The Commonwealth Bank has stood up and delivered what looks like a bumper profit result. It put a long list of regulatory and reputational problems behind and produced a $2.65bn cash profit which beat analyst expectations of $2.55bn. The market welcomed the result sending shares up as much as 2.50%. Key points from the result: Unaudited statutory net profit of approximately $2.80bn in the quarter Unaudited cash earnings1 of approximately $2.65bn in the quarter, up 6% Operating income growth of 4% underpinned by volume growth and improved margins Sound credit quality, with Loan Impairment Expense of $198m in the quarter or 11 bpts of GLAA2 Further balance sheet strengthening, with deposit funding at 68% and the Liquidity Coverage Ratio at 131% CET1 (APRA) ratio at 10.1%, up 55 bpts since June 17 after allowing for the payment of the 2017 final dividend The result was driven by lower bad debts and an increase in lending rates. Operating income was up 45% and its Net Interest Margin was higher in the quarter driven by asset repricing and reduced liquid asset balances, partly offset by the impact of the banking levy, higher funding costs and competition. It expenses however did rise by 4% but it includes provisions for any future costs associated with regulatory actions and compliance programs. But costs that could be incurred as a result of the AUSTRAC proceedings have not been included. Unconventional View: Out of the four, we think CBA’s result was the clear standout. The result not only smashed expectations it was clean and simple. No radical changes or deeper issues were buried within. Cash earnings were a clear beat on consensus forecasts, NIM was up unlike some of the other majors and…

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