Commonwealth Bank of Australia

Hello and welcome to the results briefing for the Commonwealth Bank of Australia for the half year ended 31 December 2025. I'm Melanie Kirk and I'm Head of Investor Relations. Thank you for joining us. For this briefing, we will have presentations from our CEO, Matt Common, with an overview of the results and an update on the business. Our CFO, Alan Docherty, will provide details of the results and Matt will then provide an outlook and summary. The presentations will be followed by the opportunity for analysts and investors to ask questions. I'll now hand over to Matt. Thank you, Matt.

Thanks very much, Mel, and good morning, everyone. It's great to be with you today to present the bank's half-year results. We recognise the cost of living pressures, global uncertainty and rapid change are weighing on many Australians. In this environment, we've remained focused on supporting and serving our customers. That focus has delivered disciplined growth across our core customer segments. Cash net profit increased by 6% on the prior comparative period and earnings per share increased by 19 cents. We maintained strong liquidity, funding and capital positions and our operating performance and capital position has allowed the board to declare a fully franked dividend of $2.35 up 10 cents on the prior corresponding period. This marks the 11th consecutive period of DRP neutralisation. There are two features of this result that stand out. The first is the market context. We've seen high credit growth, low loan losses, supportive funding markets and intense competition. The second, which is a key strength, has been maintaining stable margins while growing volume at or above system across all major segments. Over the past 12 months, mortgage balances grew by $45 billion or 7% and business lending grew by 12.3 times system. Deposit balances increased by $44 billion in the half. Domestic deposit and lending balance growth in a half year of 2008. Australia is currently experiencing relatively strong nominal growth and private sector demand. In this environment, banks play a critical role in supporting credit growth for productive investment while maintaining unquestionably strong capital positions. Doing this sustainably requires profitable banks that can generate capital organically to support the economy. The last time credit growth was at this level, apart from a brief period during COVID, returns across the industry were materially higher. In normal conditions, such an environment would favour disciplined competition so that scarce capital is deployed where it earns an appropriate return. However, the competitive landscape is materially shifting due to differing business models, regulatory settings and architecture, customer offerings and return hurdles. Against this backdrop, we believe CBA is uniquely positioned to adapt and perform strongly. Our deep customer relationships and franchise strength allows us to compete effectively and profitably. That profitability allows us to support higher growth across the economy, invest to improve the customer experience and deliver consistent returns for our shareholders. Discipline growth and margin management drove operating income growth of 6.6%. Operating expenses increased by 5.5%, excluding restructuring and notable items. This reflected inflationary pressures and higher investment in technology, resilience and our frontline teams to improve customer experience. Credit conditions remained very benign, contributing 6.1% cash profit growth. The performance and long-term health of our franchise is underpinned by a simple relationship-led model. Deep, trusted customer relationships drive more frequent and meaningful engagement. That engagement provides deeper insights into customer needs, enabling us to deliver superior customer experiences. Over time, this creates enduring value for customers and sustainable returns for our shareholders. This model has long underpinned our leadership in retail banking and over the past year, over the past several years, has accelerated growth in our business bank. Technology continues to amplify this advantage, enabling more personalised, timely and scalable customer engagement. Our financial performance reflects customer focus, disciplined execution and investment in our franchise. We track the strength of our customer relationships through Net Promoter Score, and this remains an important indicator of trust and advocacy. We currently hold leading NPS positions among major banks in consumer and institutional banking. Following 15 months at number one, we dropped to the second position in business banking in the half. Operationally, this is translating into scale and momentum across the group. On average, each week, we settle more than 3,000 home loan purchases, lend around $900 million to businesses, and process almost 150 million payments, and alert customers around 280,000 times to suspicious card activity. We continue to build scale and depth of primary customer relationships, which underpins long-term franchise health. We've consciously increased investment in data, technology and AI to improve customer experience, safety, security and operational resilience. The retail bank has performed well with pre-provision profit growth of 5%. We've maintained the leading net promoter score for 38 consecutive months. Retail MFI share has increased slightly to 33.5% but remains below its 35% peak. Customer engagement remains a core strength with 9.4 million CommBank app users and 14 million daily logins. We now hold 12 million retail transaction accounts, a 35% increase since the start of COVID and an increase of 585,000 in the past year. As a result, our deposit growth has been strong. Home loan balances increased by 7% in the past year to $622 billion. 