(Updates with year-earlier figure in second paragraph.)
Nov. 15 (Bloomberg) -- Commonwealth Bank of Australia reported first-quarter cash profit climbed 9.4 percent as loan impairment charges fell and said sovereign debt concerns in Europe and restrained consumers at home mean conditions are “challenging.”
The nation’s biggest lender posted profit of about A$1.75 billion ($1.79 billion) in the three months to Sept. 30, up from A$1.6 billion in the same period a year earlier. Profit margins are being squeezed by higher funding costs tied to market volatility, the Sydney-based bank said in a statement today.
“Operating conditions remain challenging,” Chief Executive Officer Ralph Norris said in the statement. “Whilst the Australian economy continues to perform relatively well, consumer and business confidence remains fragile, most noticeably reflected in subdued system credit growth.”
Commonwealth Bank and its three largest rivals including Westpac Banking Corp. face the worst domestic market for home loans in three decades. Demand for lending may recover after the central bank lowered the overnight cash rate target on Nov. 1 by a quarter percentage point to 4.5 percent.
Shares of Commonwealth Bank have slipped 1.8 percent this year. Westpac has fallen 5.2 percent, Australia & New Zealand Banking Group Ltd. tumbled 11.5 percent and National Australia Bank Ltd. has added 3.6 percent.
Westpac, Australia’s second-largest lender, on Nov. 2 posted a 13 percent decline in second-half profit as lending growth slowed and debt market turmoil triggered a drop in earnings. National Australia said last month that profit in the period rose 31 percent as it won a bigger slice of the nation’s mortgage market with discounted loans. ANZ Bank’s profit rose 4.3 percent, the lender said Nov. 3.
ANZ Bank, Westpac and Commonwealth Bank lowered their variable mortgage rates this month by the same amount as the central bank’s reduction. National Australia reduced its variable rate by 20 basis points, or 0.20 percentage point.
Commonwealth Bank’s Tier 1 capital ratio, a key measure of financial health, was 9.85 percent as of Sept. 30, it said today. The bank’s total impairment expense was lower at 19 basis points, or 0.19 percentage point, of total average loans, or A$256 million in the quarter, the bank said.
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