- Commonwealth Bank says more borrowers are in default
The Commonwealth Bank has warned that more borrowers are falling behind on their mortgage payments as a result of rising interest rates.
Australia’s largest mortgage lender has revealed that more mortgage holders are at least 30 days late on their monthly payments.
“Consumer arrears increased reflecting the impact of higher interest rates and cost-of-living pressures on some borrowers,” it said.
CBA’s cash profit for the 2023-24 financial year fell 2 percent to $9.836 billion, reflecting “inflationary increases in operating expenses.”
Chief Executive Matt Comyn, who earns $10.426 million a year in bonuses, said he understood that the most aggressive interest rate increases in a generation were hurting the company because wage growth was barely keeping pace with inflation.
“Many Australians continue to face cost-of-living pressures and falling household real disposable income,” he said.
Junvum Kim, a senior sales trader at online trading group Saxo, said struggling borrowers were becoming a problem, even though most Commonwealth Bank mortgage holders were ahead of schedule on repayments.
“The increase in impairment provisions is emerging as a significant negative factor,” he said.
The Commonwealth Bank has warned that more borrowers are falling behind on their mortgage payments as a result of higher interest rates.
Higher interest rates are also creating more competition among banks to attract customer deposits.
This has led to a decline in CBA’s net interest margin, where higher deposit interest rates are diluting the effects of higher mortgage payments.
“Competitive pressures are significantly impacting CBA’s net interest margin,” Kim said.
The Commonwealth Bank also warned that higher interest rates were slowing the economy.
This comes as high immigration is driving up home prices and worries about a global recession are weighing on stock market investors.
“Australia remains well positioned, but downside risks remain around productivity, housing affordability and ongoing global uncertainty,” he said.
Australia has been in a per capita recession since mid-2023, with output per Australian declining while productivity has remained stagnant.
Chief Executive Matt Comyn, who earns $10.426 million a year in bonuses, said he understood that the most aggressive interest rate increases in a generation are affecting
The Commonwealth Bank’s annual results were released on Wednesday, just eight days after Reserve Bank Governor Michele Bullock said an interest rate cut was unlikely in the next six months.
This month, the cash rate was held unchanged at a 12-year high of 4.35 percent, but the 13 interest rate hikes in 2022 and 2023 marked the most aggressive pace of monetary policy tightening since the late 1980s.
Despite the turmoil, Commonwealth Bank shareholders received a dividend of $4.65 per share, up 3 per cent from the previous financial year.
CBA’s share price has risen 27.8 percent over the past year to $132.52.
Following the full-year results, Commonwealth Bank shares rose another 1.5 percent to $134.54 in early trading on the Australian Securities Exchange.
