Commonwealth Bank of Australia (CBA) is on track to be the first of the big four to post a $7 billion full year profit.
Australia’s largest lender made a $1.7 billion net profit in the three months to March 31, taking net profit for the first nine months of the financial year to $5.32 billion.
CBA’s cash profit, which the industry sees as a clearer reflection of underlying performance, could also top $7 billion when the bank releases its full year results in August.
A $1.75 billion cash profit in the three months to March took CBA’s nine month cash profit to $5.35 billion.
Analysts said the third quarter result supported expectations of a profit in excess of $7 billion.
“There were no surprises, with earnings consistent with our full year forecast of $7.1 billion,” Morningstar’s head of banking research David Ellis said.
Westpac posted a $6.99 billion net profit in the year to September 30, 2011, the closest an Australian bank has been to a $7 billion profit.
Tight cost controls and falling charges on bad debts were the main contributor to CBA’s three per cent profit growth in the third quarter, as lending growth remained subdued.
CBA said its funding costs were higher in the third quarter, which had a further negative effect on its net interest margin – a key measure of the profit it makes on loans.
However no numbers were provided on margins, causing some concern for analysts.
The bank’s 10 basis point lift in variable home loan rates in February had only one month’s impact on third quarter margins, Mr Narev said.
May’s 40 basis point rate cut will only impact the current quarter’s results.
Mr Narev said the outlook for financial markets remained uncertain, and the bank was continuing to tighten its costs and focus on sourcing local, more secure funding.
“When you combine (our conservative business) settings with low credit demand and elevated funding costs, which are consistent with what all our peers are experiencing, that does and has continued to impact on revenue growth through this quarter,” he said.
CBA’s loan impairments and arrears were consistent with the trends of the first half of the financial year, and the bank’s impairment expense fell from the previous quarter to $232 million.
The bank’s shares closed 75 cents, or 1.5 per cent, lower at $51.02.
