By Alice Uribe


SYDNEY-- Commonwealth Bank of Australia posted a 6.0% rise in annual net profit driven partly by volume growth across its core home lending and business banking units, and a revision in pandemic-related provisions.

CBA, Australia's biggest bank by market value and the country's largest mortgage lender, said its net profit rose to 10.77 billion Australian dollars (US$7.50 billion) in the 12 months through June from A$10.18 billion a year earlier on a statutory basis.

Cash earnings--the measure followed by analysts that strips out items including hedging and losses or gains on acquisitions and asset sales--rose 11% to A$9.60 billion.

Directors of the company declared a final dividend of A$2.10 a share, up from A$2.00 last year. Consensus forecasts compiled by FactSet projected CBA's annual profit would be A$10.45 billion.

CBA reported growth across core units, with retail banking services cash earnings of A$4.93 billion, up from A$4.70 billion the previous year. Business banking cash earnings were A$3.0 billion, up from A$2.84 billion, and institutional banking and markets earnings were A$1.05 billion, an increase from A$926 million the previous year.

"We have focused on strengthening our customer engagements and relationships, and this has resulted in further growth in our core deposit and lending volumes to retail, business and institutional customers," said Chief Executive Matt Comyn. "Our operating performance was higher as a result of this continued volume growth and profitability was further supported by sound portfolio credit quality."

Assisting the fiscal 2022 result was a reduction in money put aside to manage the challenges of Covid-19, which saw CBA's loan impairment expense fall A$911 million to a benefit of A$357 million. CBA said this was partly offset by forward-looking adjustments for emerging risks including inflationary pressures, supply chain disruptions and rising interest rates.

For the full year, CBA's operating expenses were A$11.19 billion, down 1.5% due partly to lower remediation costs, but were offset by higher staff costs.

Still, home-loan competition hit the lender's net interest margin, a measure of the difference between what a bank pays to get deposits and funds, and what it charges to lend money. For fiscal 2022 CBA's NIM was 1.90%, down 18 basis points on the previous year, which CBA attributed partly to lower home loan margins, but said this was partly offset by increased deposit earnings.

Australian bank NIMs had been under pressure amid the low interest rate environment which helped to drive a house-price surge in Australia. With the Reserve Bank of Australia making successive interest rate hikes over recent months, analysts believe lenders should see margin benefits over time. CBA said Wednesday that its medium term outlook remains unchanged, expecting margins to increase against the backdrop of rising rates.

CBA said consumer arrears remained low in fiscal 2022 reflecting origination quality, low unemployment, and significant household savings buffers, with troublesome and impaired assets decreasing to A$6.4 billion, from A$7.5 billion in fiscal 2021.

Meanwhile, total loan impairment provisions decreased to A$5.35 billion from A$6.21 billion in the year before, which CBA said reflected sound portfolio credit quality and the reduced level of Covid-19 overlays.

Still, Mr. Comyn said that while Australian households and businesses were in a strong position amid low unemployment, inflation and a rapid increase in the cash rate was negatively impacting consumer confidence.

"We expect consumer demand to moderate as cost of living pressures increase," he said.

CBA is still of the view that the medium term outlook for Australia is positive. Mr. Comyn said the bank would continue to invest in its business, with plans to extend its digital position.

The bank's closely watched Common Equity Tier 1 capital ratio, a key measure of a bank's ability to withstand financial shocks, was 11.5%, down 160 basis points on year.


Write to Alice Uribe at alice.uribe@wsj.com


Corrections & Amplifications

This article was corrected at 2325 GMT to reflect that CBA said Wednesday that its medium term outlook remains unchanged, expecting margins to increase against the backdrop of rising rates. The original version misstated the day that CBA released its annual result in Australia.


(END) Dow Jones Newswires

08-09-22 1854ET