CBA Posts Record Earnings Amid Cooling Mortgage Demand

Australia's largest lender by market capitalisation, Commonwealth Bank of Australia (CBA), has reported record full-year cash earnings that exceeded market expectations. The bank's net profit was A$10.98 billion ($7.75 billion) for the year ended June 30, beating a consensus estimate of A$10.85 billion and last year's A$10.25 billion.

The strong earnings were driven by robust lending volumes, particularly in home lending and business lending, which grew at or above the industry average. However, CBA also flagged a decline in mortgage demand since the government introduced tax changes in May, with new home loan applications falling 15% and investor applications dropping 28%. This decline is concerning for Australian banks, as they control more than 70% of the national mortgage market and rely heavily on home loans for profits.

CBA's CEO Matt Comyn noted that 'growth is slowing, with higher interest rates and inflation placing uneven pressure on household incomes and economic activity.' The Reserve Bank of Australia had lifted interest rates to post-pandemic highs earlier this year, putting pressure on borrowers already struggling with cost-of-living strains. The bank also warned of a slowing economy due to these factors.