CBA makes $2.8 billion in three months, as more borrowers fall behind and new home lending suffers its worst quarter on record

Australia’s biggest lender is still making money hand over fist. Its customers are finding it harder.

Commonwealth Bank reported an unaudited cash profit of about $2.8 billion for the three months to 30 September in its first-quarter update on Wednesday, up 8% on the same quarter a year earlier. Against the average of its previous two quarters, the result was flat.

The detail under that number tells the more important story. The share of CBA’s home loans with repayments 90 or more days overdue rose 7 basis points to 0.80%, up from 0.73%. The bank put the rise down to cost-of-living pressure from higher inflation and interest rates.

“Higher inflation and interest rates continue to place uneven pressure on household incomes and business activity,” chief executive Matt Comyn said.

Who is falling behind?

The strain is showing up in mortgages first. Personal loan arrears eased slightly to 1.66% and credit card arrears were steady at 0.73%, which suggests households are protecting everyday spending lines while their biggest debt gets harder to service.

At 0.80%, roughly one in every 125 CBA home loans is three months or more behind. The bank lifted its collective provisions by $105 million in the quarter, a buffer against loans that may go bad, and said its coverage remained strong.

Operating income rose 3%, driven by growth in lending and deposits and partly offset by weaker markets trading. Operating costs also rose 3%, on wages and technology. Home lending grew 6.6% and business lending 13.6% over the year, while deposits grew 7.7%.

Why are fewer people borrowing?

CBA said home loan applications were 16% lower than a year earlier. Later on Wednesday morning, figures from the Australian Bureau of Statistics showed the bank is not alone.

The value of new home loans across Australia fell 15.5% in the September quarter, the largest quarterly fall since the series began in 2002. Economists had expected a drop of about 8%.

Investors led the retreat. The number of new investor loans fell 30.6% and their value fell 32.3%. The number of new owner-occupier loans fell 5.3%, and loans to first home buyers fell 8.6%.

What does it mean for households?

For people with a mortgage, the two sets of numbers point the same way: repayments are biting, and lenders are seeing it in their books. For people trying to buy, a sharp fall in investor demand can mean less competition at auctions, but borrowing costs remain high.

For shareholders, the result changed little. CBA shares were up about 0.2% in late-morning trade, while the ASX 200 recovered from an early fall of about 0.3% to sit flat.

Why does this matter beyond CBA?

CBA writes about a quarter of Australia’s home loans, so its arrears figures are an early read on mortgage stress across the country. The other major banks will be watched for the same pattern.