The asset quality of Commonwealth Bank’s mortgage book took a turn for the worse over the March 2024 quarter, with the credit quality of the corporate book also on the slide.
In its quarterly APS330 disclosures yesterday, CBA said non-performing mortgage exposures were $5.0 billion at the end of March, up from $4.3 billion at December 2023.
Actual losses on home loans during the March quarter were $7 million up from $2 million in the December quarter.
CBA holds $344 million in specific provisions against a mortgage book of $652 billion.
In a trading update the bank said arrears on home loans of 90 days or more were 0.61 per cent in March, up from 0.52 per cent in December and 0.43 per cent at the end of 2022. The bank’s historic average arrears rate is 0.65 per cent, and given the restrictive stance of monetary policy and acute cost of living concerns, mortgage arrears will soon exceed this average.
90 day arrears on credit cards lifted eight basis points to 0.68 per cent, which the bank said was in line with seasonal trends.
More material was the spike in 90 day arrears on personal loans over the quarter, to 1.34 per cent in March from 1.14 per cent in December and 0.95 per cent in December 2022. The bank said this, unsurprisingly, was linked to “customers more susceptible to cost of living pressures.” On the upside, CBA’s personal loan book is only $9 billion.
In the trading update, CommBank described the recent and broad deterioration in arrears in consumer lending as a “moderate increase”.
Across its loan book CBA said the level of troublesome and impaired assets was 0.56 per cent, up from 0.49 per cent 3 months before and 0.47 per cent a year earlier.
Inevitably, asset quality is worsening across business and institutional banking, though the TIA ratio 0f 0.56 per cent is favourable compared with the historic average of 0.91 per cent.
In dollar terms, troublesome and impaired assets lifted by $8 billion over 3 months, which the bank summed up as due to “movements in single name exposures across several sectors” as well as higher impaired home loans.
In the update CBA said its unaudited net profit for the March 2024 quarter was $5.02 billion, slightly less than its average quarterly profits over the first half, and 5 per cent less than its quarterly profit for the third quarter in FY2023.
Operating expenses increased 2 per cent over the quarter.
CBA said it has already sourced the funding needed to repay its final tranche under the Term Funding Facility.