Commonwealth Bank reports profit rise alongside jump in overdue home loans

UPDATE - follow-up to CBA's late mortgage payments tick up as interest rate rises bite: More Australians are struggling to pay their home loans as high inflation and rising interest rates put pressure on household budgets, according to a new report from the Commonwealth Bank of Australia.

Financial Results

In a trading update released on Wednesday for the quarter ending September 30, the bank posted a profit of $2.8 billion. Operating income rose 3 per cent, but expenses went up by the same amount. The profit figure stayed flat compared to previous quarters, though it grew 8 per cent when measured against the same period in the previous financial year.

Loan Arrears

The bank reported a seven-basis-point increase in home loans that are more than 90 days overdue. This brings the total rate of overdue home loans on its books to 0.80 per cent. CBA set aside a $105 million provision to protect against potential loan issues, keeping its total provisions for bad loans flat at $6.5 billion. Chief executive Matt Comyn stated that higher inflation and interest rates continue to place uneven pressure on household incomes and business activity, while noting that the broader Australian economy remains resilient.

Market Reaction

The share market responded well to the update, pushing CBA shares up about 0.8 per cent to $170 by mid-morning on Wednesday while the wider ASX200 index fell. Meanwhile, investment bank Citi analysts described the result as a modest miss due to weaker trading income and higher bad debts. Rival bank ANZ earlier reported a similar rise in customers struggling with repayments, with overdue loans reaching 0.95 per cent.

Context

Major commercial banks regularly issue trading updates to keep shareholders informed of their financial health between full earnings reports. Rising interest rates are a tool central banks use to cool down the economy by making borrowing more expensive, which in turn helps bring down high inflation rates over time.