Welcome to the Fear and Greed Business Interview.

Welcome to the Fear and Greed Business Interview.

I'm Sean Almer.

I'm Sean Almer.

The Commonwealth Bank has posted a five point one to three billion dollar profit for the six months to the end of December. The result was ahead of expectations and the bank increase dividend to two dollars twenty five is share and reported solid lending growth and credit quality. But being Australia's biggest bank and largest company overall means it's also got a unique insight in the economy because of its sheer number of customers right across the country and that's why an interview with Chief executive Matt Common is so interesting. Once again, in this reporting season, we're working with the team at osbiz to bring new interviews with the leaders of some of Australia's biggest companies. Osbiz is Australia's leading provider of live and on demand video of the latest news in Australian business markets, economy and startups. Sign up for free at OSBIZAUSBI said osbiz dot com dot Au. In today's interview, Juliet Sali speaks with Matt Common and started by asking for the highlights of the results in his own words.

The Commonwealth Bank has posted a five point one to three billion dollar profit for the six months to the end of December. The result was ahead of expectations and the bank increase dividend to two dollars twenty five is share and reported solid lending growth and credit quality. But being Australia's biggest bank and largest company overall means it's also got a unique insight in the economy because of its sheer number of customers right across the country and that's why an interview with Chief executive Matt Common is so interesting. Once again, in this reporting season, we're working with the team at osbiz to bring new interviews with the leaders of some of Australia's biggest companies. Osbiz is Australia's leading provider of live and on demand video of the latest news in Australian business markets, economy and startups. Sign up for free at OSBIZAUSBI said osbiz dot com dot Au. In today's interview, Juliet Sali speaks with Matt Common and started by asking for the highlights of the results in his own words.

Well I think, overall, from our perspective, the ability to be able to continue to support our more than sixteen million customers, keep investing in our customer experience and protecting our customers from things like scams and fraud, and also providing strength and stability in the Australian economy.

Well I think, overall, from our perspective, the ability to be able to continue to support our more than sixteen million customers, keep investing in our customer experience and protecting our customers from things like scams and fraud, and also providing strength and stability in the Australian economy.

You did have a six percent rise in operating expenses. What is the outlook for the second half given we are expecting interest rate cuts, but of course you've also got staffing pressures.

You did have a six percent rise in operating expenses. What is the outlook for the second half given we are expecting interest rate cuts, but of course you've also got staffing pressures.

Yes, and the biggest driver of that increase in operational expenses was an increase in our investment envelopes. Every year, our cash spend is going to be up eleven percent or it was for this first half versus the prior corresponding period. That's in particular to support, as I said, higher levels of investment in our customer experience and also importantly in areas like scams, for aud cyber financial crime, where we spent more than four hundred and fifty.

Yes, and the biggest driver of that increase in operational expenses was an increase in our investment envelopes. Every year, our cash spend is going to be up eleven percent or it was for this first half versus the prior corresponding period. That's in particular to support, as I said, higher levels of investment in our customer experience and also importantly in areas like scams, for aud cyber financial crime, where we spent more than four hundred and fifty.

Million dollars in the first half.

Million dollars in the first half.

To both protect our customers and the broader community.

To both protect our customers and the broader community.

What are you seeing in terms of your troubled bad loan book, and particularly when you see that Victoria makes up a lot of that.

What are you seeing in terms of your troubled bad loan book, and particularly when you see that Victoria makes up a lot of that.

Yes, So what we hear consistently from households and of course businesses is ongoing pressures that have come from higher cost of living, and we see and hear those acutely. But notwithstanding that, what we actually saw during the six months to thirty one December was pretty benign credit conditions.

Yes, So what we hear consistently from households and of course businesses is ongoing pressures that have come from higher cost of living, and we see and hear those acutely. But notwithstanding that, what we actually saw during the six months to thirty one December was pretty benign credit conditions.

So actually loan losses.

So actually loan losses.

Were well below the average that we would expect to see across both our personal and business customers, specifically when we do get into customers that are in financial difficulty. Yes, there is a higher proportion that's coming from Victoria. We do see a weaker economic and sentiment coming out of Victoria, which we hope obviously turns around. But more broadly, actually we think the credit performance was a bit better than we were expecting against that backdrop of slowing economic conditions and ongoing pressures on households.

