CBA expected to maintain low credit losses, strong capital levels

Australian banks remain exposed to high household debt and prices.

The Commonwealth Bank of Australia (CBA) is expected to maintain its low credit losses and strong regulatory capital levels in 2025.

CBA— one of Australia’s four major banks— announced that it earned A$5.1b for the first six months that ended on 31 December 2024, a 2% rise compared to the corresponding period.

CBA’s credit losses are expected to remain low over the next two years, or at about the pre-pandemic levels of 15 basis points (bps), said S&P Global Ratings.

“Nevertheless, banks in Australia, including CBA, remain exposed to a jump in credit losses due to high household debt, elevated interest rates and consumer prices, and global economic uncertainties,” the ratings agency said.

CBA's credit quality was noted to be broadly stable across the half with corporate stressed assets down by 3 bps; home loans arrears up by 1 bp; and the number of hardship cases down by 15%.

CBA's regulatory capital levels are expected to remain strong in the next two years. The bank's common equity Tier 1 (CET1) ratio was 12.2% as of 31 December 2024.

CBA is expected to manage its post-dividend CET1 ratio above 11%, which is higher than the Australian Prudential Regulation Authority's (APRA) capital requirement of 10.25%.