Commonwealth Bank of Australia said its cash profit rose 8% from a year earlier to about A$2.8 billion in the three months to Sept. 30, even as the share of home loans at least 90 days behind on repayments rose to 0.80%, as higher interest rates and cost-of-living pressure weigh on borrowers.

The unaudited figure, released in a trading update on Wednesday, Nov. 11, was flat against the average of the bank's two previous quarters. For investors in Asia who own Australian bank shares, the update is an early read on how households are coping with the Reserve Bank of Australia's tightening. CBA holds about a quarter of the home loan market, according to the Australian Associated Press. Lenders across the country have already passed recent rate increases on to mortgage customers.

Commonwealth Bank income rises on volume, trading slips

Operating income rose 3% from the A$7.60 billion quarterly average of the second half of fiscal 2026, the bank said. Net interest income climbed 4% on loan and deposit growth, earnings on its replicating portfolio and 1.5 extra days in the period, partly offset by competition for loans and a less favorable deposit mix. Excluding movements in liquid assets, the underlying net interest margin was broadly stable.

Other operating income fell 5%. CBA blamed weaker Markets trading in fixed income and rates, where higher bond yields hurt the value of its inventories. Costs rose 3%, driven by wage and IT vendor inflation, cloud computing use and software licenses.

Volume growth stayed strong. Home loans grew A$39.8 billion in the 12 months to September, about 1.1 times the pace of the wider system, and household deposits rose A$34.0 billion. Business lending, excluding the institutional unit, grew 13.6% over the year, 1.3 times system. Home loan applications were 16% lower than a year earlier, though new mortgage funding reached A$44 billion in the quarter.

Mortgage arrears and provisions edge up

Credit is where the update turned more cautious. Home loan arrears rose 7 basis points in the quarter, which CBA attributed to cost-of-living strain from higher inflation and rates. The bank said the reported rate was also inflated by slower resolution of cases after earlier pauses in late-stage collections. Personal loan arrears improved by 6 basis points to 1.66%, and credit card arrears were flat at 0.73%.

Loan impairment expense was A$300 million, or 11 basis points of average gross loans, up 36% from the same quarter a year earlier. Collective provisions rose A$105 million, mainly reflecting lower house prices across the mortgage portfolio, while individual provisions for corporate borrowers fell. Total provisions were flat at A$6.5 billion and collective provision coverage stood at 1.35% of credit risk-weighted assets.

Corporate troublesome and nonperforming exposures rose slightly to A$6.9 billion, or 1.00% of total committed exposures, after a small number of single-name downgrades.

Chief Executive Matt Comyn said in the release that higher inflation and interest rates "continue to place uneven pressure on household incomes and business activity." He added that the economy remains resilient, supported by low unemployment and a strong pipeline of public infrastructure and private investment, even as growth slows. The same comments were carried by the Australian Associated Press, as published by The Nightly.

Capital stays above APRA minimum

The common equity Tier 1 ratio, on a Level 2 basis, was 11.5% at the end of September, above the Australian Prudential Regulation Authority's 10.25% minimum. The bank paid A$4.5 billion in second-half dividends during the quarter, which cut the ratio by 85 basis points. Excluding that payment, the ratio rose 36 basis points, as capital generated from earnings outweighed the effect of growth in risk-weighted assets.

CBA bought about A$560 million of its own shares on market to neutralize its dividend reinvestment plan. Customer deposits made up 79% of total funding, and the bank has raised A$14 billion of long-term wholesale funding so far in the financial year. Its liquidity coverage ratio was 132%. Credit risk-weighted assets rose A$8.1 billion in the quarter, driven by commercial lending and home loans, and the take-up rate on the dividend reinvestment plan was 12.4%. Long-term funding made up 67% of wholesale borrowing, with an average tenor of 5.2 years.

The quarter's numbers echo the strain shown at rival National Australia Bank, whose profit fell on a higher bad debt charge. For CBA, the next test is whether the 0.80% home loan arrears rate keeps rising as the rate increases filter through more of its mortgage book.