Here’s a story about the Commonwealth Bank profit announcement, which you probably heard was a record for Australia. We should all worry if it wasn’t.
The profit for 2012-13 was $7.68 billion. Taxpayers should be happy because the tax paid would have been about $3.07 billion.
The profit was up by about 8% as were the earnings per share at 485.8c. As a shareholder I will get 200c as a final dividend, which was up only about 1.5%, but the dividend for the year was 364c, which was up 9%. I should be happy being paid a fully franked dividend of $3.64 in one year for the parcel of shares I bought in the float in 1991 for $5.40 each. They closed today at $73.76.
As a taxpayer you’ll be happy too when I kark it and the tax office gets capital gains from my estate.
As to gouging, the net interest margin came in at 2.13%, up from 2.09. It’s been steady since the GFC, before that it was about 10% higher. It’s a big company with $753 billion in assets and about 45,000 employees, who also keep the economy going and pay taxes, I presume.
To me it’s a good story for everyone, except those who have have money on term deposit. If you buy the bank instead of lending it your money CBA currently gives a dividend yield of 4.9% fully franked, with a prospect of growth better than inflation.
For those not familiar with the term, “fully franked” means that corporate tax has already been paid on 100% of net earnings. So the amount of 485.8c quoted as earnings per share is 70% of the net earnings before tax. When I submit my tax return that tax paid by the company is added in on my taxable earnings column and then deducted at the end as tax paid. It’s called a franking credit.
So as a part owner of a company I’ve already paid tax at corporate rates, which is fair and as it should be. Naturally I have an interest, but I’m not impressed with the notion that the scheme is any kind of privilege or a rort. Anyone with a super fund should be getting the same benefits.
I’d be perfectly happy if a super profits tax were to be applied, but only if the internal profit margins can be shown to be high, not just because it’s a big company with large profit numbers. Actually Tony Abbott is already promising a 1.5% levy, which if you put on top of tax already paid is an increase of 5%.
I believe the Commonwealth Bank is now the 10th biggest in the world, or as this February report said, is worth more than Germany’s entire banking system. Before the GFC it would have been a relative minnow, which says something about how our banks are regulated and were supported during the GFC. Elizabeth Knight at The Age tells us that the set of numbers produced by the CBA “would have been the envy of banks around the world.”
The boss person of the bank tells us what he wants from the pollies:
“We need an election of a government from either side of politics with a clear majority that can lay out a very clear and very inspiring picture of the economy,” he said during an analyst briefing.
He will live in hope, no doubt.
In the end I worry about the capitalist system. Analysts forecasts put CBA’s growth at around 20% all up over the next three years. That’s about par for the course for solid listed companies, perhaps a bit on the low side. But that kind of growth can’t go on forever, can it?