CBA boss defends big bank profits, says customer hardship still low

Commonwealth Bank chief executive Matt Comyn has defended the profits banks are making at a time when many households face a financial squeeze, signalling the bank will use its capital to support vulnerable customers in the coming downturn.

Comyn and Woolworths CEO Brad Banducci acknowledged on Tuesday that the cost of living pressure on households, which has sparked increased political scrutiny of some big businesses as they record strong profit results.

Comyn made the remarks shortly before the Reserve Bank raised interest rates to 3.6 per cent, a move that is likely to further widen CBA’s lending margins, after it notched up a record $5.15 billion first-half profit last month.

Speaking at The Australian Financial Review’s businesses summit, Comyn sought to put the bank’s record profits in context by saying that business trading conditions were still strong and customer stress was low.

“We’ve got very buoyant trading conditions, the economy’s performing extremely well. If the banks aren’t profitable now, that’d be a huge problem,” Comyn said.

Comyn said the number of hardship inquiries CBA was receiving was 20 to 25 per cent lower than pre-COVID levels. However, he also sought to illustrate how the bank was preparing to use its capital to help struggling customers.

Loading

As an example, Comyn said that for a customer with a $500,000 mortgage, CBA typically set aside about $15,000 of shareholder capital, mostly for unexpected losses. Comyn said if the same customer had to move to interest-only payments for a year because they were struggling, the bank would need to set aside another $4000 in equity capital.

“If that customer can’t make their repayments within 90 days, technically what we’d call in default, effectively that means the capital goes up by seven times. So that $15,000 becomes $100,000,” Comyn said.