But although analysts said the result was strong,they worried that CBA’s profit margins – which expanded rapidly in the half – may have peaked late last year amid fierce competition for home loan customers.
CBA shares,which hit record highs earlier in the month,slumped 5.7 per cent to $103,as analysts said the market would need to rein in bullish expectations for further margin growth this year.
Chief executive Matt Comyn said the mortgage market was in a period of “extreme change and intense competition”,as banks scramble for a piece of the boom in refinancing,including by trying to lure customers with cashbacks worth thousands of dollars. He said bank funding costs had increased “quite dramatically”,but this was not being reflected in the pricing of new loans.
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“Generally,when a business sees an increase in its costs,there’s a proportionate change in the pricing,but the home loan market has been very competitive over the last six months and in that period that caused some margin headwinds,” Comyn said.
Even including these “headwinds”,CBA and other banks have still reaped the benefits of rapid-fire interest rate rises by lifting their lending rates more than deposit rates. This has caused sharply wider net interest margins (NIM),which compare bank funding costs and lending rates,and are a critical driver of profitability.