Were well below the average that we would expect to see across both our personal and business customers, specifically when we do get into customers that are in financial difficulty. Yes, there is a higher proportion that's coming from Victoria. We do see a weaker economic and sentiment coming out of Victoria, which we hope obviously turns around. But more broadly, actually we think the credit performance was a bit better than we were expecting against that backdrop of slowing economic conditions and ongoing pressures on households.

You've mentioned that you do expect that the economy will turn a corner, particularly with these expected interest rate cuts. What is your data showing you though about household savings and particularly how younger customers are firing.

You've mentioned that you do expect that the economy will turn a corner, particularly with these expected interest rate cuts. What is your data showing you though about household savings and particularly how younger customers are firing.

Yes, it's been very difficult for households, and in particular probably younger customers over the last couple of years as rates increase, but also importantly, prices are twenty percent higher across the economy than four years ago.

Yes, it's been very difficult for households, and in particular probably younger customers over the last couple of years as rates increase, but also importantly, prices are twenty percent higher across the economy than four years ago.

What we did see in this period, and this is a function.

What we did see in this period, and this is a function.

Of both the Stage three tax cuts and some of those rebates, like the electricity rebates. We did see a higher level of savings across the economy. We should see that obviously in our accounts or our deposit accounts, but also customers who are repaying their home loan or actually depositing to into an offset account, which of course offsets or reduces your loan balance that was running at about double what we'd ordinarily see. So combination of as inflation has continued to reduce, that's obviously putting less pressure on prices. Higher level of savings from the areas that I mentioned leading to an improvement in household incomes, and we think that's going to continue going into twenty twenty five for the rest of the year, and as you said, we do anticipate rate cuts on the near term horizon.

Of both the Stage three tax cuts and some of those rebates, like the electricity rebates. We did see a higher level of savings across the economy. We should see that obviously in our accounts or our deposit accounts, but also customers who are repaying their home loan or actually depositing to into an offset account, which of course offsets or reduces your loan balance that was running at about double what we'd ordinarily see. So combination of as inflation has continued to reduce, that's obviously putting less pressure on prices. Higher level of savings from the areas that I mentioned leading to an improvement in household incomes, and we think that's going to continue going into twenty twenty five for the rest of the year, and as you said, we do anticipate rate cuts on the near term horizon.

Some economists have mentioned to me that you really need one hundred basis points of rate cuts to make a real difference to a lot of mortgage holders, how exposed are you to credit losses due to higher rates and some of this household debt.

Some economists have mentioned to me that you really need one hundred basis points of rate cuts to make a real difference to a lot of mortgage holders, how exposed are you to credit losses due to higher rates and some of this household debt.

Well, as I said, what we've been surprised.

Well, as I said, what we've been surprised.

To see is how much pressure of course has been on households, but also how customers and they've had to make some real sacrifices have stayed on track and terms of their loan repayment. So we see and feel the pressures acutely on households and to a lesser extent businesses, but it's actually not translating at this point into higher loan losses. That's, of course the function of very low levels of unemployment in Australia, and I think that's been a very successful outcome over now many years, being able to retain the increases in the labor market.

To see is how much pressure of course has been on households, but also how customers and they've had to make some real sacrifices have stayed on track and terms of their loan repayment. So we see and feel the pressures acutely on households and to a lesser extent businesses, but it's actually not translating at this point into higher loan losses. That's, of course the function of very low levels of unemployment in Australia, and I think that's been a very successful outcome over now many years, being able to retain the increases in the labor market.

And so I mean as we look forward, we.

And so I mean as we look forward, we.

Do think that some of those pressures will start to alleviate.

Do think that some of those pressures will start to alleviate.

And yes, small.

And yes, small.

Changes in the cash rate, I don't think they'll make a huge difference in terms of household incomes in the near term. I do think it will support an increase in more positive sentiment and just a sense that actually the long awaited rate cuts and relief have actually started, and I think that will continue. Obviously as we go throughout twenty twenty five and into the next year.

Changes in the cash rate, I don't think they'll make a huge difference in terms of household incomes in the near term. I do think it will support an increase in more positive sentiment and just a sense that actually the long awaited rate cuts and relief have actually started, and I think that will continue. Obviously as we go throughout twenty twenty five and into the next year.

You've got a near fifty percent market share of Australia mortgagees not sold via a mortgage broker. How or why do you feel that you're beating your competitors in this space.

