Commonwealth Bank posts record half-year profit of $4.9b, hikes rates for property investors

Sydney Morning Herald FEB. 15 2017 - 8:35AM

The Commonwealth Bank's half year profits have swelled to $4.91 billion at the same time as it targeted property investors with another interest rate hike.

CBA, the country's largest bank, reported the 2 per cent lift in cash earnings on Wednesday, also raising its interim dividend by 1c to $1.99 a share.

The lender is also raising home loan interest rates for property investors with interest-only loans, who will face a 0.12 percentage point increase. Mortgage customers who have taken out a line of credit against their home face a 0.04 percentage point rate hike.

The rate hikes followed a result showing the lender's bottom line benefited from low charges for bad debts and tight control of costs, even as profit margins continued to be squeezed.

Excluding one-off factors, CBA's operating income rose 3 per cent, while operating expenses rose 1 per cent over the year.

Charges for soured loans were just 0.17 percentage points, down from 0.19 percentage points over the previous full-year.

The bank said higher funding costs crunched its net interest margin - what it charges for loans compared with its cost of funds. The net interest margin fell 4 basis points to 2.11 per cent.

Chief executive Ian Narev said there was a "heightened" risk of an global economic downturn, but the domestic backdrop was more encouraging.

"The combination of geopolitical volatility and weak economic recovery in parts of the world means the risk of market volatility, and indeed economic shock, remains heightened. At the same time, recent trends in the Australian economy are more positive.," Mr Narev said in a statement.

The result beat analyst expectations, as analysts had expected CBA to deliver a $4.84 billion profit and to keep the interim dividend flat at $1.98.