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CBA on track for record profit
CBA on track for record profit

UPDATE 1.10pm: Commonwealth Bank says it is seeing signs of economic hardship hitting businesses, as it posted a first-quarter profit of $1.8 billion.

Australia's largest home lender's unaudited net profit in the three months to September 30 was approximately $1.8 billion.

CBA's unaudited cash earnings were approximately $1.85 billion in the three months to September, up 6 per cent from approximately $1.75 billion in the same period the previous year.

Morningstar analyst David Ellis said the cash profit growth put the bank on track to top the previous financial year's $7.1 billion cash profit.

"No surprises, with earnings consistent with our full-year FY13 forecast of $7.4 billion,” he said.

CBA shares closed up 27 cents at $57.89.

The bank said its revenue growth continued to reflect a combination of conservative business settings, relatively slower credit growth and elevated funding costs.

But it has seen a fall in the quality of its business loan portfolio due to tough economic conditions.

"A slight deterioration in corporate credit quality in the quarter reflected the continuing difficult operating environment in certain sectors of the economy,” CBA said in a statement.

The observation follows a similar trend noted by the other major banks, particularly ANZ, which said in October it expects to see difficulty among small and medium sized businesses.

Fitch Ratings has also forecast a rise in bad debt costs for the big four, saying the best point of the credit cycle was now past.

"Early signs of deterioration are emerging in lending to domestic sectors such as agriculture, manufacturing, retail and tourism - which are exposed to the strong Australian dollar,” the agency said.

"We expect to see a slight increase in loan impairment charges in FY13 from cyclical lows as the broader economy adjusts to the slowdown in China and the domestic mining boom."

CBA said a rise in bad debts in its business book were not reflected in its retail lending, where arrears were lower in the first quarter.

That saw the bank's impairment expense for the three months to September remain broadly in line with the previous financial year.

CBA also said its movements in interest rates had largely offset the high costs of attracting deposits, which now make up 63 per cent of CBA's total funding.

Net interest margins, a key measure of the profitability of its lending, were broadly in line with margins in the second half of the 2011/12 financial year, it said.