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Funding costs put pressure on CBA

by Staff Reporter8 minute read
The Adviser

By: Staff Reporter

Despite posting a third quarter cash profit of $1.5 billion yesterday, the Commonwealth Bank of Australia has warned that pressure on lending margins and bank funding costs may force the bank to move out of step with the RBA.

Speaking at the company’s results briefing, Mr Norris said home loan margins were trending down, and the bank was doing the best it could to “absorb increasing funding costs”.

Last December, the bank moved 12 basis points above the RBA, lifting its standard variable rate by 0.37 per cent.

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According to Mr Norris, higher funding costs continued to plague the bank, despite mortgage growth remaining above average.

“While the economic outlook has progressively improved over the past 12 months or so, operating conditions remain challenging,” he said.

“Credit growth remains muted, and margins continue to come under pressure from higher average funding costs and strong price competition.

“Whilst we have clearly passed the peak in the bad debt cycle, key credit quality indicators remain at elevated levels and we continue to expect gradual, rather than dramatic improvement.”

Against this background, the group managed to perform well with good volume growth, further improvements in customer satisfaction levels and disciplined cost controls.

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