Commonwealth Bank has lifted third-quarter profit to a slightly below-expectation $2.3 billion as it follows its big four rivals by reporting a rise in bad debts.
Australia's biggest bank said on Monday the unaudited cash earnings result for the three months to March 31 was up from $2.2 billion in the prior corresponding period.
Statutory profit was up about nine per cent at $2.4 billion.
But CBA said loan impairment expense rose in the quarter to $427 million, which chimes with reports from the other big four banks in their first-half earnings updates last week.
"The increase is largely due to a small number of exposures in the group's institutional lending portfolio, which became impaired or exhibited heightened signs of stress, including a single, relatively large, domestic exposure with a syndicate of lenders including other Australian major banks," CBA said in its trading update.
UBS banking analyst Jon Mott said Commonwealth Bank's major exposure was to steelmaker Arrium, to which Westpac, ANZ and National Australia Bank are also exposed.
"Asset quality is deteriorating with CBA calling out weakness in mining regions and industries exposed to the resources cycle," Mr Mott told investors.
"CBA has fewer exposures to large single names, with Arrium the only major hit in the quarter."
Mr Mott had expected cash earnings of about $2.4 billion.
CBA's troublesome and impaired assets rose in the quarter to $6.3 billion but the bank said credit quality remained sound.
"However, ... pockets of weakness remain and warrant caution, particularly as global volatility continues," the bank said.
Even so, CBA was positive about the state of the economy.
"The Australian economy continues to perform relatively well, with the steady transition from a mining-dependent to a more broad-based economy evident in GDP (gross domestic product) and unemployment trends, and supported by low interest rates and the decline in the AUD (Australian dollar) over the past 18 months," CBA said.
Commonwealth Bank shares closed up $1.43, or 1.9 per cent, at $75.78 against the backdrop of a flat market.
COMMONWEALTH BANK's THIRD QUARTER
* Cash earnings up 4.5pct to $2.3b
* Net profit up 9pct to $2.4b
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