Rates hike bonanza: CBA half-year profits tipped to spill over $5b

Morningstar analyst Nathan Zaia said results from Suncorp’s bank last week, and a quarterly update from ANZ, suggested banks were still recording very low levels of bad debts. “The banks are not seeing anything to worry them or cause them to move provisions yet,” Zaia said.

CBA, led by chief executive Matt Comyn, is likely to have benefited handsomely from rising interest rates because it has been able to lift rates on loans while tapping a vast pool of cheap deposit funding.

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Zaia said investors would also examine how much CBA’s retail customers were moving their money from low-interest savings accounts to products that pay higher rates – a shift that could dampen some of the expansion in margins.

Jarden analyst Carlos Cacho, who is tipping CBA’s earnings will exceed $5.2 billion, said he expected a “very strong” result from the bank, also predicting wider margins and low bad debts.

“I really doubt we are going to see any signs of deterioration on the bad debt front yet,” Cacho said.

Cacho and Martin said CBA’s half-year cash earnings had not hit $5 billion in the past. However, the bank’s statutory profits including discontinued operations did hit $5.87 billion in the first half of 2022.

The expansion in bank margins comes as Treasurer Jim Chalmers has called on banks to pass on higher rates to savers, requesting an inquiry from the Australian Competition and Consumer Commission into the deposit market.

RateCity last week said the ongoing rates paid by the big four on online savings accounts were “alarmingly low”, at between 0.6 per cent and 1.6 per cent. But bonus saver accounts, which require customers to meet certain conditions to get a better rate, have increased by more than official rates in some cases. CBA, Westpac and National Australia Bank are paying rates of 4 per cent on their bonus saver accounts.

Analysts say competition for deposits will increase due to higher wholesale funding costs, and because they expect consumers to be more willing to seek out better rates as interest rate levels climb.