(Bloomberg) -- Commonwealth Bank of Australia’s profit came in line with analyst estimates as a weakening economy and fierce competition for lending weighed on the nation’s biggest bank.
Cash profit dropped to A$9.8 billion ($6.5 billion) in the 12 months through June 30, down 2% on the prior year, the firm said in a statement Wednesday. That compared with the A$9.8 billion average estimate of analysts surveyed by Bloomberg.
Australia’s banks are grappling with a deteriorating outlook for margins as markets bet benchmark interest rates could start to decline before the end of this year. Focus has also turned to Commonwealth Bank’s equity valuation after its stock surged nearly 20% this year.
“Higher interest rates are slowing the economy and gradually moderating inflation,” Chief Executive Officer Matt Comyn said in the statement. “Australia remains well positioned but downside risks continue around productivity, housing affordability, as well as ongoing global uncertainty.”
The firm’s net interest margin declined eight basis points over the year to 1.99%. The bank will pay a final dividend of A$2.5 per share.
Investors are also watching for signs of increasing stress on borrowers. The proportion of home loans that have been in arrears for more than 90 days increased 12 basis points to 0.64%. Mortgages, the bank’s key business, saw loan growth increase 3% and the majority of its customers remain in advance of scheduled repayments, the statement said.
“We have retained strong loan loss provision coverage, with surplus capital and conservative funding metrics,” Comyn said.
(Adds detail on margins, home loans from fifth paragraph)
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