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Co's Q3 profit up 8.3%, beats Visible Alpha consensus
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Home and business lending volumes grow
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Q3 CET1 ratio 12.1%, up 7 bps from Q2
(Recasts throughout to focus on arrears rate expectations)
By Sameer Manekar
May 9 (Reuters) - Commonwealth Bank of Australia on Tuesday warned high interest rates could impact
its customers' capacity to repay loans on time over the coming
months while heating competition in the mortgages markets
threatens its margins.
Australia's biggest lender expects arrears rate to
increase as borrowers bear the full brunt of interest rates,
which accelerated to over a decade-high level at an
unprecedented pace, also auguring economic uncertainty and
potentially weak credit growth.
CBA's home loan arrears stood at 0.44%, as of March-end
quarter, a tick higher from 0.43% seen in the prior quarter. Its
troubled and impaired assets rose to A$6.70 billion ($4.54
billion), or 0.47% of total exposures, from A$6.30 billion as at
2022-end.
"Many of our customers are feeling the strain of higher
interest rates and the rising cost of living," the bank said.
Australian banks have been facing headwinds from
intensifying competition in the mortgage market as windfall from
rising interest rates that boosted their margins over the past
year peaks, forcing them to look beyond traditional residential
mortgages business for growth.
Earlier, the other three of the "Big Four" banks voiced a
downbeat outlook on margins as competition among the rivals
steps up even as high borrowing costs could impact lending
growth. CBA logged a 2% drop in its net interest income, pulled down
by lower net interest margins due to "continued competitive
pressure in home loan pricing and customers switching to higher
yielding deposits".
Home lending volumes in Australia jumped A$6.90 billion during March quarter, in line with system growth, while business lending outpaced system to add A$2.60 billion. Household deposits, however, grew at 0.7 times the rate of system, or A$6.2 billion. The lender's cash net profit after tax came in at about A$2.60 billion for the three months ended March 31, marginally beating the consensus estimate of A$2.58 billion by Visible Alpha, according to Citi. It had reported A$2.40 billion in cash net profit after tax a year earlier. Common equity tier 1 ratio, a closely watched measure of spare cash, stood at 12.1% on March 31, 7 basis points higher than on Dec. 31.
($1 = 1.4743 Australian dollars) (Reporting by Sameer Manekar in Bengaluru; Editing by Shinjini Ganguli and Sherry Jacob-Phillips)
