It’s no wonder the shares of the Commonwealth Bank (CBA) touched a record $80 in trading on the ASX on Tuesday.
The bank’s third quarter trading update this morning confirmed what many had suspected – that the country’s biggest bank is on track for a record profit for 2013-14.
Third quarter cash earnings rose by nearly 16% to $2.2 billion, from the $1.9 billion in the first quarter of 2013.
That takes the profit so far this year to more than $6.3 billion.
The bank earned a record $7.68 billion in 2012-13, and is now on track to lift that to $8.5 billion by the time June 30 this year comes around.
The shares closed at $79.90 yesterday and will regain the $80 level in trading today, if previous market reactions to solid trading updates are any guide.
CBA 1Y – CBA lifts March quarter earnings to $2.2bn
The bank said in its update to the ASX this morning its third-quarter cash earnings rose despite "moderate" growth in mortgage credit and "subdued" lending in the commercial sector.
The bank said "competitive pressures" had intensified and that the group net interest margin was marginally lower primarily because of regulatory settings forcing the bank to hold more liquid assets.
The statutory net profit on an unaudited basis for the same period was approximately $2.3 billion, up from $1.9 million a year ago.
"A combination of solid revenue growth and cost discipline resulted in positive jaws." That means that income grew faster than costs, even though there was a small dip in the net interest margin.
"First half business momentum was maintained but with increased focus on managing the volume/margin trade off as competitive pressures, particularly in lending, intensified.
"Trading income returned to normalised levels," the bank said.
The CBA said that credit quality was stable, with impaired assets unchanged at $3.9 billion.
"Strong provisioning levels and coverage ratios were maintained, with the economic overlay unchanged. Total loan impairment expense was $204 million."
That was down from the $255 million expense in the March quarter of 2013
"Bankwest performed well, highlighted by above system home lending, solid growth in deposit volumes and good cost discipline; and
"The New Zealand economy continued to gain momentum as strong demand for commodity exports and construction growth drove improved activity across a broad range of sectors.
"ASB lending growth for the quarter was modest, with margins remaining under competitive pressure and a continued customer preference for fixed rate lending.
"Retail deposits continued to grow above system," the CBA said.
