Commonwealth Bank of Australia’s profit met analyst estimates as strength in its key home lending business offset concern from chief executive officer Matt Comyn that economic conditions remain fragile.
Cash profit from continuing operations came in at A$5.13 billion ($3.23 billion) in the six months ended Dec. 31, the country’s biggest bank said in a statement Wednesday, broadly in line with analyst expectations.
Australia’s biggest lenders are facing a transition phase, with the nation’s central bank potentially on the cusp of moving to a cycle of interest rate cuts that could weigh on margins. That comes at a time of intense competition for mortgages and a deteriorating outlook for the economy.
“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,” Comyn said in the statement. “Private sector growth is weak, immigration is starting to slow and geopolitical uncertainties remain.”
The firm’s shares added 0.9% as of 12:12 p.m. in Sydney and are on course for a record closing high. They remain up about 41% over the past year and the bank’s price-earnings valuation leaves it as one of the most expensive in the world. Commonwealth Bank accounts for about a quarter of all the nation’s mortgages.
Citigroup Inc. analyst Brendan Sproules said “expectations have run hard into this result and we don’t see anything to justify the recent share price run.”
Consumers in arrears to the bank remained stable, thanks partly to changes to the nation’s top tax brackets, with the majority of home borrowers ahead on their repayments, according to the Commonwealth Bank statement. Expenses continued to grow, largely due to outlays for its ongoing investment in technology, including generative artificial intelligence and data infrastructure.
The lender will pay an interim dividend of A$2.25 per share. Meantime, strength in business banking growth endured, an increasingly key area of focus alongside its giant mortgage book.
“Our balance sheet settings remain strong, with surplus capital and conservative funding, provisioning and interest rate risk settings,” Comyn said.
With an election looming in Australia and a focus on weak productivity in the economy and the high cost of living, access to housing remains an issue for many people who can’t afford to buy a home.
“Housing in Australia is an issue of great concern and will no doubt be one of the dominant themes for many years,” Comyn said on a call with reporters Wednesday. “Productivity growth will also be critical and is the only path to grow standards of living over time for all Australians.”