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CBA's mortgage growth slows as profits take a hit

The big four bank has reported “below system” mortgage growth, a rise in home loan arrears and a $150 million drop in its cash profits.

According to the Commonwealth Bank of Australia’s (CBA) first quarter 2019 (1Q19) financial results, released prior to the commencement of CBA’s annual general meeting (AGM), the bank’s home lending portfolio grew by 3.1 per cent, 50 basis points below system growth of 3.6 per cent.

However, when compared to 1Q18, CBA’s home lending growth increased by 40 basis points to 2.7 per cent.

The bank’s financial results also revealed that arrears underlying its mortgage portfolio increased from 0.59 of a percentage point in 1Q18 to 0.67 of a percentage point in 1Q19.

Further, according to the results, CBA continued to report negative business lending growth, which dropped by 4.2 per cent in 1Q19, following on from a 1 per cent decline in 1Q18.  

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Conversely, the bank reported 8.9 per cent growth in household deposits over 1Q19, compared to 4.8 per cent in 1Q18.

However, overall, CBA posted a cash net profit of $2.5 billion in 1Q19, down by $150 million from $2.65 billion in 1Q18.

Reflecting on the results, CBA CEO Matt Comyn claimed that the “fundamentals” of the bank remain strong, pointing to “continued deposit growth, sound credit quality and balance sheet strength”.

Mr Comyn also reiterated CBA’s commitment to simplifying its bank, making reference to its sale of global asset management business, Colonial First State Global Asset Management, and its demerger of its wealth management and mortgage broking businesses.

“[The divestments] represent another important milestone in our strategy to focus on our core banking businesses and to create a simpler, better bank,” the CEO said.

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CBA establishes external advisory panel

In his address to shareholders during CBA’s AGM, Mr Comyn also announced the establishment of an “external advisory panel” to assist the leadership team in shaping its “engagement with customers, employees and the community”.

Mr Comyn announced that the panel will be chaired by deputy chair of St. Vincent’s Health Australia and KPMG partner Patricia Faulkner AO.

Ms Faulkner previously served as deputy commissioner to the Royal Commission on Family Violence and as chair of superannuation firm Superpartners.

CBA chair acknowledges failings

CBA chair Catherine Livingstone, who also addressed shareholders at the bank’s AGM, apologised for failings of the bank identified by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“[The] board and I regret these failings, and we apologise, without reservation, to our customers, to our staff, to you our shareholders, to our regulators, and to the broader community,” the chair said.

Ms Livingstone acknowledged that when CBA’s processes failed, “there were neither the systems nor processes in place to identify and fix the problems, nor a sufficient sense of urgency to identify the root cause and take steps to prevent similar issues [from] arising again”.

The CBA chair added: “We also acknowledge the royal commission’s criticism that, too often, a focus on profitability disadvantaged some of our customers. We agree that this imbalance is not acceptable.

“There is much to be done to address these failings, and significant programs of work have been underway for the past year.”

[Related: Major bank reports drop in mortgage applications]

CBA's mortgage growth slows as profits take a hit
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Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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