CBA posts $10.9bn profit as mortgage applications slide 15% post-budget

The much anticipated Commonwealth Bank (CBA) FY26 results showed resilience through an uncertain period, with profit up 7%, a higher full year dividend and net interest margins that landed in line with analyst expectations. 

“The Australian economy has remained resilient, supported by historically low unemployment and longer-term investment,” said CEO Matt Comyn. “However, growth is slowing, with higher interest rates and inflation placing uneven pressure on household incomes and economic activity,” he added.

Since the federal budget in May, CBA has seen a 15% downturn in mortgage application volumes, much like Westpac, which reported a 20% decrease, earlier this week. Comyn said that housing activity has “softened from a high base”, but application volumes “appear to have stabilised in recent weeks”.

CBA dipped as much as 2% in early trade to $170.11, but is now hovering around breakeven.

CBA’s FY26 numbers in focus

CBA delivered a solid FY26 result, beating on profit and dividends while landing broadly in line on margins and capital, with impairments coming in lighter than feared. 

• Cash profit up 7% to $10.98bn vs est $10.86bn (+1.1% beat)

• Cash EPS up 7% to $6.57 vs est $6.50 (+1.1% beat)

• Net interest margin down 3 bps to 2.05% vs est 2.05% (in line)

• CET1 (APRA) down 30 bps to 12.0% vs est 12.02% (-2bps, in line)

• Loan impairment expense up 9% to $788m vs est $920.5m (-14% below est)

• Full-year dividend up 4% to $5.05 vs est $5.02 (+0.6% beat)

  • Final DPS $2.70, fully franked

  • Record 20-Aug, ex-div 19-Aug, payable 29-Sep

FY26 cash profit rose 7% to $10.98 billion, beating consensus by 1.1%, with growth at or above the market across all five core domestic categories (home lending, business lending, consumer finance, household deposits and business deposits). CBA says it is the first time it has achieved this, and the first time any major Australian bank has done so in the past 15 years. 

Margins also held firm against fears of further slippage, with NIM steady at 2.05%, in-line with consensus, though it fell 3 bps over the year. The bank said it had been supported by business lending and deposits.

There were fears that the bank would have a provisioning blowout after Westpac’s discretionary-spend overlay and Judo's exposure-driven downgrade. In contrast, CBA's loan impairment expense of $788 million came in well below the $920.5 million consensus, though it still rose 9% year-on-year. Provision coverage remains strong at 1.53% of credit risk-weighted assets.

The strain is starting to show in the loan book, however, with home loan 90+ day arrears up 10 bps on the prior half to 0.73%, which the bank attributed to ongoing cost-of-living pressures. 

Guidance points to a slowing economy

CBA expects housing credit growth of 7.5% in the year to 30 June to slow to between 5% and 7% over the next 12 months, while business credit growth of 10.8% is forecast to ease to between 6.5% and 8.5%.

The bank pointed to this year's three rate rises and persistent inflation "dampening real income growth", while housing activity and prices had turned down, "reducing household wealth and consumer confidence". It added that weak productivity growth was constraining economic capacity.

Mortgage application volumes have softened 15% since May but appear to have stabilised in recent weeks, echoing the trend Westpac reported earlier in the week, where post-budget applications were down 20% on its second quarter.

The bottom line: There's no denying CBA continues to flex its leadership in the banking sector. Growing above system across all five domestic categories in such a competitive market is no easy feat. But there's also no denying that the average investor and analyst is reluctant to even look at a slow-growing stock trading at 30x. CBA is always caught between these two polarising factors. The FY26 result delivered on both profits and dividends, while holding in-line on NIM and capital. The slowdown commentary and forecasts aren't new, and perhaps aren't even surprising given what's already come out of banking peers, retail companies, ABS data and more. Today's flattish share price reaction suggests the market is accepting this near-term environment, and CBA continues to do what it seemingly does best: Deliver and trade at elevated multiples.