You've got a near fifty percent market share of Australia mortgagees not sold via a mortgage broker. How or why do you feel that you're beating your competitors in this space.

Well, I think the broker industry has continued to grow and has become a more significant.

Well, I think the broker industry has continued to grow and has become a more significant.

Part of the overall market. Like any business, we.

Part of the overall market. Like any business, we.

Of course like to be able to serve our customers directly. The mortgage brokers are a very important channel, but we also have invested a lot in the experience for our customers to come directly to us.

Of course like to be able to serve our customers directly. The mortgage brokers are a very important channel, but we also have invested a lot in the experience for our customers to come directly to us.

We've got a.

We've got a.

Very significant and well skilled lending team who support our customers directly and that, as you said, has led to us becoming almost fifty percent of what we call proprietary or direct mortgages that are originated in Australia.

Very significant and well skilled lending team who support our customers directly and that, as you said, has led to us becoming almost fifty percent of what we call proprietary or direct mortgages that are originated in Australia.

So with the economic outlook, we are expecting some kind of interest rate carts. But more broadly, when we're watching what's happening from Washington, how are you seeing the global macro picture and how potential tariff shops could impact the economy.

So with the economic outlook, we are expecting some kind of interest rate carts. But more broadly, when we're watching what's happening from Washington, how are you seeing the global macro picture and how potential tariff shops could impact the economy.

Yeah, look, of course, like everyone we've been watching the steady stream of news and updates over the last couple of weeks. In particular, I think it's of course important to try to look through the near term and some of the noise that's associated with that. We're looking obviously fundamentally at what we think the prospects are for the Australian economy, which we remain optimistic certainly over the medium term. We of course support customers from a very wide range of industries, so trying to understand what the impacts might be on them, at least at this stage. Whilst we're following all of those developments closely, we haven't made any changes. We don't anticipate making any changes, certainly in the near term, but we have to recognize that there are a number of assumptions within that we do think the outlook for global economic growth is probably slightly weaker.

Yeah, look, of course, like everyone we've been watching the steady stream of news and updates over the last couple of weeks. In particular, I think it's of course important to try to look through the near term and some of the noise that's associated with that. We're looking obviously fundamentally at what we think the prospects are for the Australian economy, which we remain optimistic certainly over the medium term. We of course support customers from a very wide range of industries, so trying to understand what the impacts might be on them, at least at this stage. Whilst we're following all of those developments closely, we haven't made any changes. We don't anticipate making any changes, certainly in the near term, but we have to recognize that there are a number of assumptions within that we do think the outlook for global economic growth is probably slightly weaker.

We need to be conscious.

We need to be conscious.

Of how trade relations evolve, and of course the geopolitical risks that are always present.

Of how trade relations evolve, and of course the geopolitical risks that are always present.

A lot of investors hold CBA for the divid end and the highest ever first half divid and announced Matt, what can investors expect looking I know you don't have a crystal wall but looking forward to the second half some more strong dividend returns.

A lot of investors hold CBA for the divid end and the highest ever first half divid and announced Matt, what can investors expect looking I know you don't have a crystal wall but looking forward to the second half some more strong dividend returns.

Well, we're very conscious, as you said, that our shareholders, which are predominantly domestic and Australian based, either directly or through their superannuation fund, the dividend an important part of why you own the Commonwealth Bank, and of course access to fully franked dividends. So look, we will please notwithstanding the small increase in the profit, to be able to declare a two dollars twenty five fully franked dividend, and our policy would see us look to pay in the midpoint of that seventy to eighty percent range. So obviously it will depend on what our full year profit is, but we of course think very carefully about any dividend decisions to both support our shareholders in both the near term as well as over the long term.

Well, we're very conscious, as you said, that our shareholders, which are predominantly domestic and Australian based, either directly or through their superannuation fund, the dividend an important part of why you own the Commonwealth Bank, and of course access to fully franked dividends. So look, we will please notwithstanding the small increase in the profit, to be able to declare a two dollars twenty five fully franked dividend, and our policy would see us look to pay in the midpoint of that seventy to eighty percent range. So obviously it will depend on what our full year profit is, but we of course think very carefully about any dividend decisions to both support our shareholders in both the near term as well as over the long term.

And shares today have hit yet another record. I mean, Matt, not a day goes by I think where an analyst doesn't tell me you're overvalued UBS again, saying we don't see anything to justify the recent share price run. What do you say to that when analysts are saying sell CBA shares.

