Commonwealth Bank of Australia, the country's top mortgage lender, on Wednesday posted a 4 percent gain in first-half cash profit, in line with expectations, while revenues slipped and loan impairment expenses increased.
Cash profit for the six months ended Dec. 31 rose to a record A$4.80 billion ($3.39 billion) compared with A$4.62 billion a year ago and A$4.77 billion estimate of six analysts polled by Reuters.
The board declared a dividend of A$1.98 a share, unchanged from a year ago.
Australia's four major banks posted their sixth straight year of record profits last year but rising bad debt charges, pressure on margins as well as stricter capital rules are clouding growth outlooks.
Loan impairment expense rose 28 percent compared with a year ago to A$564 million largely driven by higher home loan arrears and losses in mining towns of Western Australia and Queensland and higher rural lending provisioning in New Zealand.
Net interest income, the difference of interest earned and paid out, rose 6 percent. Net interest margin, a key gauge of profitability for banks, remained flat at 2.06 percent compared with the prior half.
Each of the "Big Four" banks including National Australia Bank, ANZ Banking Group and Westpac have increased their mortgage rates to protect profits and cover the costs of tougher capital requirements.
The four banks have together raised over A$20 billion ($14.42 billion) since May 2015 as regulators try to make them among the safest in the world.
CBA's common equity tier-1 ratio stood at 14.3 percent as of Dec. 31, on an internationally comparable basis, placing it amongst the top quartile of international peers.
As a result of the fund raisings, return on equity for the major banks has dropped. On Wednesday, CBA said cash ROE slipped to 17.2 percent, the lowest since at least 2010.
CBA shares have suffered their worst start to a year since the global financial crisis, falling nearly 15 percent as investors worry about a slowing mortgage market and the prospects of dividend cuts in the future.