Quarterly profits fall to $2.4b

Commonwealth Bank chief executive Matt Comyn says interest rates are likely to stay on hold as the Australian economy remains resilient after the bank reported a second consecutive drop in profit in its latest trading update.

On Thursday, Comyn said while some businesses and households were under pressure, the Reserve Bank’s priority was to get inflation back within the target range. “I think it’s more likely that [interest rates] will be on hold in the near term,” he said. “The economy has been very resilient.”

Comyn said immigration was providing a tailwind for the economy and the bank, providing a source of customers for CBA, and supporting economic growth.

“I think strong migration over many decades has been a real positive economically and socially,” he said. “Obviously, there’s always a need to make sure that the infrastructure is keeping pace, but the increase in migration has certainly helped with some of the pockets of labour shortages.”

CBA on Thursday reported a 3 per cent fall in net profit compared to the first half of the year, pocketing $2.4 billion in the three months to March, and a 5 per cent drop in net profit compared to the same time last year.

Shares in CBA fell over 2 per cent to $117.25 a share in afternoon trading following the announcement.

The bank’s net interest margin – a measure of profitability comparing its funding costs with what it charges for loans – fell, with CBA blaming continued competitive pressures and customers switching to higher-yielding deposits.

Comyn said while margin pressures had stabilised in the most recent quarter the bank would continue to adopt a “dynamic” approach to growing its home loans.

“What we have seen in the past 12 months is more unsustainable pricing,” he said. “We’ve seen a slight improvement [in margins] in recent months. At times, we’ll be prepared to grow below system, and if we see opportunities to grow above system, of course, we will take those.”