Commonwealth Bank boss Matt Comyn upbeat on economy despite fall in profit and rise in loan arrears

Commonwealth Bank boss Matt Comyn has struck an optimistic tone about the Australian economy while conceding households are increasingly feeling the strain of higher interest rates and noting a rise in the number of mortgage arrears.

Reporting an unaudited cash profit of $2.4 billion for the third quarter — down 5 per cent compared with the previous three-month period — the chief executive said the fundamentals of the economy remained sound.

“Unemployment remains low, supported by business and government investment and elevated terms of trade,” Mr Comyn said.

“We recognise that all households are feeling the impact of higher inflation and higher rates, however immigration is providing a structural tailwind for the economy.”

The nation’s biggest lender reported loan impairments of $191 million for the three months to the end of March — up 8 basis points on the previous quarter — with home loan arrears rising to 0.6 per cent, up 9 basis points.

Credit card arrears rose 8 basis points as stretched households struggled with the increased cost of living and began to feel the full effects of 13 rounds of hikes in the Reserve Bank’s official cash rate. Personal loan arrears soared 20 basis points, with “elevated arrears observed for customers more susceptible to cost of living pressures”.

“We expect to see further increases in arrears in the months ahead given continued pressure on real household disposable incomes,” CBA said.

Saxo Asia Pacific senior sales trader Junvum Kim said CBA’s performance was muted and hampered by shrinking margins amid heightened competition and rising operating expenses.

“Nonetheless, the firm’s financial foundations remained strong, with a Common Equity Tier 1 capital ratio that exceeded regulatory thresholds and an increased provision for potential losses, underscoring a sturdy balance sheet,” Mr Kim said.

The RBA held fire on lifting the official interest rate from 4.35 per cent this week as it awaits further data to strengthen its belief that inflation is slowly working its way back to target of between 2 and 3 per cent.

The latest reading in March showed it at a higher-than-expected and still sticky 3.6 per cent, leading some economists to suggest at least one more hike could be needed later this year.

RBA governor Michele Bullock, while defending suggestions the bank had not gone hard enough on the credit squeeze at the height of the inflation crisis, again acknowledged the hardships being faced by many families but said her board couldn’t rule in or out any further increase.