Commonwealth Bank of Australia has reported a 16 per cent fall in quarterly cash earnings, citing ongoing pressure on margins due to historic low interest rates.
Australia’s biggest mortgage lender generated net cash earnings, its preferred measure of performance, of $1.8 billion in the first quarter of the financial year, down from the same period last year.
While home and business lending grew and deposits increased, the current environment of low interest rates weighed on CBA’s performance, as did the need to increase provisioning for potential bad loans.
“The group’s net interest margin was lower … due to reduced earnings on deposits and capital from lower interest rates, unfavourable lending margins,” it said in a statement on Wednesday.
The net interest margin is a profit measure and indicates the gap between the money a bank earns in interest on loans compared with what it pays in interest on deposits.
But CBA said its balance sheet remained strong and it was well positioned to meet the challenges thrown up by the economic impact of the coronavirus pandemic.
The bank also reported that as of end-October, more borrowers were back to repaying their loans, with deferrals falling by 59 per cent during the month.
Many borrowers had deferred repayment due to the pandemic after jobs were lost and business activity slowed.
Home loan rates in Australia are at the lowest level in decades, with the cheapest rates – about 2.0 per cent – to be had in the fixed mortgage market.