Commonwealth Bank of Australia has announced a $6 billion buyback, the largest of the big four banks so far, as it releases its full-year results.
In a statement to the Australian Securities Exchange (ASX), the firm said the off-market buyback had been decided on based on the capital generated by strategic divestments, level of future organic capital generation, expected divestment proceeds and the size of the franking credit surplus.
These divestments, which included BoCommLife and CommInsure Life, had generated $6.2 billion since 2018, the firm said. Additional proceeds were expected from the majority sale of Colonial First State and divestment of CommInsurance General Insurance later this year.
It also noted CBA was able to adequately absorb any potential stress and had a strong capital and balance sheet position.
The buyback would be conducted by an off-market tender process which would begin for eligible shareholders on 30 August and close on 1 October.
The buyback compared to one of $2.5 billion by NAB and $1.5 billion by ANZ.
There would also be a dividend of $2.00 per share, fully franked, which brought the full-year dividend to $3.50 which the bank said represented 71% of its cash earnings.
Net profit after tax was $8.8 billion, up 19.7%, while operating income was $24.1 billion, up 1.7%.
Cash net profit after tax in the retail banking space rose 16% from $2.6 billion in the end of June 2020 to $4.8 billion.
Chief executive, Matt Comyn, said: “Looking ahead, we anticipate ongoing economic impacts and earnings pressure from lower interest rates. We will continue to invest in the business to reinforce our product offering to our retail and business customers and extend our digital leadership”.
Meanwhile, the partnership with AIA Australia for partial transfer of Commonwealth Financial Planning, which was announced at the end of July, was likely to mean a $52 million post-tax loss. This was the result of the write-down of assets to fair value less cost to sell.