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Speaker 1: Welcome to Fearing Greek Q and A.

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Speaker 2: Will we ask and answer questions about business, investing, economics,

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Speaker 2: politics and more. I'm Sean Elmer. Yesterday, Commonwealth Bank announced

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Speaker 2: a cash profit of five point four billion dollars for

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Speaker 2: the December half, lifted by record growth in loans and deposits.

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Speaker 2: It came in well ahead of market expectations. Investors love

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Speaker 2: that's sending the bank share price up more than five percent.

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Speaker 2: Matt Common, CEO of Commonwealth Bank, spoke with Juliet Sally

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Speaker 2: at osbiz, Australia's leading provider of live and on demand

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Speaker 2: video of the latest news in Australian business, markets, economy

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Speaker 2: and startups. Sign up for free at osbiz dot com

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Speaker 2: dot au.

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Speaker 3: Matt, an incredible result, biggest one day gain for your

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Speaker 3: shares in six years. I had an analyst say, you

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Speaker 3: either deliver or you die in this reporting season. You've

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Speaker 3: clearly delivered. What's the secret source?

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Speaker 1: Well, thanks very much, Julia, good to be with you.

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Speaker 4: Well, look, I think what the result demonstrated is just

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Speaker 4: very strong growth on both loans and deposits across all

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Speaker 4: of our businesses.

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Speaker 1: And I know you mentioned the margin.

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Speaker 4: The margin outcome was actually pretty stable during the period. Again,

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Speaker 4: low unemployment has led to low credit losses. All of

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Speaker 4: those sort to boost the profit overall, and as you said,

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Speaker 4: we were able to declare a fully frank two dollars

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Speaker 4: thirty five dividend, which is up ten cents.

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Speaker 3: How is CBA holding its own amid the disruption caused

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Speaker 3: by mcquarie in its growth of home loan and retail

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Speaker 3: deposit market share.

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Speaker 4: Well, I think there's lots of competitors in the market

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Speaker 4: and in all of the businesses that we operate. We've

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Speaker 4: been continuing to invest in technology and in our overall

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Speaker 4: customer service proposition. We've added bankers to serve our customers,

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Speaker 4: particularly our business customers. As you mentioned, we're on track

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Speaker 4: to spend well north of two billion dollars in terms

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Speaker 4: of technology investment, about a billion dollars that is actually

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Speaker 4: in protecting our customers and scams, fraud, cyber broader resilience

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Speaker 4: and also financial crime. So we think technology is a

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Speaker 4: really important part of banking with our customers. Today, we're

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Speaker 4: very fortunate to be able to support eighteen million Australians

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Speaker 4: that record lending has not only helped on average every

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Speaker 4: week more than three thousand people into a new home.

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Speaker 4: It's also enabling us to lend about nine hundred million

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Speaker 4: dollars to business customers every week, which supports economic growth.

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Speaker 4: One of those areas is to businesses that are building

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Speaker 4: more houses, which is of course a very important supply

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Speaker 4: constraint at the moment.

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Speaker 3: Yeah, and you've touched on that in the past. Do

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Speaker 3: you think that more policy reform needs to be undertaken

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Speaker 3: to try and meet that, particularly with the housing shortage supply.

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Speaker 4: Well, I do think it's going to continue to be

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Speaker 4: a really important point. Obviously bringing more supply onto the

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Speaker 4: market in areas that are close to transport and areas

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Speaker 4: of opportunities from an employment perspective, and also just bringing

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Speaker 4: lower cost methods of construction into the market as well.

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Speaker 4: I think it's part of probably a broader productivity objective

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Speaker 4: which we need to really improve in Australia if we're

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Speaker 4: able to be able to support a higher growth rate

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Speaker 4: without some of the inflationary pressures that we've seen come

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Speaker 4: through the economy.

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Speaker 3: And in fact, productivity is one thing that the RBA

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Speaker 3: Governor continues to really hone in on. How is AI

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Speaker 3: and your ten percent uplift spending in AI going to

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Speaker 3: help drive some of that profitability, with Australia the third

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Speaker 3: largest AI investment destination now behind the US and China.

