- Commonwealth Bank says more borrowers in arrears
The Commonwealth Bank is warning that more borrowers are falling behind on their mortgage payments as a result of higher interest rates.
Australia’s largest mortgage lender has revealed that more mortgage holders are at least 30 days behind on their monthly repayments.
“Consumer payment arrears have increased due to the impact of higher interest rates and cost of living pressures for some borrowers,” the report said.
CBA’s cash profit for the 2023-24 financial year fell 2 percent to $9.836 billion, reflecting “inflationary increases in operating costs.”
Chief Executive Matt Comyn, who makes $10.426 million a year with bonuses, said he understood the most aggressive rate hikes in a generation would hurt as wage growth barely kept pace with inflation.
“Many Australians continue to face challenges with the cost of living and a decline in real disposable household income,” he said.
Junvum Kim, a senior sales trader at online trading group Saxo, said the number of borrowers in trouble was becoming a problem, despite most Commonwealth Bank mortgage holders being ahead of scheduled repayments.
“The increase in provisions for impairments appears to be a notable negative factor,” he said.
The Commonwealth Bank has warned that more borrowers are falling behind on their mortgage payments due to higher interest rates
Higher interest rates also create more competition between banks to attract customer savings.
This caused CBA’s net interest margin to decline as higher deposit rates diluted the effects of higher mortgage payments.
“Competitive pressure has a significant impact on CBA’s net interest margin,” said Mr. Kim.
The Commonwealth Bank also warned that higher interest rates would slow the economy.
This is happening because high immigration is driving up house prices and stock market investors are worried about a global recession.
“Australia remains well-positioned, but downside risks remain around productivity, affordable housing and ongoing global uncertainty,” the report said.
Since mid-2023, Australia has been in a per capita recession. The output of every Australian is falling, while productivity remains the same.
Chief Executive Matt Comyn, who earns $10.426 million a year in bonuses, said he understood that the most aggressive rate hikes in a generation were hurting the economy.
The Commonwealth Bank’s annual results were released on Wednesday, just eight days after Reserve Bank Governor Michele Bullock said a rate cut was unlikely within the next six months.
The cash rate was left unchanged at 4.35 percent this month, the highest level in 12 years. However, the 13 rate hikes in 2022 and 2023 marked the fastest pace of monetary tightening since the late 1980s.
Despite the turmoil, Commonwealth Bank shareholders received a dividend of $4.65 per share, up 3 percent on the previous financial year.
CBA’s share price has risen 27.8 percent over the past year to $132.52.
Commonwealth Bank shares rose another 1.5 percent to $134.54 in early trading on the Australian Securities Exchange after the company released its annual results.