Commonwealth Bank reports slight profit increase

Half-year profit inched upward by just 1% to $3.66 billion.

Commonwealth Bank of Australia, the largest of the Big Four Australian banks, said the improvement came despite slow lending growth across the Australian economy.

The bank, however, said its cash earnings, excluding one-off costs and gains, rose 6% to $3.78 billion. The improvement was due to a $26 billion or 4.2% rise in loans to $649 billion. Deposits grew $26 billion or by 7.4% $376 billion.

CBA said its net interest margin that measures the gap between the interest rate the bank pays to borrow money and what it lends it out at fell 2 basis points over the past year to 2.1% due to higher wholesale funding and deposit costs.

Its net interest margin rose 4 basis points in the six months to December compared with the six months to June.

Analysts were pleased that Australia’s largest bank continued to prosper due to better margins, higher trading income, a recovery in wealth management and productivity improvements.

CBA has set aside $4.7 billion in provisions to cover potential losses.