Commonwealth Bank records a mega $5.1billion profit – as Aussies struggle under rising interest rates

The Commonwealth Bank has enjoyed a profit boost even as high interest rates have slowed Australia’s economic growth and squeezed mortgage holders.

Australia’s biggest home lender has announced a $5.1billion profit for the second half of 2024, marking an eight per cent increase compared with the corresponding period in 2023.

Shareholders are also benefitting from even higher dividends, despite Australian only just emerging from the worst of the cost of living crisis. 

Commonwealth Bank chief executive Matt Comyn said a stronger profit result for the first six months of the 2024-25 financial year was an achievement, with Australia’s economic growth pace at the weakest level since the 1991 recession, outside of the 2020 pandemic.

‘Through supporting our customers and investing in our franchise, we have been able to deliver solid results for our shareholders, despite the weaker economic backdrop,’ he told the Australian Securities Exchange on Wednesday morning.

‘Our consistent financial performance demonstrates our disciplined operational and strategic execution, and the bank’s deep customer relationships that help us understand needs and risks and deliver superior digital experiences.’ 

Mr Comyn said cost of living pressures had weighed on consumer demand with younger customers in particular making ‘real’ sacrifices.

‘Underlying inflation is now moderating towards the target range and we expect Australia will follow offshore economies with an easing cycle starting in 2025,’ he said.

Shareholders are being paid a dividend of $2.25 per share, up five per cent from a year ago, with the payment claimable on tax as a franking credit to account for company tax already paid.

The Commonwealth Bank is expecting the Reserve Bank to cut interest rates on February 18, which would mark the first relief to borrowers since November 2020. 

It sees the RBA cash rate being eased four times in 2025, which would take it to 3.35 per cent for the first time since March 2023 from an existing level of 4.35 per cent.

‘There are some risks around the outlook, however there are reasons for optimism in the Australian economy, with near record low unemployment and real disposable incomes starting to lift,’ Mr Comyn said.

‘We know many households are looking forward to lower rates.’

CBA’s net interest margin, a key gauge of profitability, was broadly stable at 2.08 per cent, up two basis points from a year ago.

The bank’s operating expenses rose to $6.4billion, up six per cent from the previous six months, mainly driven by higher staff expenses due to inflation as well as additional expenses in generative AI and data infrastructure.