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* Retail lender is world's 10th biggest bank by market cap
* Boosts H2 cash profit by 6 pct to record A$3.78 bln
* Increases H2 dividend by 20 percent to A$1.64
* One in two Australians bank with CBA
By Jane Wardell
SYDNEY, Feb 13 If boring is beautiful,
Commonwealth Bank of Australia is a master of the
The Australian retail bank, which writes one in four of the
country's mortgages, reported a record half-year profit on
Wednesday, pushing its shares to an all-time high and proving
that basic banking is enough to win a place in the big league.
CBA has slowly crept up the world rankings by eschewing
investment banking to keep its business solidly based on plain
vanilla retail and commercial operations.
With a market capitalisation of A$108 billion, CBA is now
the world's tenth biggest bank by market value, according to the
Thomson Reuters Global Banks Index. That's about equal to the
value of Britain's Barclays Plc and Germany's Deutsche
Bank AG combined.
"The difference between the Australian banks and others,
mainly European banks, is that they haven't branched out of
retail and commercial banking," said Evan Lucas, a
Melbourne-based market strategist at IG Markets.
Analysts expect CBA's results to be reflected across the
sector when Australia's other main banks report later this year.
CBA largely avoided riskier areas such as mortgage-backed
securities or European bond markets, and lent to householders in
an economy that sailed through the recent financial crisis with
the support of a China-backed mining boom.
"They didn't end up having a situation where margins were
really squeezed on the one side and the books were fairly heavy
on the other side," Lucas said.
CBA's 6 percent rise in second-half cash profit to a record
A$3.78 billion was underpinned by growth in its retail bank
business and improvements in global markets that boosted wealth
One in two Australians bank in some way with CBA, a huge
asset in a country where household net worth rose by 10 percent
last year, according to Reserve Bank of Australia estimates.
The strong result propelled the bank's shares to an all-time
high of A$67.38 and also lifted the three other banks that round
out Australia's "Big Four" -- Westpac Banking Group,
National Australia Bank and Australia and New Zealand
The bank's shares have risen 34 percent over the past year,
well ahead of an 18 percent gain in the benchmark S&P/ASX 200
PLAYING IT SAFE
Australian banks have played it safe for several years,
sticking to the basics as international peers moved into
investment banking and risky instruments such as CDOs.
They have been extremely cautious about making acquisitions
despite their cash piles.
CBA Chief Executive Ian Narev dismissed suggestions on
Wednesday that the bank would use its highly valued stock to
make a rash of purchases.
"The bar that we put for successful M&A is very high," Narev
told an analyst briefing.
"And what we've seen here again is that by sticking to the
knitting we can still continue to do a pretty good job for our
CBA's return on equity ratio has averaged 16.5 over the past
10 years, according to Thomson Reuters data, and is currently at
just over 18 percent.
In contrast, at Swiss bank UBS, return on equity
sank to a negative 61.78 at the height of the financial crisis
in 2008, recovering to just 8.25 percent last year. Japan's MUFJ
has averaged 5.4 percent and Citigroup 5.7 percent over
the past 10 years.
Only the Canadian banks, where a long run-up in the housing
market has helped credit growth, compare to their Australian
CBA rewarded existing investors by boosting its interim
dividend by 20 percent to A$1.64, although it cautioned that its
final dividend was likely to be slightly lower than a year ago.
But anyone hoping to catch a bargain may have missed out.
CBA's price to book ratio - where a low number may signal a good
deal - is the highest among the global top 10 banks at 2.57. In
contrast, Industrial and Commercial Bank of China, the No. 1 by
market value, is the nearest at 1.61.
($1 = 0.9700 Australian dollars)
(Editing by Richard Pullin)