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Growth in its home loan book this year should boost Commonwealth Bank’s mortgage profit by around 3%, chief executive Matt Comyn said Thursday.
Speaking before a parliamentary committee, Comyn said that CBA, the country’s largest lender, expects to grow its $378 billion mortgage book by about 5% this year as record-low rates pump up demand.
Comyn also predicted that Australia’s strong economic recovery from the COVID-19 pandemic will likely push house prices even higher, Reuters reported.
“We’re anticipating credit growth of about 5% over the course of the year,” Comyn told the committee. “Our forecast for housing (price growth) … I expect it’s probably closer to 10% at this particular point in time.”
Asked whether a 5% increase in CBA’s loan book meant an equivalent hike in mortgage profit, Comyn said factors like bad debt and price-based competition meant profit would be lower, Reuters reported. Asked whether that meant a 3% increase in profit, Comyn said, “It could be in that order.”
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“We’ve also seen the highest level of refinancing in the market that I think we’ve ever seen,” he said. Comyn added that business lending growth would be much lower.
With the Reserve Bank continuing to hold the cash rate at a record-low 0.1%, banks have lowered fixed rates to historic lows. The cheap fixed rates have lured many borrowers to the market in order to refinance their mortgages.
CBA reported $3.89 billion in cash profit for the six months to Dec. 31, a 10% drop from the previous year, Reuters reported.
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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