Interest rates

Australia’s CBA Q1 profit jumps on loan growth and rising interest rates

Nov 15 (Reuters) – Commonwealth Bank of Australia (ABC.AX)the nation’s largest bank reported better-than-expected first-quarter cash profits on Tuesday, helped by loan growth and rising interest rates.

Australian banks are taking advantage of an aggressive monetary tightening path taken by the central bank to contain runaway inflation, improving their lackluster margins and high interest rate earnings.

“The economy has shown resilience in the face of rising cost of living and interest rate pressures and despite these short-term challenges, we remain optimistic about the medium to long-term outlook,” said general manager Matt Comyn.

The Sydney-based lender’s net interest income rose 16% in the quarter, driven by higher income on deposits, commodity volume growth in home loans, business loans and household deposits over the period.

Cash profit, which excludes one-time and non-cash accounting items, was A$2.50 billion ($1.68 billion) in the three months to September 30, from A$2.20 billion . one year ago and a Visible Alpha consensus of A$2.33 billion.

The bank’s home loan book grew 6.3% in the quarter from a year ago, while business loans and household deposits jumped 12.6% and 8.6 %, respectively.

The CBA, which has a quarter of Australia’s mortgage market share, said overdue and bad loans remained low due to low unemployment. Its arrears were at multi-year lows of 0.88% for personal loans and 0.44% for home loans.

However, analysts say rising interest rates, inflation and a rebound in unemployment could push those numbers up.

Operating expenses increased by 4.5% excluding remediation costs, driven by wage inflation and additional working days.

The other three of Australia’s ‘big four’ lenders: National Australia Bank (NAB.AX)Westpac Banking Corp. (WBC.AX)and Australian and New Zealand Banking Group (ANZ.AX)have previously warned of rising costs in the coming fiscal year.

($1 = 1.4901 Australian dollars)

Reporting by Sameer Manekar in Bengaluru; Editing by Shailesh Kuber

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