CBA to retain capital levels despite buyback, high dividend payout

Cash net profit after tax declined 2% in the latest financial year.

The Commonwealth Bank of Australia (CBA) is expected to maintain its robust capital levels despite giving out a higher dividend and extending its capital buyback, reports S&P Global Ratings.

CBA has extended its capital buyback by 12 months, with A$6718m still to be completed. Its dividend payout ratio is 79%.

Its cash net profit after tax declined 2% in the financial year that ended on 30 June 2024.

Despite the lower profit, CBA is forecasted to maintain its risk-adjusted capital ratio at 11.5% to 12% over the next 2 years. 

CBA also intends to manage its common equity tier 1 ratio at above 11%, higher than local regulators’ requirement of 10.25%, S&P said.

S&P said that CBA’s credit losses over the next 2 years should remain low and hover at around pre-pandemic levels of 15 basis points.

It did warn that banks in Australia, including CBA, remain exposed to a jump in credit losses due to high household debt, elevated interest rates and consumer prices, and global economic uncertainties.

An earlier report by S&P set expectations that CBA will maintain low credit losses until end-2025.