Commonwealth Bank says its home loan rates could be cut independently of cash rate movements, as improving economic conditions helped it post another record profit.
Australia's biggest home lender made a net profit of $3.66 billion in the six months to December 31, up one per cent on the same period in the previous year.
Its cash profit, a measure preferred by banks as it illustrates underlying performance, was up 6 per cent on the previous corresponding period to a record $3.78 billion.
The better-than expected result pushed CBA shares to a record high, and put the bank on track for another record full-year profit near $7.6 billion.
CBA's retail bank was a standout performer in the six months to December, in part because of higher margins as interest rates fell by less than the cash rate.
The Reserve Bank of Australia cut the cash rate by 125 basis points to 3 per cent in calendar 2012 while CBA's standard variable mortgage rate was cut by just 90 basis points to 6.4 per cent.
With the cost of wholesale funds easing, analysts have raised the prospect of major banks lowering interest rates outside of any further moves by the RBA.
CBA chief executive Ian Narev confirmed that could happen.
"I'm not allowed to say anything on future prospects for pricing," he said. "What I could say is that it is a competitive market, and if we reached a different environment in terms of both the volatility and the cost of funding, that is conceivable, yes."
Mr Narev issued a promising outlook for the Australian economy, another factor behind the bank's strong share price rise.
He said that improvements in Europe and the United States had reduced the level of global economic volatility in recent months.
"That volatility will remain lower, and as it keeps remaining lower month on month, we will see a slow and steady rebuilding of confidence in the Australian economy from both consumers and businesses," Mr Narev said.
The bank also increased its interim dividend to shareholders by 20 per cent from a year ago to $1.64 a share. CBA shares jumped $1.59 to $67.11.
Morningstar analyst David Ellis described the result as "a cracker".
"Australia's largest bank continues to prosper due to better margins, higher trading income, a recovery in wealth management and productivity improvements," he said.
Argo Investments senior investment officer Christopher Hall concurred.
"The key from today's earnings is margin expansion and reasonable asset quality," Mr Hall said.
Australia's largest bank continues to prosper."
Morningstar analyst David Ellis