Commonwealth Bank boss Matt Comyn said Australia’s growing migrant influx was helping to prop up the country’s economy, even as his bank posted its second consecutive quarterly decline in profits.
In the three months ended March 31, profits fell to $2.4 billion, barely eclipsing analysts’ forecasts. The figure was 5 per cent lower than the March 2023 quarter and 3 per cent lower than the quarterly average recorded in the six months to December 31.
In a trading update posted to the ASX on Thursday, Comyn told investors his business, and the wider Australian economy, remained strong.
“Unemployment remains low, supported by business and government investment and high terms of trade,” he said.
‘We recognize that all households are feeling the impact of higher inflation and rates; however, immigration is providing a structural tailwind for the economy.’
CBA chief executive and president Matt Comyn (pictured) said immigration is helping the economy.
Even as immigration props up the Australian economy, Comyn said CBA’s profits were down and mortgage arrears were up.
But despite the more optimistic economic outlook, the country’s largest lender reported an increase in loan impairment charges of $191 million in the first three months of 2024, with “moderate” increases in both loan arrears consumers as well as at problematic corporate exhibitions.
Home loan arrears rose to 0.6 percent, an increase of 9 basis points, as households came under greater pressure from high interest rates, while late payments on credit cards also rose 8 basis points at 0.7 percent. Both measures remain below their historical averages.
Comyn said the CBA expects loan repayment arrears to increase as Australian households continue to struggle with cost of living pressures.
More worryingly, payment on personal loans due over 90 days increased between 0.2 percent and 1.3 percent, above its long-term average.
“We expect to see further increases in arrears in the coming months, given the continued pressure on households’ real disposable incomes,” Mr Comyn said.
Growth in the bank’s mortgage loan portfolio rose slightly, 0.7 times the system or $4.2 billion, while loans across its business rose 1.1 times the system or $2.7 billion. Household deposits increased by $5.3 billion.
The bank’s net interest margin – a key metric of bank profitability that calculates the difference the bank earns in interest on loans compared to what it pays in interest on deposits – sank as fierce competition in lending hit its bottom line. .
Higher personnel costs and amortization caused expenses to rise 2 percent, while operating income fell 1 percent.