97% of these customers hold a transaction account with us. Digitisation and technology continue to drive performance in home lending. 70% of proprietary home loan applications are auto-decision on the same day. We're focused on continuing to strengthen our MFI share and investing in AI-enabled digital experiences. The business bank has had another period of strong performance. Pre-provision profit growth was 8% and cash profit growth was 14%. MFI share increased to 26.9, which is a 310 basis point increase since the start of COVID. We added 85,000 transaction accounts in the past year, which is a 7% increase. And the business bank is now the Commonwealth Bank's largest source of transactional deposits. We grew lending at 1.3 times system, increasing balances by $18 billion in the year. Business banking lending balances have increased by 87% or $78 billion in the past six years, supporting growth and jobs in our economy. Approximately 90% of business loans are linked to a CBA transaction account, reflecting the depth of our primary relationships. This supports credit quality with loan losses of six basis points in the half. It also allows us to use data and automation to substantially improve lending and servicing processes. For small businesses, we've doubled the volume of loans auto-approved through BizExpress over the past two years and have reduced annual loan maintenance activity by 85%. We also launched a national AI cybersecurity and digital capability initiative, supporting up to 1 million small businesses to lift productivity and competitiveness. The combination of deep customer relationships and prudent lending growth is delivering sustained earnings performance. Our institutional business is also performing well, with pre-provision profit increasing by 13%. We've regained the number one position in NPS, supported by improvements in client experience and execution. Our institutional bank plays an important role in providing $64 billion in net deposit balances and supporting markets activity. We've seen growth in new transaction banking mandates, enabling the institutional bank to further support the group in deposit funding. The markets business has had a particularly strong half. We led the market in debt capital market performance and last year topped the Bloomberg combined lead table. In New Zealand, ASB performed well with operating income growth of 8%. ASB is the highest reputation score of the major banks in New Zealand and has been a digital bank of the year for the past four years. ASB saw 1.3 times system growth in home lending and business and rural lending. Deposits grew at 1.2 times system. Customer deposits and home lending balances have both increased by 41% in the last six years, by $26 billion and $24 billion, respectively. The credit environment remains benign. Troublesome and non-performing exposures decreased following upgrades or external refinancing activity. The number of home loan customers in hardship declined by 28% since June 2024. And we remain well provisioned for a range of economic scenarios. We hold total provisions of $6.3 billion, which is $2.8 billion above our central economic scenario. Our balance sheet remains strong with 79% deposit funding. Our weighted average maturity of long-term funding is 5.2 years and liquid assets are $199 billion. Our capital ratio of 12.3% is $10 billion above minimum regulatory requirements. A strong balance sheet allows us to invest for the long term and respond to any deterioration in market conditions. We've seen record inflows of deposits in the half. We've also seen $15 billion increase in redraw balances and offset accounts. Customers having surplus funds available is a significant predictor of arrears performance and so this behaviour has a positive capital impact. 87% of home loan customers are now in advance of their scheduled repayments, on average 35 payments in advance. When adjusted for redraw and offset savings, household debt has now returned to levels not seen since 2015. The transmission of monetary policy in Australia means that our banks pay very competitive interest rates on at-call household deposits compared with other markets. On average, at-call deposits in Australia attract an interest rate which is five times higher than in the US and 10 times higher than in Europe. We've seen a strengthening in the economy in the past six months driven by consumer demand. Spend has been increasing across all customer age cohorts. Most age groups are broadly maintaining discretionary spending and increasing savings levels. GDP growth in mid-2026 was 2%, more than double the same period a year ago. Most noticeably, economic growth has shifted from being primarily driven by public demand to being driven by household consumption. Last week, we saw the Reserve Bank raise interest rates to 3.85% in response to inflation, which is running higher than the target band. Almost one third of the increase in the CPI basket is driven by housing, with utilities a substantial contributor to that category. Our purpose, building a brighter future for all, guides how we allocate capital, manage risk and invest for the long term. It reflects our long term commitment to Australia, our customers and our communities. Some of the ways we're delivering on our purpose