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Speaker 4: Well, firstly, I think the productivity is a really important

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Speaker 4: concept of the At times, I think it can seem

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Speaker 4: quite ambiguous. I think more recently as people have seen

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Speaker 4: where we've hit a growth rate of just through two

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Speaker 4: percent and that's already leading to inflation. That's because our

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Speaker 4: productivity rate isn't where it needs to be in Australia

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Speaker 4: to be able to support a higher growth rates.

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Speaker 1: So that's really important.

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Speaker 4: That has to be able to support growth and improvement

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Speaker 4: and living standards into the future, and I think that's

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Speaker 4: going to be a really important long term objective. One

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Speaker 4: aspect of that, of course, is the adoption of technology.

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Speaker 4: Australia has some wonderfully innovative companies here, but we also

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Speaker 4: rely on technology that's being developed, particularly in the US

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Speaker 4: and as you mentioned in AI, and the ability for

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Speaker 4: both countries and businesses to be able to adopt that

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Speaker 4: technology is very important. As you mentioned where we've increased

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Speaker 4: our investment in that particular area in a number of

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Speaker 4: ways to improve the customer proposition. Also again to protect

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Speaker 4: our customers. One of the things we also announced late

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Speaker 4: last calendar year was an objective to help train and

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Speaker 4: educate a million small businesses around the country in AI

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Speaker 4: and how they should be thinking about it and using

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Speaker 4: it within their businesses. And that's that broad based adoption

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Speaker 4: as one technology is certainly not a single or a

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Speaker 4: simple answer to rectify sagging productivity, but it is an

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Speaker 4: important aspect of it.

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Speaker 3: This move though into AI and technology, whilst it's great,

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Speaker 3: it's moving very quickly. What does it mean for regional

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Speaker 3: and rural areas and particularly those that still want to

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Speaker 3: go into a branch Well, we.

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Speaker 4: Have the largest branch network of a lot, the largest

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Speaker 4: ATM network, more than double our nearest competitor. We recognize

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Speaker 4: the importance and convenience for our customers around the country.

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Speaker 4: As you mentioned in Regional Australia, it's actually been a

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Speaker 4: real source of growth for US. Regional and agri business

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Speaker 4: has posted double digit increase in lending and so we

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Speaker 4: certainly intend to maintain a very strong branch footprint in

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Speaker 4: regional areas. We do think, of course, we're covering vast

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Speaker 4: areas of a very large continent, so there will also

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Speaker 4: of course to be supplemented by digital banking, and of

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Speaker 4: course just a broader infrastructure to be able to support

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Speaker 4: an increasing reliance on technology.

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Speaker 3: And what does it mean for staffing levels, Matt, are

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Speaker 3: you reducing those their Financial Services Union survey saying that

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Speaker 3: their survey of CBA workers shows they're under staffed and

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Speaker 3: they're concerned about job security.

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Speaker 4: Well, look, in the near term, the impacts from AI

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Speaker 4: in terms of workforce disruption is very, very minimal. I

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Speaker 4: think it's perfectly though understandable. It's actually something we've been

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Speaker 4: talking about with the FSU. For any company, and certainly

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Speaker 4: within CBA, we've rolled out AI.

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Speaker 1: Tools to all of our teams.

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Speaker 4: We're very actively encouraging them to learn and build these

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Speaker 4: new capabilities. I think it's really important to have a

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Speaker 4: real engagement with your employees. We're doing that both directly

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Speaker 4: and with the Financial Services Union. We want to be

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Speaker 4: talking about across the whole organization of skills we think

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Speaker 4: are going to be important into the future, how to

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Speaker 4: build new skills and capability, how to build greater career resilience.

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Speaker 4: I don't see this as a big issue in the

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Speaker 4: near term, but I do think over the long term,

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Speaker 4: giving people the choice and the ability to be able

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Speaker 4: to build on their existing skill base and perhaps be

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Speaker 4: able to take their career into directions that they wouldn't

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Speaker 4: have contemplated a few years ago. And so this is

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Speaker 4: a big focus for us over the course of the year,

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Speaker 4: and of course we'll continue to engage directly with employees

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Speaker 4: and with our unions. But I don't think adopting new

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Speaker 4: technology is something that should be avoided.

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Speaker 1: I think embracing it.

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Speaker 4: And of course it's incumbent on us to help our

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Speaker 4: people best prepare so that they have a really successful

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Speaker 4: career or with the Commonwealth Bank, or if they were

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Speaker 4: to go on to something else later in their career.

