The Commonwealth Bank has announced a 9 per cent increase in profits, despite a fall in its margins.
- CBA has posted a statutory net profit of $9.7 billion
- The bank will pay a final dividend of $2.10, fully franked
- CBA says most of its customers are well placed to afford rising interest rates, but 37 per cent are less than a month ahead on repayments
The bank made a net profit of $9.7 billion over the 2021-22 financial year and its preferred measure of cash profit, which excludes a range of one-offs, rose 11 per cent to $9.6 billion.
The increase in profits came despite a steep fall in net interest margin (NIM) — the gap between the rate the bank pays to borrow money and the rate it lends it out at and its main source of profits.
NIM fell 0.18 percentage points to 1.9 per cent, driven by lower home loan margins in an ultra-low interest rate environment.
Analysts expect the NIM to grow as the recent jump in interest rates is passed on in full to mortgage borrowers but only in part to savers.
The bank made up for falling profit margins on its loans by growing home lending by 7.4 per cent and business lending by 13.6 per cent, although its growth in home lending was slightly below its competitors.
CBA has expressed confidence that its customers will be able to keep up their repayments in the face of rapidly rising interest rates.
It said two-thirds of its customers had direct debits above their minimum required repayments at the current level of interest rates, although this would drop to a quarter if the cash rate rose to CBA’s forecast peak of 2.6 per cent.
The bank also noted that more than a third of its mortgage customers were at least two years ahead in their repayments, with around half at least three months ahead
However, 22 per cent are only paying just on time, while a further 15 per cent are less than one month ahead.
CBA’s economists are tipping home prices to fall at least 15 per cent from peak to trough, largely because rising interest rates are reducing borrowing capacity.
Most households can only borrow about the same amount or less than they could in 2016, while property investors have seen their borrowing capacity cut.
Commonwealth Bank shareholders will receive a final dividend of $2.10 per share, taking the full-year payout from the bank to $3.85.