CBA closing in on another bumper year
The third-quarter result, for the three months to March 31, was up from $1.75 billion in the same period last year, and brings the bank's profit to $5.7 billion so far this financial year - on track to comfortably beat last year's full-year cash profit of $7.1 billion.
In a statement to the stock exchange, the bank said its revenue growth continued to reflect conservative management and modest growth in the credit market.
The country's largest home lender said its improved margins were "partly offset by higher funding costs". It reported growth in household deposits but said margins remained under pressure in a competitive market.
Deposit funding now makes up 65 per cent of its funding.
The bank's announcement follows a string of record half-year results for the other big four banks in the past month. Westpac's first-half profit jumped 10 per cent to $3.53 billion, ANZ reported an 8 per cent leap to $3.2 billion, while National Australia Bank's profits grew 3 per cent to $2.9 billion.
Consensus forecasts now suggest Commonwealth Bank is in line to report a cash profit of about $7.6 billion for the full year.
But in a note to clients, Credit Suisse warned the result was reliant on historically low bad-debt levels, and that growth in bank profits could be getting harder to achieve.
"The result suggests that the optimisation of bank earnings is reaching its limit, with bad debt charges as feasibly low as they can get, margin expansion and the pace of productivity improvements fading, and capital management initiatives now announced," it said.
But Morningstar analyst David Ellis said CBA's earnings growth was impressive given the low credit growth environment, and said shareholders could expect to reap higher dividends.
"CBA continues to get the basics right, extracting attractive earnings growth from a low credit growth environment - an outcome we have long argued to be very achievable," he said.
The bank also said the quality of its loans had remained sound in the three months to March, with arrears in home loans stable.
CBA shares gained 56¢, or 0.8 per cent, to $72.65 on Wednesday.
Frequently Asked Questions about this Article…
Yes. Commonwealth Bank (CBA) reported quarterly cash earnings of $1.9 billion for the three months to March 31 and totals $5.7 billion so far this financial year, putting it on track to comfortably beat last year's full-year cash profit of $7.1 billion and in line with consensus forecasts of about $7.6 billion for the full year.
CBA's quarterly cash earnings were $1.9 billion for the three months to March 31, up from $1.75 billion in the same period last year, showing continued earnings growth despite a low credit growth environment.
The bank said improved margins were partly offset by higher funding costs and that margins remain under pressure in a competitive market, even as household deposits grew and deposit funding now makes up 65% of its funding.
Deposit funding now accounts for 65% of Commonwealth Bank's funding, reflecting growth in household deposits reported by the bank.
CBA's strong quarterly result follows a string of record half‑year results across the big four: Westpac's first‑half profit rose 10% to $3.53 billion, ANZ's jumped 8% to $3.2 billion, and NAB's profits grew 3% to $2.9 billion.
Credit Suisse warned that the recent results rely on historically low bad‑debt levels and cautioned that optimisation of bank earnings may be reaching its limit as bad‑debt charges are as low as they can feasibly get, while margin expansion and productivity gains may be fading.
Morningstar analyst David Ellis said CBA's earnings growth is impressive given the low credit growth environment and indicated shareholders could expect to reap higher dividends, noting the bank continues to get the basics right.
CBA shares rose 56 cents, or 0.8%, to $72.65 on the day the result was released, reflecting a positive market reaction to the quarterly performance and year‑to‑date profit momentum.
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