Despite tepid credit growth CBA ups profit and reduces bad debts. CBA's share run should continue.

Can things get even better for Commonwealth Bank? The stock, up 45 per cent in the last 12 months, rose in early trading after the second-biggest Australian lender said its net profit for the three months to March 31 was $1.9 billion, up 12 per cent from the same period a year ago.

CBA’s net interest margin was up. The average tenor of its wholesale funding rose to 3.8 years. The bank’s deposit funding percentage increased to 65 per cent, presumably paring its cost of funds. Total impaired assets were unchanged from December 2012 at $4.3 billion.

Still, CBA says its household lending business recorded only “modest” growth in the three months to March. There was little or no growth in commercial lending. Its fund management grew its funds under administration and management by 4 per cent. The bank’s New Zealand business may have benefitted from better household lending in that country but company credit demand is subdued.

Impaired assets and past due loans for CBA fell to $7 billion in March from $7.1 billion in December, further evidence the bad debt cycle is at its nadir, helping to boost the bottom line. Home loan arrears continue to fall. Credit card arrears show no signs of picking up. 

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles