Commonwealth Bank is on track to post another record profit of more than $8 billion in the coming year as it rides a wave of revenue growth, low bad debts and an improving economy.
In the latest bumper result from the sector, the country's biggest lender on Wednesday said cash earnings swelled 14 per cent to $2.1 billion in the September quarter. Investors cheered the result, pushing shares in the lender to an record high of $78.40.
It comes as the bank faces a new class action relating to its 2008 takeover of BankWest, which proponents say has already attracted claims worth about $500 million.
After the big four racked up collective profits of $27.4 billion in 2013, CBA's latest result confirmed the industry is reaping the benefits of fewer bad loans and a lift in mortgage lending.
The bank said the healthy profit result, up from $1.85 billion a year earlier, had been driven by solid revenue growth, contained costs and improving credit quality.
Although the bank's profit margins had declined marginally, analysts said the result suggested it was on track to post profits of more than $8 billion in the year to September 2014, bettering this year's result of $7.8 billion.
Andrew Martin, principal at fund manager Alphinity, said the sector's profits were being helped by its focus on costs and lower provisioning for bad debts.
"They're getting a bit of a tailwind after such a tough period in the GFC [global financial crisis] and post-GFC, where they did experience quite large losses and put away quite large reserves," Mr Martin said.
CBA's ratio of bad and doubtful debts to total loans declined to 16 basis points, with fewer home loan customers falling behind on repayments.
The resurgent sharemarket also helped to enhance the bank's bottom line, with assets under management in its fund management arm lifting 4 per cent in the quarter.
In a sign record low official interest rates are changing the behaviour of some consumers, the bank said there was "strong growth" in new business, though customers continued to pay off loans quickly.
"Whilst lower interest rates have supported strong growth in new business activity compared to the prior year, this has been balanced by higher levels of loan repayments," the bank said.
The bank's net interest margin - which measures the profitability of lending - had narrowed "marginally" due to low interest rates, it said. But analysts said this was in line with industry trends.
White Funds Management managing director Angus Gluskie said the numbers showed conditions facing the banks were "benign" and argued recent dividend growth was sustainable.
"They're not being confronted by too many negatives, and for bank investors that means we're likely to see things continue to roll on in a reasonably favourable manner unless we see some dramatic change," he said.
Separately, a new class action against the bank will be launched over allegations it unfairly terminated commercial loans after buying BankWest in 2008.
Unhappy Banking spokesman Geoff Shannon said about 150 people had so far joined the action with claims of about $500 million, and the value of the claims could run into billions of dollars.