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The Commonwealth Bank of Australia (CBA) has issued a trading update for the third quarter of 2021 (3Q21), in which it reported unaudited statutory net profit after tax (NPAT) of around $2.4 billion in the quarter ended 31 March 2021.
Home lending rose by $6.7 billion over the March 2021 quarter, marking a 5.3 per cent rise compared with the March 2020 quarter, and was 1.1 times over system during the quarter as the housing market recovery continued to gather pace, CBA said.
The major bank said the above system growth was supported by strong funding volumes and continued focus on credit decisioning turnaround times.
Business lending rose by $3.0 billion and was over 3.0 times system over the quarter, representing an 8.1 per cent increase compared with March 2020, the trading update revealed.
Household deposits grew by 13.9 per cent over the quarter, or $4.0 billion, and was 1.4 times above system.
The bank reported a customer deposit funding ratio of 75.0 per cent.
Unaudited cash NPAT from continuing operations totalled around $2.4 billion in the quarter, up 24 per cent from the 1H21 quarterly average, which it said was mainly driven by lower loan impairment expenses (total credit provisions reduced by $300 million to $6.5 billion as at 31 March), CBA reported.
However, the major bank said that provisioning coverage has remained, as it continues its cautious approach to managing risks across its lending portfolios as economic recovery has continued, particularly as customers transition from COVID-19 temporary support measures implemented during the pandemic.
The bank also reported that around 158,000 home loan customers (totalling $54.0 billion) and 83,000 business loan customers deferred their loans during the pandemic.
CBA expects ‘modest’ rise in arrears
Of the customers who deferred their home loans, 81.0 per cent have returned to pre-deferral terms, 10.0 per cent are closed, 4.0 per cent have switched to interest-only arrangements, and 1.0 per cent are impaired or restructured, while the remaining 4.0 per cent have required further or ongoing assistance, the bank said.
It reported that there was a small increase in home loan arrears in the quarter as the deferral program concluded, and said that it expects further modest increases in coming months.
All business customers have concluded their deferral arrangements, with 95 per cent returning to regular repayments or closing their loans, while the overall arrears profile was consistent with the rest of the portfolio, CBA said.
Operating income increased by 2.0 per cent, with net interest income higher, which the major bank attributed to continued volume growth in core businesses and an improved net interest margin, but added that this was partly offset by the impact of two fewer days.
Operating expenses were 2.0 per cent higher including increased remediation costs, but 1.0 per cent higher excluding these costs. CBA said that this reflected a stronger investment spend profile and higher volume-related costs, partly offset by ongoing business simplification and two fewer days in the quarter.
Troublesome and impaired assets were lower at $7.8 billion, which the bank said was driven by improvements in the corporate portfolio, particularly related to a small number of single name exposures.
The bank’s term funding facility (TFF) totalled $48.0 billion, up from $41.0 billion in December 2020, which it said was driven by growth in SME lending. Its wholesale funding requirements have reduced due to deposit growth and utilisation of the TFF ($19.1 billion drawn as at 31 March 2021).
It issued $3.6 billion of Tier 2 long-term funding in the quarter, and added that it has continued to make progress towards the Australian Prudential Regulation Authority’s (APRA) total loss-absorbing capacity (TLAC) requirements.
Commenting on the home lending growth, CBA CEO Matt Comyn said: “Our disciplined focus on operational excellence was reflected in continued strong operational performance in the March quarter.
“This was highlighted by strong home loan funding volumes, particularly through our proprietary network, and business lending growth continuing to grow at greater than three times system levels.”
“Credit quality across our lending portfolios remained sound. While it is pleasing to see that the vast majority of customers have smoothly transitioned from the bank’s COVID-19 temporary loan repayment deferral program as it concluded in March, we continue to offer ongoing assistance to those in need.”
[Related: Major banks revise house price predictions]