include significantly increasing funding for new residential housing development, delivering $190 million in benefits to consumers through CommBank Yellow, migrating our core banking system to the cloud to improve resilience, delivering 30% more technology changes, reducing critical incidents and improving recovery times by 65%, rolling out new AI tools and training programs to our teams to build capability and deliver better customer experiences. and maintaining our strong balance sheet settings, sending around 40,000 alerts a day to customers about suspicious activities and deploying more than 2,900 AI bots to engage and disrupt scammers. Importantly, our strong performance enables us to continue supporting our 18 million customers, protect communities, support Australia's economy and invest for the long term. As cost of living pressures persist, we are providing targeted support to households under strain, including 63,000 tailored payment arrangements for customers most in need. We've supported more than 79,000 households to buy a home, including through dedicated support for first home buyers. And we lent $25 billion to businesses supporting growth, jobs and economic activity. We're investing a billion dollars a year to help more people protect themselves from scams and fraud. Our strong balance sheet allows us to support customers and communities while delivering sustainable long-term returns for shareholders, including $4.4 billion in dividends this half, benefiting more than 14 million Australians. we will continue to support our customers, protect communities, and invest for the long term to provide strength and stability to the Australian economy. I'll now hand to Alan to take you through the result in more detail.

Thank you, Matt, and good morning, everyone. Starting with the results overview, we've set out the key aspects of our current operating context, how we are responding, and how those actions are contributing to the long-term strengthening of our franchise. At a macro level, we are seeing strong system growth in both credit and money supply. Competitive intensity within the banking sector remains elevated. Technological innovations continue at pace, and geopolitics remains a source of potential tail risks. Against that backdrop, our response has been deliberate and disciplined. We have carefully managed volume and margin trade-offs, continued to invest and extend our leadership in both technology and proprietary distribution, and maintained conservative balance sheet settings. This approach is yielding strong financial outcomes. Pre-provision profit growth is healthy, Our dividend per share continues to reflect the strong compositional quality of our earnings. And our balance sheet settings give us confidence in our ability to continue supporting customers, growing the franchise and delivering sustainable returns to shareholders over the long term. This slide sets out the usual reconciliation between statutory and cash profits for the half. there were only modest movements in the usual non-cash items during the period. As such, both statutory and cash profits on a continuing operations basis totaled around $5.4 billion. Breaking down the components of that cash profit, Operating income grew 6.6% year-on-year as our investments in technology and proprietary distribution continue to yield strong operational outcomes. That top-line performance allows us to continue to invest in the franchise with underlying operating expenses increasing 5.5% on the prior comparative period. Notable expense items totaled $170 million over the last six months largely due to the settlement of a long-standing legal proceeding in New Zealand during the September quarter. Loan impairment expense was flat year on year and lower versus the second half, reflecting the benefits of our conservative settings and the resilience we continue to see in customer and portfolio credit quality. This resulted in growth in cash profits of a little over 6% on both the prior corresponding period and the second half of last year. It's worth noting that the effective tax rate for the half was 30.3%. Looking ahead, you can assume that will settle closer to 30% for the 2026 financial year. On operating income, we delivered growth of 6.6% over the prior comparative period, Net interest income increased strongly, up $761 million, supported by profitable above-system growth in lending and deposits. Other operating income also contributed, growing $163 million over that period, assisted by one-off gains. This slide sets out some of the drivers of long-term franchise strength that we have been targeting. deeper customer relationships, deposit-led growth in our core segments that underpins and precedes lending growth, and productivity improvements within our frontline teams. Our retail bank continues to build foundational banking relationships, adding 3 million net new transaction account customers over the past five years. In home lending, we continue to prioritise and grow proprietary distribution, with $55 billion of new fundings originated over the last six months through our own channels. And our strategic focus on business banking continues to deliver strong outcomes with double-digit compound annual growth in both deposits and lending over recent years. Our investments in building a more digital, customer-focused and streamlined business bank for our people and our customers can be seen in the productivity improvements delivered over the last five years, with fundings per banker up 65% over that period. Turning to