Commonwealth Bank chief executive Ian Narev sees positive signs in an Australian economy already healthy enough to have helped the country's largest bank to another record first-half profit.
Australia's largest lender beat analysts' expectations by raising cash profit for the six months to December 31 by 2.1 per cent to $4.9 billion, and Mr Narev said the broader economic picture looks brighter now than it did over that period.
He said higher commodity prices, the passing of headwinds from mining sector retrenchment, continued construction activity and a lower Australian dollar were all lending support to the local economy.
"Relative to where we were six months ago, despite the disappointing GDP figures for the third quarter, there's no doubt the underlying income story for Australia has just gone up a notch," Mr Narev said.
That bodes well for CBA, which is contending with increased funding costs, higher capital requirements and fierce competition for both borrowers and savers.
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"There is no part of the business anywhere where the intensity and breadth of competition is getting any easier," Mr Narev said.
Net interest margin - the difference between interest a bank makes on loans and interest it pays on funds to finance them - fell by 0.04 percentage points to 2.11 per cent and the Commonwealth followed its profit announcement by raising some mortgage rates.
Interest-only investor loans will go up by 0.12 per cent on April 3, while customers who have line of credit products against the equity in their home will see their mortgage interest rate rise by 0.04 per cent.
That should also act as a brake on investor lending growth and keep it below APRA's 10 per cent annual limit.
"We have not exceeded the 10 per cent benchmark and we are determined not to," Mr Narev said.
The retail banking unit was the standout performer as the bank lifted total operating income 6.2 per cent to $13.1 billion.
CBA increased its share of the total Australian home loan market to 25.4 per cent from 25.1 per cent a year earlier, with the average value outstanding loans increasing six per cent on the prior corresponding period to $430 billion.
Customer deposits also rose, by eight per cent to $541 billion and 66 per cent of the bank's total funding.
Its loan impairment expense was up six per cent on the prior corresponding period at $599 million, but down 13 per cent on the six months to June 30.
Analyst consensus had been for a profit of $4.84 billion and a flat interim dividend.
CBA lifted its dividend one cent to a fully franked $1.99.
"There's a lot to like in the result: an impressive RoE, strong volume growth, strong balance sheet, good asset quality, strong cost control, solid dividend," Morningstar analyst David Ellis said.
At 1551 AEDT, Commonwealth Bank shares were up $1.95, or 2.4 per cent, at $84.58.
CBA'S FIRST-HALF FIGURES
* Cash profit up 2.1pct to $4.907b
* Net profit up 5.9pct to $4.895b
* Total income up 5.8pct to $13.142b
* Interim dividend up one cent to $1.99, fully franked
