By Himanshi Akhand
(Reuters) -Commonwealth Bank of Australia’s first-quarter cash earnings remained largely unchanged on Tuesday, but the lender’s home loan balances declined as it focused on increasing its share of revenue in the country’s competitive mortgage market.
Even though rate hikes since last year have boosted interest incomes and margins at Australian banks, rising cost of repayments has intensified competition in the home loan market, capping profit margins and hindering credit growth.
Australia’s biggest lender said cash net profit after tax was A$2.50 billion ($1.59 billion) for the quarter ended Sept. 30, same as the year earlier. That compares with a consensus estimate of A$2.45 billion, according to Citi.
CBA’s home loan balances declined A$4.5 billion in the quarter.
“This reflects a disciplined approach to pricing which ensures marginal shareholder returns remain above the cost of capital in a highly competitive market,” the lender said.
Net interest margin was lower in the quarter, mainly due to continued competitive pressure in deposits and customers switching to higher yielding deposits, CBA added.
“Our customers are continuing to take practical steps to navigate through a period of tighter household finances… As a result, we have seen a modest increase in consumer arrears over recent months,” CEO Matt Comyn said in a statement.
CBA dominates Australia’s A$2 trillion mortgage industry, which benefited from a property boom through COVID-19 restrictions.
But rising cost-of-living crisis amid the recent run of interest rate hikes squeezed customers. That had prompted Australia’s “Big Four” banks to start offering cash payments for mortgage refinancing to lure borrowers. But CBA was the first among its peers to stop that practice earlier this year.
CBA’s rivals National Australia Bank, Westpac and ANZ Group all posted higher annual profit earlier this month despite inflationary headwinds.
($1 = 1.5676 Australian dollars)
(Reporting by Himanshi Akhand in Bengaluru; Editing by Shilpi Majumdar)
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