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CBA reports strong lending growth

Mortgage and business lending both rose in 1H21, but the major bank’s profit dropped 20 per cent as a result of low interest rates and the COVID pandemic, according to new figures.

The Commonwealth Bank of Australia (CBA) has released its half-year results for the 2021 financial year, revealing that home and business lending grew significantly over the six months to 31 December 2020 (1H21).

According to the 1H21 results, CBA’s home loan portfolio was $423 billion at December 2020, or $498 billion when including loans written to its subsidiary, Bankwest. These represent an increase of 5 per cent and 3 per cent ($13 billion), respectively, when compared with the same period the year before.

Indeed, the financial results show that over the first six months of the financial year (ending 31 December 2020), home lending balances had grown at 1.5 times system.

CBA Group now accounts for more than a quarter of home lending share when including Bankwest (or 21 per cent when excluding it).

Fundings were up 23 per cent on 1H20, with new fundings for home loans at $65 billion. A large proportion of its loans were for fixed rate mortgages, accounting for 38 per cent of its fundings mix (up from 10 per cent on 1H20).

Approvals were up 32 per cent to 179,000 in 1H21, which the lender partly attributed to faster credit decisioning in its proprietary channel.

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CBA CEO Matt Comyn noted that the bank had seen a particularly strong December, with $3 billion in loans funded that month, adding that January was also expected to return strong results.

A growing proportion of its loans were being written by the broker channel, the CBA results show, with the proportion of new business from brokers rising from 42 per cent in 1H20 to 44 per cent in 1H21 (or 48 per cent, when including Bankwest).

According to the major bank, the growth in mortgages can be attributed to the “resurgence” in the housing market and an increase in borrowers coming to market as a result of low interest rates and stimulus measures.

Looking at deferrals, the major bank revealed that over 70 per cent of customers who had deferred repayments on 250,000 home, personal and business loans during COVID-19 had resumed repayments.

CBA had 25,000 active deferrals as of 31 January (with 92 per cent having returned to pre-deferral terms of closed) on home lending.

Business lending

There were just 2,000 active deferrals on business lending (down 96 per cent from 83,000), totalling 300 million, according to the half-year results. The majority of active business deferrals were for businesses in Victoria (37 per cent).

CBA outlined that business lending had also grown strongly over the half, growing at approximately three times system over the year. Business lending was up $4 billion, taking its market share to around 17.3 per cent.

The big four bank has reportedly now funded approximately 50 per cent of all SME Guarantee Loans issued to businesses across Australia, lending $1.1 billion across 12,100 loans up to December 2020.

Overall, CBA reported a cash net profit after tax of $3.89 billion and statutory net profit after tax of $4.88 billion, 21 per cent lower than the prior comparative period. 

Nearly two-thirds of this was due to lower one-off gains on disposals and about a third was due to a decrease in cash profits from continuing operations, down 10.8 per cent to $3.9 billion. 

When the impact of COVID-19 and remediation costs are excluded, cash profit was broadly flat.

Mr Comyn commented that while the future outlook was positive, he warned that the coming months may present economic challenges as the government’s stimulus measures start to roll off.

“We continue to monitor our lending portfolios closely for any signs of stress. The low interest environment will continue to put pressure on our revenue, which is why we remain focused on performance, operational execution and capital allocation.”

However, Mr Comyn added: “The strength of our balance sheet and capital position enables us to support customers and help lead the country through recovery.”

[Related: CBA book boosted by multibillion-dollar OO rise]

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