Commonwealth Bank’s full-year earnings benefited from tighter regulatory rules around home and investor loans following an industry-wide crackdown on banking practices.
Australia’s biggest bank posted a two per cent rise in lending volume and a five basis point rise in net interest margin to 2.15 per cent for the year ended June 30 from a year earlier, helping its extensive retail banking services unit post a 5 per cent rise in cash profit to $5.19 billion.
CBA said the increase in NIM was largely due to the repricing of interest-only and investor loans to meet regulatory requirements.
Financial regulator APRA required banks to wind back the growth in interest-only lending and lending to investors in early 2017 following concerns about an overheating housing market.
The gains on earnings for CBA were partly offset by higher funding costs and the federal government’s banks levy.
Interest-only mortgages have been a focus in recent months, with a report by ratings agency Moody’s earlier this month warning that it expected delinquencies on home loans to rise as interest-only periods ended and borrowers faced higher repayments.
CBA chief executive Matt Comyn said the bank has been getting in touch with customers on interest-only mortgages early to discuss their options.
‘We’re communicating with customers well in advance of any switching that’s required,’ he said on Wednesday.
‘We’re typically doing this as much as 12 months in advance, and we think this is going to deliver good customer outcomes, I think it will moderate any upward pressure on arrears.’