Property becomes pressure cooker

CBA customers struggle

Commonwealth Bank home loan customers in hardship jumped 20 per cent, reaching more than 7000 as surging living costs continue to squeeze budgets, chief executive Matt Comyn said after the bank posted a slight fall in interim profits to $5bn, as higher funding costs and competition hurt margins.

The nation’s largest lender on Wednesday reported a 3 per cent fall in cash earnings for the six months to December 31 to $5.02b and a $2.15 dividend.

These figures were broadly in line with expectations, but clouded by slightly thinner than expected interest margins, disappointing investors who pay high prices for the bank’s shares.

Australia’s economy continued to show resilience weathering the highest interest rate hikes in decades, Mr Comyn said.

However he said an increasing number of households were feeling the pinch of a rising cost of living and were cutting back spending to adjust, which in turn was hurting businesses.

But even as he acknowledged the ongoing financial strain for households and businesses, Mr Comyn said the bank had not grown more apprehensive about the overall economic outlook, and expressed optimism.

“Some households are absolutely feeling the pressure from higher prices across the economy,” he said, before adding that those feeling the strain were only a tiny fraction of CBA’s customer base.

“We fully expected the economy may slow over the course of the year, but we feel very well-prepared for a range of economic scenarios and of course to make sure that we’re supporting our customers throughout that.”

CBA had contacted every one of its clients coming off an ultra cheap fixed-rate loan to offer “personalised pricing offers” to customers.

For those struggling, the bank was arranging loan repayment deferrals, customised payment arrangements and even a loan repayment suspension for those that required, Mr Comyn said.

With consumer arrears expected to continue rising, bad debt provisions had also increased marginally to be at $6.06bn, reflecting ongoing pressures from higher costs of living and interest rates on households and businesses.

The bank wrote off a net $324m in loans during the half, which was a bit more than the $364m written off a year earlier.

But as a proportion of gross loans and acceptances, the loan loss rate actually fell to 0.09 per cent, from 0.11 per cent in December 2022.

“The economy remains fundamentally sound and stronger than many international markets, and we remain optimistic about the overall outlook,” Mr Comyn said.

CBA shares fell 3.5 per cent following the announcement, which also included a declared interim dividend of $2.15 per share, slightly below the $2.16 that analysts had forecast but higher than the $2.10 paid a year earlier.