the net interest margin and looking at the movement over the most recent six-month period. The main driver of the four basis point reduction over the half was the increased mix of low margin liquid assets and institutional repos. Excluding those items, margins were one basis point lower with competitive pressures and the impact of a lower cash rate largely offset by the replicating portfolio and the favourable portfolio mix effect of strong deposit growth. Margins were a little stronger in the December quarter, largely due to the benefit of higher swap rates on our replicating portfolio. You can see here that we're managing margin outcomes carefully, balancing competitiveness with returns and staying focused on building lasting primary relationships with our customers rather than chasing unprofitable volume growth. On operating expenses, they increased 5.5% on the prior corresponding period. The drivers are largely unchanged over recent years. We are seeing inflationary impacts on wages and IT vendor cost inflation continues to run higher than CPI. At the same time, we continue to invest behind the franchise with higher cloud consumption and software licensing costs and our ongoing investment in technology infrastructure and AI capabilities alongside enhanced frontline capacity and operational resilience. We are self-funding much of that investment through productivity initiatives, realising approximately $222 million in incremental cost savings over the past six months. Turning to credit risk, loan impairment expense for the half was $319 million, broadly consistent with the prior comparative period and improving versus the second half. Across the portfolio, we continue to see broadly stable to improving conditions. Households have been supported by the strength of the labour market and rising disposable incomes. We have seen this reflected in higher prepayments and lower consumer arrears. In the corporate portfolio, troublesome assets and non-performing exposures continue to trend lower as a proportion of the portfolio. Given the uncertainty in global macro and geopolitics, we've maintained strong provisioning coverage. Total recognized provisions are approximately $6.3 billion, and importantly, we continue to hold the material buffer above the central scenario. This slide provides the usual additional detail on sectoral considerations, we marginally reduced base provisioning and forward-looking adjustments in areas where conditions have improved, including consumer, construction and retail trade. This was partly offset by an increased level of provisioning relating to our downside economic scenarios, where we take into account the risk of exogenous shocks to the domestic economy. Overall, our approach to provisioning remains grounded, forward-looking and appropriately conservative. Our funding and liquidity profile has continued to strengthen. We continue to be predominantly deposit funded, supported by a strong deposit gathering franchise. Total customer deposits grew at an annualized rate of 10% over the last six months, taking our customer deposit ratio to 79%. We also maintained a historically low proportion of short-term wholesale funding. This combination of deposit growth, consistent term issuance across diverse funding markets and strong liquidity buffers mean we remain well positioned to support the current strong level of customer demand for lending growth. On capital, our common equity tier one ratio remained at 12.3%, with organic capital generation continuing to support franchise growth and dividends. Growth in risk-weighted assets was largely a function of lending volume growth, with credit risk weightings remaining broadly stable over the past six months. The interim dividend increased 10 cents to $2.35, representing a headline payout ratio of 72% and a normalized payout of 74% after adjusting for the benign first half loan loss rate. The dividend will be fully franked and the dividend reinvestment plan will be offered with no discount and fully neutralised. Delivering franchise growth while maintaining returns above our shareholders' cost of capital allows sustainable and consistent accretion in dividend per share over the long term. This slide sets out our long-term approach to capital management. We prioritise profitable franchise growth as the first and best use of organic capital generation. We invest in line with our strategic priorities, aim to pay sustainable dividends, and we carefully manage our share count and surplus capital in a disciplined way. Over time, you can see we've balanced capital generation with capital distribution, supporting franchise growth when lending demand is elevated, while also returning excess capital to shareholders primarily through dividends as well as through the selective utilization of buybacks. Ultimately, we remain focused on optimizing long-term shareholder outcomes while maintaining the balance sheet resilience that underpins our ability to support our customers and the broader economy through the cycle. In closing, this long-term approach has again assisted in delivering consistent and superior shareholder returns. Our combination of a high return on equity and strong payout ratio continues to compare favourably with domestic and global banking peers. Our strategic investments are yielding measurable improvements in franchise growth and productivity, underpinning our continued outperformance in net tangible assets and dividends per share. I'll now hand back to Matt for the economic outlook and closing remarks. Thank you.