(Reuters) – Commonwealth Bank of Australia (CBA.AX) posted its highest annual cash earnings in four years, partly thanks to a first-half surge in home lending amid record low interest rates, but warned of easing consumer demand as borrowing costs rise.
The results on Wednesday wrapped up a solid year for CBA in which it beat out rivals to home buyers when rates were ultra-low, before the central bank’s policy tightening halted the surge in the real estate market seen last year.Australia’s largest lender said cash net profit after tax was A$9.60 billion ($6.68 billion) in the twelve months to June 30, compared with A$8.65 billion last year, also helped by a loan impairment benefit of A$357 million as COVID-19 risks eased.
Chief Executive Matt Comyn, however, said rising interest rates due to soaring inflation were hurting consumer confidence.
“We expect consumer demand to moderate as cost of living pressures increase,” Comyn said. Australia’s “big four” lenders have so far been in lockstep with the central bank in passing rate hikes down to their customers, which has raised borrowing costs by 125 basis points since May.
“It is a challenging time, but we remain optimistic that a path can be found to navigate through these economic conditions,” Comyn said, adding the medium-term outlook for Australia was positive.
Net interest margin, a key measure of profitability, however, fell 18 basis points to 1.90% amid stiff competition in home lending and an increase in low-yielding liquid assets.The over 100-year old bank declared a final dividend of A$2.10 per share, compared with A$2.00 last year.
Troublesome and impaired assets fell to A$6.4 billion at year-end, compared with A$7.5 billion last year.
Rival National Australia Bank (NAB.AX) had on Tuesday reported a 6% rise in earnings, but warned on costs for the second time in four months.
