Australia’s CBA posts flat Q1 profit on higher competition in home loan market

COMMONWEALTH Bank of Australia’s (CBA) first-quarter cash earnings remained largely unchanged on Tuesday (Nov 14), but the lender’s home loan balances declined as it focused on increasing its share of revenue in Australia’s competitive mortgage market.

Even though rate hikes since last year have boosted interest incomes and margins at Australian banks, the rising cost of repayments has intensified competition in the home loan market, capping profit margins and hindering credit growth.

The country’s biggest lender said cash net profit after tax was A$2.50 billion (S$2.17 billion) for the quarter ended Sep 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.

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Its common equity tier one ratio, a measure of spare cash, stood at 11.8 per cent as at September-end. REUTERS