By Sameer Manekar
(Reuters) -Commonwealth Bank of Australia, the country’s biggest lender, reported a smaller-than-expected drop in annual cash profit on Wednesday, although it warned that high interest rates were affecting the economy and crimping household incomes.
CBA, which writes around a quarter of the country’s mortgages, warned that decade-high interest rates were slowing the economy and inflation, with huge impact still being absorbed.
“Higher interest rates are slowing the economy and gradually moderating inflation,” Chief Executive Officer Matt Comyn said in the annual results report.
“Australia remains well positioned but downside risks continue around productivity, housing affordability, as well as ongoing global uncertainty.”
The results report also highlighted a growing trend of borrowers struggling to meet their loan payments due to the double whammy of sticky inflation and high interest rates, leading to delayed loan payments.
“Many Australians continue to be challenged by cost of living pressures and a fall in real household disposable income,” the bank said.
“Consumer arrears increased reflecting the impact of higher interest rates and cost of living pressures on some borrowers.”
Home loan payments due for 90 or more days were at 0.65% of its total mortgages at the end of June, an increase of 13 basis points from December-end.
The bank’s net interest margin, a closely watched measure of the difference between interest earned from loans and interest paid on deposits, fell 8 basis points to 1.99%.
The country’s biggest lender by market value said cash net profit after tax was A$9.84 billion ($6.52 billion) for the year ended June 30, ahead of an LSEG estimate of A$9.68 billion.
It fell around 3% from last year’s record profit of A$10.16 billion.
The bank declared a final dividend of A$2.50 per share, compared with A$2.40 a year ago.
($1 = 1.5081 Australian dollars)
