The Commonwealth Bank (ASX:CBA) reported virtually no profit growth in the first quarter of its 2023-24 fiscal year, indicating potential challenges for both the bank and the sector after strong results in 2022-23.
In its Q1 update on Tuesday, CBA revealed unaudited cash earnings of approximately $2.5 billion, remaining flat compared to the final months of 2022-23 and showing a marginal 1% increase compared to the Q3 of 2022.
Statutory after-tax earnings also hovered around the $2.5 billion mark, signaling subdued growth, particularly in the mortgage sector, where the bank had reduced its previous aggressiveness.
CBA reported that operating income remained flat during the quarter, with some growth in lending volume and an additional 1.5 days offset by lower net interest margins due to competitive pressures and decreased other operating income.
Media reactions to the update will likely focus on these factors, as well as the anticipation of a challenging year for the bank and the entire banking sector.
Analysts will pay attention to the lower net interest margins for the quarter, a 3% rise in costs, and may express concerns, with some economists even mentioning a 'wage price spiral.' CBA attributed part of the blame to higher amortization charges but noted some offset from productivity improvements.
Loan impairment charges amounted to $198 million in the quarter, with slightly higher collective and individual provisions. However, the bank maintained sound portfolio credit quality, with credit quality indicators remaining near historic lows.
CBA's CEO, Matt Comyn, stated, "We have achieved solid financial outcomes in the quarter, reflecting our customer focus and consistent operational and strategic execution. Our performance was driven by a disciplined approach to volume/margin management, delivering sustainable shareholder returns in a competitive market."
Comyn also acknowledged the challenges facing Australians, saying, "We are very conscious that many Australians are feeling under pressure in the current environment. While some remain well positioned, we recognize that others are finding the higher cost of living very tough. Our customers are continuing to take practical steps to navigate through a period of tighter household finances, and we are here to help them. As a result, we have seen a modest increase in consumer arrears over recent months. Our balance sheet strength means we are well positioned to support those customers who need it."
On Monday, ANZ reported a flat result for the full year to September 30, with numerous indications of a weaker final six months for the country's fourth-largest bank.