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Speaker 3: Now you've mentioned inflation, matt is putting upward pressure on rates.

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Speaker 3: If we are at the start of a hiking cycle,

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Speaker 3: how much is that going to weigh on your mortgage?

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Speaker 3: Is you starting to see signs of stress or default?

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Speaker 4: I mean, look, we're not and obviously the rate increase

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Speaker 4: was very recent. We're forecasting one more rate increase in May,

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Speaker 4: so we're not talking about going back to the peak

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Speaker 4: of the rate hiking cycle. I do think there is

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Speaker 4: quite an evident disconnect. Obviously, rates going up is weighing

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Speaker 4: on many customers' minds, and certainly customers with a home

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Speaker 4: loan or with a debt facility. But I do think

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Speaker 4: it's going to be fairly constrained in terms of the

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Speaker 4: number of rate hikes that will be necessary. We've actually

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Speaker 4: seen an improvement across all of our credit metric over

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Speaker 4: the six months. So I mean again, our consistent approach

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Speaker 4: will be to support our customers, make sure they know

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Speaker 4: about all the financial support and assistance that is available

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Speaker 4: to them. We don't think the vast, vast majority of

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Speaker 4: them are going to require that, but we also recognize

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Speaker 4: that that sense of uncertainty and a rate hiking cycle

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Speaker 4: does weigh on consumer sentiment and confidence.

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Speaker 1: And so you know, as.

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Speaker 4: Part of the discussion we were having on productivity, being

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Speaker 4: able to support a high level of growth rate in

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Speaker 4: Australia would be good for all Australians in.

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Speaker 3: Terms of your share price, Matt, I mean, the lift

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Speaker 3: recently suggests perhaps some of this concern of your growth

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Speaker 3: may have weighed some analysts saying, look are you a

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Speaker 3: growth stock? Now? You are the most expensive bank in

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Speaker 3: the developed world. Every analyst saying cell sell Sell, what

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Speaker 3: do you say to that, I mean, the market today

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Speaker 3: is obviously liking your result, but still about I guess

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Speaker 3: thirty percent above where most analysts think that CBA should

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Speaker 3: be valued well.

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Speaker 4: From our perspective, look, we understand that the movements in

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Speaker 4: the share price are of interest to many stakeholders that

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Speaker 4: you know, including our shareholders. Obviously, what matters most is

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Speaker 4: the long term performance. From a management perspective, we need

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Speaker 4: to think about and be very focused on what we

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Speaker 4: know will support sustainable and long term performance, and that's

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Speaker 4: obviously continuing to acquire new customers, do a great job

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Speaker 4: serving those customers wherever we can, helping to support both

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Speaker 4: they're either their dreams or the growth in their businesses,

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Speaker 4: and being able to do that responsively and comprehensively over

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Speaker 4: the long term. If we take care of all of

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Speaker 4: those things with a highly motivated and engage workforce, with

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Speaker 4: the best technology, and we continue to invest through this circle,

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Speaker 4: then the performance will take care of itself.

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Speaker 3: And for those that love the dividend payments that CBA

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Speaker 3: gives two dollars thirty five fully franked high than was expected.

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Speaker 3: What can we guide in terms of whether or not

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Speaker 3: we'll see a good dividend in the full year.

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Speaker 1: As well well as you'd expect.

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Speaker 4: We won't give any specific guidance or forecasts, and obviously

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Speaker 4: most shareholders who hold our shares it's almost eight hundred

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Speaker 4: thousand directly and millions more through superannuation. We target a

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Speaker 4: dividend pay our ratio between seventy and eighty cents, typically

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Speaker 4: in the midpoint of that rain, So obviously it will

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Speaker 4: depend on the second half profit. Usually the dividend is

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Speaker 4: higher in the second half versus the first half, and

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Speaker 4: from our perspective, we're going to continue to keep doing

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Speaker 4: what we did in the first half, investing in our business,

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Speaker 4: supporting and serving our customers as best we can, and

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Speaker 4: hopefully that'll deliver a good full year performance.

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Speaker 1: That's coming off banks.

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Speaker 2: Matt Common speaking to Juliet Sally at Osby's find out

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Speaker 2: more at Osby's dot com today, you I'm sure and

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Speaker 2: I all met this fear in Greek Q and a