CBA profits up 10% to $2.6b but growth is slowing

Like results from rivals in recent days, CBA’s update pointed to the impact of competition, saying its net interest income had fallen 2 per cent in the quarter, due in part to “lower margin from competitive pressure on home loans and deposits.”

The bank said its mortgage book had grown in line with the market in the year to March, expanding by $6.9 billion, calling out strong growth in its low-cost digital mortgage Unloan and the Bankwest brand. Household deposits grew by $6.2 billion, slightly slower than the market, and CBA said more customers had been moving their savings into deposits that paid them more interest.

CBA the proportion of customers falling behind on their mortgage repayments remained low at 0.44 per cent, up from 0.43 per cent in December.

Arrears on personal loans rose 14 basis points to 1.09 per cent, while credit card arrears rose 5 basis points to 0.51 per cent. The bank said these levels were low by historical standards, but it expected more customers would fall into arrears in coming months.

“We expect to see further increases in arrears rates as the full effects of interest rate increases are borne by borrowers in the months ahead,” CBA said.

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CBA said it had $8.7 billion in surplus capital above the regulatory minimum, with common equity tier 1 capital of 12.1 per cent of risk-weighted assets.

The trading update rounds off a series of bank profit results, which have shown Australia’s banking giants’ profit margins peaked in late 2022, after rising due to higher interest rates.

Investors are now focused on how the banks are being affected by the stiff competition in mortgages, which has seen banks offer deep discounts on interest rates for new borrowers and cashbacks worth thousands of dollars.