The group’s year-on-year volume growth was driven by an 11 per cent increase in business lending, a 5.7 per cent rise in household deposits and a 3.1 per cent lift in home lending. Overall domestic mortgage balances decreased by $4.5 billion reflecting ongoing competition and a disciplined approach to managing margins.
Operating expenses were up 3 per cent compared to the 2H23 quarterly average, due to higher staff costs from wage inflation, partly offset by productivity initiatives. The overall operating performance (difference between operating income and costs) increased 2 per cent on the prior corresponding period and was flat versus the 2H23 quarterly average.
Matt Comyn, CBA’s CEO, said the quarterly result underscored the group’s balance sheet strength that allows CBA to support its customers through the current challenging times while providing strength and stability for the broader Australian economy.
“We are very conscious that many Australians are feeling under pressure in the current environment. While some remain well positioned, we recognise that others are finding the higher cost of living very tough,” said Mr Comyn.
“Our customers are continuing to take practical steps to navigate through and we are here to help them. As a result we have seen a modest increase in consumer arrears over recent months. Our balance sheet strength means we are well positioned to support those customers who need it.”
From a balance sheet perspective, CBA remains 75 per cent deposit funded, with long term and short term wholesale funding representing 17 per cent and 8 per cent of total funding respectively.
The group has repaid $19 billion of the Reserve Bank of Australia’s Term Funding Facility put in place to support the economy during the Covid-19 pandemic and has issued $17 billion in new long-term wholesale funding this financial year which is approximately 50 per cent of CBA’s FY24 requirements.
CBA also retained a strong capital position during the quarter with a CET1 (Level 2) ratio of 11.8 per cent as at 30 September 2023, well above APRA’s minimum regulatory requirement of 10.25 per cent. That equates to $7.3 billion in surplus capital.
The capital ratio increased by 46 basis points in the quarter before allowing for the impact of paying the $4 billion second half FY23 dividend to approximately 860,000 shareholders.
The group also completed the purchase of more than $700 million of shares on-market to neutralise the impact of the second half FY23 dividend reinvestment plan and has started the $1 billion on-market share buy-back, announced with the FY23 results on 9 August 2023. This will be completed subject to market conditions and other considerations.
Credit quality remained sound with several indicators still near historic lows. The loan loss rate was nine basis points of gross loans and acceptances for the quarter compared to 12bps for FY23 while consumer arrears ticked up slightly.
Total credit provisions were $6.1 billion, with a slight increase in collective provisions to $5.3 billion which reflected ongoing pressures from higher interest rates and the increased cost of living. There was a $53 million increase in individual provisions to $807 million. Strong provision coverage was maintained with a peer-leading total provision coverage ratio of 1.65 per cent.
Commenting on the broader economic indicators, Mr Comyn said CBA remained optimistic about Australia’s medium-term prospects. “The Australian economy remains resilient, supported by low unemployment and strong population growth,” he said.
“Higher interest rates are resulting in slowing growth and consumer spending, with pressure on some households and businesses. Our balance sheet strength combined with our strong organic capital generation allows us to support our customers through challenging times.
“Strong banks benefit all Australians, and we remain well positioned to continue to support our customers, invest in our communities and provide strength and stability for the broader Australian economy.”