CBA's quarterly profit slides as record-low interest rates bite

Credit: REUTERS/DAVID GRAY

Commonwealth Bank of Australia, the country's biggest lender, reported a near 10% drop in first-quarter cash profit on Tuesday, citing record-low interest rates.

Adds details on results, background

Nov 12 (Reuters) - Commonwealth Bank of Australia CBA.AX, the country's biggest lender, reported a near 10% drop in first-quarter cash profit on Tuesday, citing record-low interest rates.

The Reserve Bank of Australia, in a bid to stimulate the economy, has slashed interest rates to record lows this year, hurting banks' margins.

However, the "Big Four" lenders have resisted regulatory and government pressure to pass on the cuts in full to customers due to ever-thinning margins.

Cash profit, a measure that excludes one-offs and non-cash accounting items, from continuing operations fell to A$2.26 billion ($1.58 billion) for the three months ended Sept. 30, compared with A$2.50 billion a year earlier, the bank said in a limited trading update.

CBA said its net interest margin, a key measure of profitability, was lower than in the June quarter. The group's common equity tier 1 ratio stood at 10.6% at the end of September, slightly down from 10.7% as at June 30.

The bank said headwinds from a low interest rate environment, will continue to impact margins in future periods.

The country's major banks are on the back foot as rising costs and falling rates eat into margins amid increased competition.

All of Australia's four major lenders, who were once the envy of banks around the world because of their consistent high profits and returns to shareholders, have reported a second consecutive year of lower returns.

($1 = 1.4588 Australian dollars)

(Reporting by Nikhil Kurian Nainan and Aby Jose Koilparambil in Bengaluru; Editing by Shounak Dasgupta)

((NikhilKurian.Nainan@thomsonreuters.com; Twitter: @NikhilKurianN; +91 806 749 1637))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More