• Internal Code :
  • Subject Code : MBA403
  • University : Kaplan University
  • Subject Name : finance Management

Financial Analysis of Commonwealth Bank of Australia


Executive Summary



Conclusion and Recommendation


Executive Summary

The Commonwealth Bank of Australia isa listed company registered in Australia that is involved in providing services related to banking and in the provision of financial services. The bank carries on its operations not just in Australia but also in other countries of the world such as South Africa, New Zealand, United Kingdom, Asian countries and the United States of America. The head office of the bank is located in Sydney it has nearly 45000 employees. The Commonwealth Bank of Australia is one of the largest banks of Australia and is listed on the Australian Stock Exchange. This bank provides a number of banking products and also offers a wide range of other financial products and services to its customers. The operations of the bank have been divided into various divisions– Retail Banking, Business and Private Banking, Institutional Banking and Wealth management. This report is intended to analyze the Annual report of the said bank for the year 2019, so as to provide a recommendation as to whether an investment should be made in the shares of the bank or not.


The key financial results of the Common Wealth Bank of Australia for the year 2019 (as taken from its Annual report) have been provided in the below table. On an overall basis, it is evident from the below numbers that the financial position and financial of the bank underwent a slight downfall in the year 2019 (CBA 2019).

Trend in income and expense

table representing trend in income and expense

Dividends declared by the company

table showing Dividends declared by the company

Key metrics for the year 2019

table showing key metrics for the year 2019

Non-financial indicators

Allegations of misconductKey metrics for the year 2019

Non-financial indicators

Recent changes in the governance board of the bank


Justification for inclusion of the selected indicators

The selected financial indicators- profitability, dividends and return on equity and shareholders’ funds are the most relevant indicators that are usually used for evaluating the attractiveness of the company as a proposed investment opportunity. The shareholders or potential shareholders are the most interested in knowing about these metrics. The non –financial indicators considered in this report are really important as these factors have brought major negative shift in the brand image of the company and are expected to have long run implications. Thus, it becomes really important to consider these factors when making a decision to invest in the bank. 

Interpretation of financial indicators

Profitability position of the bank

It is evident from the above analysis that the revenues and incomes of the bank declined in the year2019 and the operating expenses experienced an increase thereby causing a decline in the net profit attributable to equity shareholders (CBA 2019). The decline in operating income was affected by the many factors including the claims related to bushfire and removal of customer fees. 

The bank generated a total shareholder return of 21 percent for the year 2019 which is a reasonable rate of return.


The bank has continued to maintain its dividend payment in spite of the decrease in net profits.  The stable dividend payments made by the company make it a good option for the even in an environment of negative publicity about the business of the bank (RTT news 2020). 

Evaluation of the Strength of Balance Sheet

The bank has a strong balance sheet and its net assets position has improved since the last financial year. The solvency position of the bank is fine; however, it is cash and liquid assets declined during the year. 

Interpretation of Non-financial indicators

  1. Various allegations have been made by the Royal banking Commission of Australia against the Commonwealth Bank of Australia, owing to which a number of investigations were conducted into the operations of the company. The bank was also issued with warnings by the prudential regulator who has instructed the bank to take efforts to bring improvements in the bank’s governance and culture (Butler 2019). These allegations have made a negative impact on the brand image of the bank and have led to declining in the trust and confidence of clients which has also caused a reduction in the number of clients of the bank. Thus, the bank faced a decline in business due to these allegations apart from the additional costs borne by it.

  2. As a part of the strategic initiatives made towards improving the governance and culture at the bank, there have been certain changes in the governance structure of the bank The bank decided to sell its problematic areas such as Insurance and Wealth Management and focus on its core banking activities of buying and lending (Butler  2019). 

Conclusion and Recommendation

On the basis of the results of financial analysis and interpretation performed above, it is concluded that it is worth making an investment into the company. The overall performance of the bank is satisfactory and its lending business increased during the year (Mickleboro, 2019). Even though the bank has suffered a lot of negative publicity, and the banking industry is facing a lot of challenges, the shares of the company are worth making an investment (Harrison 2019: Mosaleva 2018)). The bank continues to pay regular dividends and has been able to maintain a share price of $60-$70 in spite of the negative publicity (Fung, 2019). Hence, it is recommended that an investment in the shares of the company will be profitable.


Butler B, 2019, Commonwealth Bank profits slump as compliance bill surges by $1bn, Guardian.com, viewed 13 February 2020 <https://www,theguardian,com/news/2019/aug/07/commonwealth-bank-profits-slump-compliance-bill-surges-by-1bn>

CBA, 2019, Annual Report, viewed 13 February 2020 <https://www,commbank,com,au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/CBA-2019-Annual-Report,pdf>

Fung H, 2019, Commonwealth Bank ASX CBA Has Multiple Headwinds But Still Worth Holding, viewed 13 February 2020 <https://mfam,com,au/research/commonwealth-bank-asx-cba/>

Harrison T,2019, Is the CBA share price a buy for the 7,5% dividend yield?, Motley Fool, viewed 13 February 2020 <https://www,fool,com,au/2019/06/25/is-the-cba-share-price-a-buy-for-the-7-5-dividend-yield/>

Mickleboro J, 2020, What to expect when CBA announces its half year results, Yahoo Finance viewed 13 February 2020 <https://au,finance,yahoo,com/news/expect-cba-announces-half-results-235709089,html>

Mosaleva Y, 2018, 5 reasons the Commonwealth Bank of Australia ASX:CBA share price could be a buy, Motley Fool, viewed 13 February 2020 <https://www,fool,com,au/2018/11/30/5-reasons-the-commonwealth-bank-of-australia-asxcba-share-price-could-be-a-buy/>

RTT News, 2020, Commonwealth Bank Of Australia HY Profit Rises, But Cash Profit Down, Nasdaq, viewed 13 February 2020 <https://www,nasdaq,com/articles/commonwealth-bank-of-australia-hy-profit-rises-but-cash-profit-down-2020-02-11>

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