the squeeze on the Commonwealth's net interest margin to 2.15 per cent, down 10 basis points on the second half of last year.
It's not just the European woes that are forcing up the cost of funds for the bank. There is intense competition for domestic deposits, which comprise 62 per cent of the total funding used by the bank.
Higher interest rates certainly benefit people with money to save.
Credit growth in Australia has been patchy. The Commonwealth Bank has experienced relatively strong business lending growth compared with the market but has not been chasing residential mortgage loans as aggressively. The slightly higher margins in the former are offsetting the lower margins in the latter, which has been of benefit.
The Commonwealth Bank has taken a different approach to managing its costs. Those looking for a slash-and-burn approach to staff numbers would have been disappointed as Narev has simply opted to make his employees more productive. He has avoided the need to sack thousands but his strategy needs to pay off by lifting the revenue line of the business.
Cost growth of 4 per cent during the period matched income growth, thus delivering a "level jaws" scenario. An improving level of credit quality also led to a lower loan-impairment cost. The outcome of these factors was a 7 per cent lift in cash earnings to $3.576 billion for the period.
The Commonwealth Bank lifted its interim dividend by 4 per cent to $1.37 a share and, of course, it is fully franked. The bank's 800,000 shareholders (and millions more superannuation fund investors) will therefore enjoy a gross dividend yield of about 9.5 per cent.
Outlook Narev says his bank is taking a "scenario-based approach to an unpredictable environment". By that he means the Commonwealth is being careful about how it conducts its business considering the lack of demand for credit, the higher cost of borrowing funds and a tougher regulatory environment.
Price At just more than $50, the share price has slightly trailled the market so far this year but has been a strong performer in the past 12 months. The comparison also holds against its retail banking peers in Australia.
Worth buying? Don't expect much in the way of earnings growth this year but the Commonwealth Bank remains a high-quality business with a big dividend yield. As an investment, that's not a bad formula.