Why is the CBA share price on the rise?
Shares in the top lender have rebounded nearly 50% in the past 12 months.
Shares in Commonwealth Bank (ASX: CBA) are always a market favourite and the stock is again among the top traded stocks. The stock hit an all-time high of $109.03 in early trading on Wednesday, and was still up 1.2% at $107.75 at the time of writing.
Why the CBA share price is poised for gains
Australia’s biggest lender on Wednesday reported full year results and the numbers have turned out better than expected. Cash profit for the 12 months to 30 June rebounded nearly 20% to $8.65 billion, while operating revenue rose 1.7% to $24.2 billion.
The bank said an improvement in economic conditions helped boost performance in its core retail, business and institutional banking businesses, all of which saw solid volume growth. It also allowed the bank to write back $554 million in provisions that it had made at the height of the pandemic last year.
CEO Matt Comyn said the bank’s continued balance sheet strength and very solid capital position has allowed CBA to support customers while delivering strong and sustainable returns to shareholders.
But more importantly for investors, CBA unveiled a mammoth off-market share buyback worth up to $6 billion and also lifted its final dividend to a solid $2 per share, fully franked. Analysts had expected it to announce a buyback up to $5 billion, so the final number was certainly a surprise.
Strong capital position
Mr Comyn said the bank’s buyback was “the most efficient and appropriate way” to return capital after the bank built up excess capital of $6.2 billion from divestments since 2018.
At the same time, it had a Common Equity Tier 1 capital ratio of 13.1% at June-end, far in excess of the unquestionably strong 10.5% benchmark mandated by the prudential regulator APRA.
The bank said the share buyback would open on 30 August and close on 1 October, and would be conducted at a discount of 10-14% on the market price. CBA’s last major buyback, in 2006, amounted to about $500 million.
CBA shares are already up nearly 50% over the last 12 months.
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