Commonwealth Bank has reported a record half-year profit of $5.15bn as it faces political pressure along with other big banks over interest rates and regional branch closures.
Australia’s biggest retail bank announced its financial results for the six months to December 31 on Wednesday, confirming its cash profit after tax had increased by 9 per cent from a year earlier.
CBA increased its operating income by 12 per cent to $13.59bn. Its net income from interest increased by 19 per cent as lenders reap the rewards of soaring interest rates.
It said its operating expenses rose by 5 per cent over the same period as a result of inflation, higher staff numbers, IT and remediation costs.
The bank attributed the boost to net income from interest primarily to the “rising rate environment” as well as “organic volume growth” in home, business and institutional loans.
The nation’s banks have been put on notice to ensure they are passing on rising interest rates to customers with savings accounts, with the Australian Competition and Consumer Commission investigating the issue.
The CBA announced its half-year financial results a day after it said it would temporarily stop shutting regional branches while a parliamentary inquiry into the issue is held.
A senate committee will respond to the announced closure of more than 90 branches of different banks in regional and remote communities across Australia since September last year.
A CBA spokesman said it would postpone the already announced closures of branches in Bright in Victoria and Junee in NSW until the inquiry was complete as an “additional sign of good faith”.
“We continue to welcome constructive engagement with government, industry and communities – an approach demonstrated by our recent work with all members of the regional banking taskforce,” he said.
“CBA looks forward to assisting the inquiry, and continuing to engage with our customers and communities, as we collectively respond to the digitisation of the economy and banking services.”
Nationals senator Perin Davey, who co-chaired the regional banking taskforce, said it was a disappointing “slap in the face” that the major banks were continuing to close regional branches even after sitting down with the government and affected communities.
Senator Davey is among the federal Coalition politicians who have led the push for the new senate inquiry and are arguing that many people in regional communities are older people who can’t manage online banking.
They have urged the other big banks to follow the CBA in pausing regional closures until the inquiry, which is due to report to government by December 1, is complete.
The ACCC’s probe into deposit pricing is also due to be complete by December 1.
Treasurer Jim Chalmers this week tasked the competition watchdog with undertaking the investigation, saying deposit holders should experience the “silver lining” of rising interest rates.
“It’s a fact that banks have been a lot slower to pass on the increases in interest rates to savers than to mortgagees,” Dr Chalmers said on Wednesday.
The ACCC is expected to release an issues paper in the coming months before it hands down its final report.
The watchdog will investigate how banks set interest rates for savers, including differences in interest rate increases between bank deposits and home loans.
“We welcome this direction from the government to shine a light on the retail deposit market and rate-setting decisions of banks” ACCC chair Gina Cass-Gottlieb said.
Australian households together hold more than $1.3 trillion in savings and deposit accounts.
In a letter sent to shareholders on Wednesday, CBA chief executive officer Matt Comyn and chair Paul O’Malley said the bank had increased interest rates “across a number of our savings products”.
Reserve Bank governor Philip Lowe said on Wednesday the country was better off having “strong resilient banks” as he was grilled over the major banks’ profits at a parliamentary hearing.
Asked what he would tell renters and mortgage holders who were “getting smashed” by interest rate increases while the major banks pulled in “megaprofits”, Dr Lowe said he knew people were struggling.
“I get a lot of people writing to me at the moment telling me about their personal circumstances and it’s really, really tough, I understand that,” he said.
“Personally, I find it disturbing. People are really hurting, I understand that, but I also understand that if we don’t get on top of inflation it means even higher interest rates and more unemployment.”
But Dr Lowe said Australian needed its banks to be profitable in order to be able to provide essential financial services.
“I know it’s hard for people to accept when they’re suffering problems with their personal finances,” he said.
