Commonwealth Bank of Australia, the country's top lender by market value, posted a near 10 percent rise in first-quarter cash profits on Wednesday as demand for home loans remained strong and bad debt charges fell.
Unaudited cash profits for the three months to Sept. 30 totaled A$2.3 billion ($2 billion), CBA said, compared with A$2.1 billion reported in the same period a year ago.
Group net interest margins fell slightly while revenues rose faster than costs, it said.
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Three of Australia's major four banks, including CBA, have posted record profits in the recently-ended financial year although their results highlight future challenges in maintaining this earnings momentum.
Intensifying lending competition has driven margins to near record lows, bad debt charges are widely seen as getting bottomed out while concerns banks may be asked to keep aside more capital have kept investors on the sidelines.
A government-backed inquiry tasked with providing a blueprint for the country's financial system over the next decade is due to release a final report this month, and expectations have grown that it could recommend a higher capital regime for Australia's "Big Four" banks.
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While Westpac Banking and Australia and New Zealand Banking raised concerns around holding more capital over the last two weeks, CBA remained quiet about it in its trading update that provided limited information.
"Overall business momentum was maintained," CBA said in a statement. "In home lending, focus remains on profitable growth in a competitive market, with strong new business levels balanced by higher repayment activity in a low interest rate environment."
CBA said credit quality remained sound, with A$198 million set aside for bad debts.
Its shares are up 3.8 percent so far this year, almost in line with a 3.1 percent rise in the benchmark index. Over a three-year period, CBA has far outperformed the market with a 65 percent jump while the benchmark rose 29 percent.