Commonwealth Bank of Australia 1Q Profit Rises

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Commonwealth Bank of Australia (CBA.AU) said its first-quarter profit rose as home lending increased and soured loans shrank.

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The country's largest bank by market value and the biggest mortgage lender on Wednesday reported an unaudited net profit of around 2.80 billion Australian dollars (US$2.14 billion) for the three months through September. That compares with a profit of about A$2.4 billion reported a year earlier.

Cash earnings--a measure followed by analysts that strips out one-time items, treasury shares and hedge-value changes--rose by 6% to about A$2.65 billion.

The bank said the credit quality of its lending portfolios remained sound, with consumer arrears falling compared to the previous three months. The loan-impairment expense for the quarter was A$198 million, or about 11 basis points of gross loans and acceptances.

Operating income rose by 4%, while expenses for the period also increased 4%, Commonwealth Bank said.

The bank's net interest margin, a profit measure based on the difference between the rate at which a bank borrows and lends, improved in the first quarter. That was driven by asset repricing and reduced liquid asset balances, although it was partly offset by the impact of a banking levy, higher funding costs and competition, CBA said.

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Over the past fiscal year, Australia's four biggest banks collectively recorded a 6.3% increase in cash earnings to A$31.5 billion, helped by a 23% drop in bad-debt expenses to A$3.97 billion, accountancy firm Ernst & Young calculated. However, the average net interest margin contracted an average 0.045 percentage point to 2.01%.

The fiscal year for Australia & New Zealand Banking Group Ltd. (ANZ.AU), National Australia Bank Ltd. (NAB.AU) and Westpac Banking Corp. (WBC.AU) runs through September.

-Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

November 07, 2017 16:48 ET (21:48 GMT)