Commonwealth Bank says home loan arrears rose in the third quarter as borrowers struggled with stagnant wage growth and the rising cost of living.
Australia’s largest mortgage lender says the number of home loans whose repayments are 90 days or more overdue rose to 0.65 per cent of its book in the three months to March 31, from 0.59 per cent three months earlier.
“There has been an uptick in home loan arrears, influenced by a small number of customers experiencing difficulties with rising essential costs and limited income growth,” CBA said in a trading update on Wednesday.
Stripping out Western Australia, which has been hit by the end of the mining boom, home loan arrears still rose from 0.47 per cent to 0.53 per cent.
CBA shares were $2.10, or 2.9 per cent, lower at $71.40 at 1040 AEST.
CBA made a third-quarter cash profit of $2.35 billion, with its lending margin hit by customers switching from interest-only to principal-and-interest mortgages.
The unaudited cash profit was two per cent lower than the average profit of each of the first quarters, and 2.1 per cent lower than the unaudited figure for the prior corresponding period.
CBA said net interest income was broadly flat, but that net interest margin – a key measure of lending profitability – fell due to the move away from higher-rate interest-only lending.
APRA’s requirement that CBA holds an additional $1 billion in regulatory risk capital until it addresses regulatory concerns dropped its Common Equity Tier 1 ratio to 9.8 per cent on a pro rata basis.
However, CBA said the sale of its life insurance operations in the first half of FY19 will add 0.70 percentage points to the CET1 capital ratio.