CBA Posts $11B Cash Profit, Warns Economy Slowing as Mortgage Demand Drops

For investors, CBA's result epitomizes the peak-of-cycle conundrum: record earnings powered by margin expansion, yet unmistakable signals that the credit cycle is about to turn. The divergence between the bank's stellar profitability and the deepening cracks in household finances demands a nuanced view of valuation and forward guidance.

Commonwealth Bank of Australia (CBA) has reported a robust full-year net profit of $10.9 billion, up 7% year-on-year, reflecting the resilience of Australia’s largest bank in an environment marked by tightening monetary policy and softening property markets. The cash net profit, CBA’s preferred metric, came in at $11 billion, also a 7% increase and exceeding market expectations. Revenue climbed 7% to $30.2 billion, underpinned by margin expansion and disciplined cost management. These numbers underscore CBA’s dominant market position and the ability of the banking sector to generate strong returns even as the broader economy decelerates.

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Westpac disclosed a 20% slump in mortgage applications since the budget, while NAB reported a 15% fall in home loan applications for the June quarter.

The results, however, were accompanied by unusually pointed warnings from CEO Matt Comyn about the deteriorating outlook for Australian households. Comyn noted that while the economy has been supported by historically low unemployment and long-term investment, growth is clearly slowing. He highlighted the uneven pressure that higher interest rates and persistent inflation are placing on household budgets, a dynamic that directly impacts the bank’s core mortgage lending business. This candid assessment from the head of the nation’s largest bank signals mounting concern about the durability of consumer spending and housing demand, which have been key pillars of Australia’s post-pandemic recovery.

CBA’s commentary comes against a backdrop of significant policy changes. The federal government’s May budget introduced amendments to negative gearing and capital gains tax concessions for property, triggering some of the steepest monthly house price declines since 2022. The impact on loan demand has been swift and measurable. Westpac disclosed a 20% slump in mortgage applications since the budget, while NAB reported a 15% fall in home loan applications for the June quarter. CBA itself acknowledged that housing activity has softened from a high base, though it noted that its own application numbers appear to have stabilized in recent weeks. This divergence suggests that CBA’s market share may be holding up better than its peers, but the overall trend is one of cooling credit appetite.

The Reserve Bank of Australia’s decision to leave rates on hold for a second consecutive meeting on Tuesday provides only modest relief. Economists immediately branded it a “hawkish hold,” pointing to the central bank’s stated bias toward further tightening. Betashares chief economist David Bassanese captured the sentiment: “Australian mortgage holders have had an interest rate reprieve but are not out of the woods just yet.” The implication is clear: the cumulative effect of 13 rate rises is still working through the economy, and more pain may be ahead. For a bank like CBA, this means loan impairments are likely to rise from current benign levels, potentially eroding some of the profitability gains.