The Commonwealth Bank has unveiled a monster $8.68 billion profit but there are growing concerns its best performances may be behind it.
Australia's biggest lender lifted its cash profit 12 per cent for the year to June 30, delivering the largest profit ever posted by an Australian bank.
But with interest rates set to go up in the next year, analysts question whether the bank can continue to deliver that kind of growth.
For his part, chief executive Ian Narev, was cautiously optimistic on the outlook.
"We're still fundamentally quite positive, although aware of the fact that there are some risks to the downside as there are some opportunities to the upside," he said.
"I do think we are in an environment, particular in terms of the global environment, where significant uncertainty still exists and I think as the head of a financial institution we need a degree of conservatism."
But he said Australians should take its latest profit result as a sign of the strength of the economy.
"A good strong profit result should be a sign of confidence in the economy," he said.
The Reserve Bank of Australia has kept the cash rate at 2.5 per cent for more than a year but is expected to start hiking in 2015, which could slow growth in the housing and share markets and lead to an increase in defaults.
CSLA banking analyst Brian Johnson pointed to the bank's credit quality as a sign of possible weakness to come.
He said the bank had benefited from an ongoing reduction in loan loses in recent years as interest rates fell.
Loan impairments down 12 per cent to $953 million for 2013/14, but were up nine per cent during the second half.
"For a number of years you have seen very, very low loan losses boost their earnings and that's what you see again," he said,
"So a lot of it comes down to do you think that can continue? And in this quarter you saw the loan loss charge go up quite sharply."
Investors were less than impressed with the record profit result, with Commonwealth Bank shares down 73 cents to $80.96 on Wednesday.
The Commonwealth recorded gains across all of its major divisions during the year, with earnings up 12 per cent at its retail banking division and four per cent at its business banking arm.
But the star was the wealth management division, which lifted earnings 17 per cent despite becoming embroiled in a scandal over fraud and misconduct by some advisors.
Mr Narev said the bank was serious about "putting things right" for customers affected by the scandal.
"I and my team have a very genuine commitment that we aim to drive right through the organisation to do the right thing by our customers," he said.
"We've realised that when we don't do that we need to put it right."
The Commonwealth launched a review of the division in July following the release of a damning Senate report.
CBA POSTS RECORD PROFIT
* Cash profit of $8.68b, up 12 per cent from $7.82b in 2013/14
* Net profit of $8.63b, up 13 per cent from $7.67b
* Fully-franked final dividend of $2.18, up from $2
Share