And shares today have hit yet another record. I mean, Matt, not a day goes by I think where an analyst doesn't tell me you're overvalued UBS again, saying we don't see anything to justify the recent share price run. What do you say to that when analysts are saying sell CBA shares.

Well, I also recognize that the analysts have a job to do. We don't track or watch the share price on a day to day basis.

Well, I also recognize that the analysts have a job to do. We don't track or watch the share price on a day to day basis.

Of course, it's important for our owners and.

Of course, it's important for our owners and.

As you said, both the price of shares but also what.

As you said, both the price of shares but also what.

The dividend is.

The dividend is.

But there's a number of elements within that which is more difficult to control. I think it's important as a management team for the Commonwealth Bank to be focusing on what we can control, which is of course trying to do a great job serving our customers, allocating capital or loans efficiently to both our customers and to support broader economic growth and financial stability.

But there's a number of elements within that which is more difficult to control. I think it's important as a management team for the Commonwealth Bank to be focusing on what we can control, which is of course trying to do a great job serving our customers, allocating capital or loans efficiently to both our customers and to support broader economic growth and financial stability.

You've still got.

You've still got.

About seven hundred million of the one billion dollar buyback program that was announced. Where are you sitting with your CET one ratio and how do you expect that to be affected?

About seven hundred million of the one billion dollar buyback program that was announced. Where are you sitting with your CET one ratio and how do you expect that to be affected?

Yeah, we're well above regulatory minimums the common equity tier one of twelve point two.

Yeah, we're well above regulatory minimums the common equity tier one of twelve point two.

We on top of the dividend.

We on top of the dividend.

As we covered that, we intend to neutralize the dividend reinvestment plan, so effectively we go into the market and buy back those shares. So obviously we have managed the share count and try to reduce the share count over time.

As we covered that, we intend to neutralize the dividend reinvestment plan, so effectively we go into the market and buy back those shares. So obviously we have managed the share count and try to reduce the share count over time.

The way to do that is via buybacks. We also think about.

The way to do that is via buybacks. We also think about.

It in the context of our capital can be allocated to growth, and importantly, this is a very strong period of lending growth, which consumes capital. We want to make sure we're well provisioned for any economic deterioration and also to keep investing in our business. But overall, yes, our balance sheet and capital position gives us a lot of flexibility to be able to be patient and also to look for ways to most effectively allocate that capital and deliver appropriate returns to our owners.

It in the context of our capital can be allocated to growth, and importantly, this is a very strong period of lending growth, which consumes capital. We want to make sure we're well provisioned for any economic deterioration and also to keep investing in our business. But overall, yes, our balance sheet and capital position gives us a lot of flexibility to be able to be patient and also to look for ways to most effectively allocate that capital and deliver appropriate returns to our owners.

So a strong financial position. If there is an interest rate cut next week, Matt, how quickly we'll CBA pass that on well.

So a strong financial position. If there is an interest rate cut next week, Matt, how quickly we'll CBA pass that on well.

As you'd expect.

As you'd expect.

We don't pre announce the decisions that we're likely to take in the future, but it's fair to say that we recognize that Australian households have been looking forward to some rate relief for some time, and we know that that decision and the decisions to flow from that will be very closely scrutinized and watched and watched.

We don't pre announce the decisions that we're likely to take in the future, but it's fair to say that we recognize that Australian households have been looking forward to some rate relief for some time, and we know that that decision and the decisions to flow from that will be very closely scrutinized and watched and watched.

That was Commonwealth Bank Chief Executive Matt Common speaking to Juliet Sally on Osby's, Australia's leading provider of live and on demand video of the latest news in Australian business markets, economy, in startups. Sign up at Osby's dot com today you It's free. This is the Fear and Greed Daily Interview. Join us every morning for the full episode of Fear and Greed daily business news for people who make their own decisions.

That was Commonwealth Bank Chief Executive Matt Common speaking to Juliet Sally on Osby's, Australia's leading provider of live and on demand video of the latest news in Australian business markets, economy, in startups. Sign up at Osby's dot com today you It's free. This is the Fear and Greed Daily Interview. Join us every morning for the full episode of Fear and Greed daily business news for people who make their own decisions.

I'm John Elmer Joey Today.

I'm John Elmer Joey Today.