Commonwealth Bank warns economy still fragile as it books $5.13b profit for first half

Commonwealth Bank of Australia will shower its shareholders in a supersized dividend after reporting a cash profit of $5.13 billion for the first half of the financial year, buoyed by strength in its powerhouse home lending business.

That beat market estimates of just over $5b, and the bank will pay out $2.25 a share to investors — up 5 per cent on the same time a year ago.

Chief executive Matt Comyn on Wednesday said he expected the Reserve Bank to start its rates easing cycle soon and offer long-awaited relief to millions of Australia’s struggling borrowers. But he warned economic conditions remain fragile.

“The Australian economy has slowed considerably, with cost of living pressures continuing to weigh on consumer demand and younger customers in particular making real sacrifices,” Mr Comyn said.

“Private sector growth is weak, immigration is starting to slow and geopolitical uncertainties remain.

“However underlying inflation is now moderating towards the target range and we expect Australia will follow offshore economies with an easing cycle starting in 2025. This should provide some relief to many households and improve business confidence.

“The strong labour market and level of ongoing public sector infrastructure spend also provide cause for optimism on the domestic economic outlook.”

CBA’s cash profit was up 2 per cent on a year earlier and 7 per cent on the last half of 2023/24.

The result was supported by volume growth in its core businesses and a lower loan impairment expense, partly offset by higher operating expenses due to continued inflationary pressures and a discretionary increase in franchise investment spend.

A rate cut from the RBA at next week’s meeting could trim margins in the highly competitive home loan market, where CBA remains the biggest player.

Mr Comyn said it had been a challenging year for many customers and the bank had been proactive in engagement to offer a range of support options.

“This has included improved access to hardship assistance, delivery of money management tools for greater visibility of finances, and tailored payment arrangements for those customers most in need,” he said,

CBA reported consumer arrears remained broadly stable, supported by stage 3 tax refunds which come into effect in July last year and changes to income tax rates and thresholds.

It said the majority of mortgage customers remain in advance of scheduled repayments.

Expenses continued to grow, largely due to outlays for its continued investment in technology, including generative artificial intelligence and data infrastructure.

“Our balance sheet settings remain strong, with surplus capital and conservative funding, provisioning and interest rate risk settings,” Comyn said.

Saxo Asia Pacific senior sales trader Junvum Kim said CBA’s net interest margin of 2.08 per cent showed effective management in a competitive landscape.

“Despite a 6 per cent rise in operating expenses due to inflation and tech investments, the bank’s decision to increase the interim dividend to $2.25 per share signals confidence in its financial health,” Mr Kim said.