Right now Australia’s Commonwealth Bank is quite probably the most profitable big bank in the entire world. Terry McCrann explains why.
Right now Australia’s Commonwealth Bank is quite probably the most profitable big bank in the entire world. Terry McCrann explains why.

Why CBA might just be the world’s most profitable bank

Two big things stand out in the CBA profit - the extraordinary strength of the CBA franchise, and the surprisingly mild impact, so far, of the worst recession in nearly a century.

Right now CBA is quite probably the most profitable big bank in the entire world - generating a double digit return on capital (true, just, 10.3 per cent for the full year; albeit 'only' 8.3 per cent for the second half)) in a world of zero interest rates.

Despite the big plunge in rates and three months of the government-mandated recession, CBA's interest margin for the year barely twitched compared to 2018-19.

Yes it made a big $1.5bn special virus bad debt provision - the reason its profit fell - but actual bad debts at June 30 remained extraordinarily low.

Yes, it had to slash its final divided to abide by the APRA order to conserve cash, but so much cash poured into its deposits it only borrowed $2bn from the RBA under its special 0.25 per cent facility.

terry.mccrann@news.com.au

Originally published as Why CBA might just be the world's most profitable bank


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