“The economy has been fairly resilient,supported by a strong labour market,savings and repayment buffers,population growth and relatively high commodity prices. We think there will be ongoing pressure,and in some sectors clearly more than others,but we remain optimistic that there’ll be a soft landing.”
CBA shares fell 1.7 per cent to $114.07.
CBA’s loan impairments decreased $96 million over the half. However,the bank is bracing for conditions to potentially worsen,with loan impairment provisions – money set aside for possible loan impairments – increasing by $113 million from the prior half amid ongoing cost-of-living pressures.
Comyn said he expected financial strain to continue in 2024,including an increase in arrears,as pressures continue to build on household disposable incomes,noting cash rate increases had a lagged impact on customers.
CBA’s profit result was just shy of itsrecord $5.15 billion half-year profit this time last year when it was facing stiff competition in mortgages. The bank announced an interim dividend of $2.15 a share,fully franked,2 per cent higher than the previous half.
Comyn said on Wednesday the lower cash profit reflected the effects of high inflation and a competitive operating environment. CBA’s expenses increased 4 per cent and staff expenses grew 5 per cent.
The bank’s net profit margin – a measure of profitability comparing banks’ funding costs with what they charge for loans – fell 6 basis points from the prior half to 1.99 per cent as a result of increased competition,customers switching to higher-yielding deposits and higher funding costs.
‘We recognise that it’s going to be a challenging year for many of our customers.’
CBA chief Matt Comyn
While CBA pulled back from the mortgage wars and lost market share for three months last year,the bank picked up its pace in following months,with Comyn on Wednesday flagging volume growth in home and business lending.
“At points last year,we felt it was unsustainably[competitive] in a couple of areas,” he said. “That has eased slightly,but’s still very competitive.”
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Comyn said the bank would be “very thoughtful” about risks and pricing but that “if there are opportunities to continue to grow,which I’m sure there will be,then we will look to take those up”.
He also said CBA would look at contributing more capital to the development of social and affordable housing amid strong population and migration growth.
“Clearly,the Commonwealth Bank is a beneficiary of higher economic growth and higher standards of living,” Comyn said.
“Housing is an important economic and social issue. And so wherever we can,it should be a real objective which CBA needs to try to support as best we can.”
UBS head of Australian bank research John Storey said CBA did not live up to expectations but that the bank was well-placed if the mortgage market rationalised,having endured “extreme” levels of pricing pressure in mortgages and deposits.
E&P Capital analyst Azib Khan said the result showed CBA’s discipline on margin and volume management,with loan pricing only contributing to a 2 basis point drag on the bank’s net interest margin.
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