In its March Quarter 2015 Trading Update, Commonwealth Bank of Australia (ASX:CBA) reported a cash earnings of $2.20bn in the March quarter. Compared to the previous corresponding period, earnings were flat. Statutory net profit on an unaudited basis for the same period also came in at $2.20bn, with non-cash items treated on a consistent basis to prior periods. The company said group net interest margin continued to be impacted by competitive pressures, although trading income remained strong. CBA also reported growing expenses for the company, citing growing regulatory, compliance and remediation costs. The bank used FATCA, FoFA, Stronger Super and LAGIC as examples of regulations that were increasing costs. Credit quality remained strong for the banking giant. Retail portfolios, home loan and credit card arrears were flat, while seasonal factors lead to higher personal loan arrears.
In key markets for the company, home lending volume growth continued to track slightly below system. Core business lending remained relatively unchanged at mid-single digit levels. Household deposits growth was strong, with balancing rising by an annual rate of over 10 per cent. Funds under Administration grew at 7 per cent and Assets under Management grew at 8 per cent, reflecting strong investment performance, net inflows and foreign exchange gains. Insurance inforce premiums grew by 3 per cent on the prior quarter. The CBA earnings report comes a day after another Australian banking giant, ANZ, reported a marginal increase in earnings. The day before that, Westpac also reported a flat profit. Some US-based institutions, including Goldman Sachs and Morgan Stanley, have downgraded Westpac and are poised to further downgrade the sector.
CBA has fallen $4.08, or 4.63 per cent, at $84.06 per share around 1:30pm on Wednesday. CBA has advanced 5.97 per cent in the last 12 months but has fallen 1.90 per cent so far this year.