Finance

Stronger loan margins and lower bad debts give CBA record $7.8 billion annual profit

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The Commonwealth Bank of Australia has posted an annual profit of $7.8 billion – its fourth consecutive year of record profits and the biggest ever reported by an Australian bank.

Lower bad debts and stronger profit margins on loans after the CBA held back some the RBA’s interest rate cuts last year helped trigger the result.

CBA’s net interest margin widened by four basis points to 2.13% driven by lower funding costs.
But CBA chief Ian Narev remains cautious about the economic outlook.

“Our outlook for the global economy remains similar to six months ago,” he said.

“Our primary areas of economic focus are the level of confidence of Australian business and households, the impact of economic conditions in China on the demand and price for resources, the value of the Australian dollar and the resultant impact on export-sensitive parts of the Australian economy and the stability of funding markets.”

He suggested indicators had been “mixed” over the past six months, and “we expect that to remain the case in the near term.”

“However, we are well positioned to meet the needs of our customers should the economy rebound more quickly than anticipated.”

He noted home loan and deposit competition was intense.

Competitors, the National Australia Bank has this week offered home owners $1000 if they switch mortgages.

The CBA profit result will be followed by the ANZ Banking Group posting its third quarter profits on Friday.

National Australia Bank reports its third quarter results next week.

This article first appeared on Property Observer.

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