Commonwealth Bank boss says surging immigration is propping up Australia’s economy

Commonwealth Bank boss Matt Comyn said rising migration inflows into Australia were helping to support the country’s economy, even as his bank posted its second straight quarterly profit decline.

In the three months ended March 31, profits fell to $2.4 billion, narrowly exceeding analyst expectations. The figure was 5 percent lower than the March 2023 quarter, and 3 percent lower than the quarterly average recorded in the six months to December 31.

In a trading update released to the ASX on Thursday, Mr Comyn told investors his business, and the wider Australian economy, remained healthy.

“Unemployment remains low, supported by business and government investment and improved trading conditions,” he said.

‘We recognize that all households are feeling the impact of higher inflation and higher rates; However, immigration provides a structural tailwind for the economy.’

Despite immigration supporting the Australian economy, Comyn said CBA profits have fallen and mortgage arrears have increased.

But despite the brighter economic outlook, the nation’s largest lender posted a $191 million increase in loan loss expenses in the first three months of 2024, with a “moderate” increase in both consumer delinquencies and troublesome business risks.

Home loan arrears rose to 0.6 percent, up 9 basis points, as households came under increasing pressure from high interest rates, while credit card arrears also rose 8 basis points to 0.7 percent. Both measures remain below their historical averages.

Mr Comyn said CBA expects loan delinquencies to increase as Australian households continue to battle cost of living pressures

More worryingly, repayments on personal loans with terms longer than 90 days rose 0.2 percent to 1.3 percent – ​​above the long-term average.

“We expect payment arrears to increase further in the coming months, given continued pressure on households’ real disposable income,” Comyn said.

Growth in the bank’s home loan portfolio rose slightly higher, up 0.7 times system, or $4.2 billion, while lending in its operations rose 1.1 times system, or $2.7 billion. Household deposits rose by $5.3 billion.

The bank’s net interest margin – a key measure of bank profitability that calculates the difference the bank earns in interest on loans compared to what it pays in interest on deposits – fell as intense lending competition hit its bottom line .

Due to higher personnel costs and depreciation, costs increased by 2 percent, while operating profit fell by 1 percent.