Australia's Top Lender Sees $3.1B Half-year Profit

SYDNEY (AP) - The Commonwealth Bank of Australia Ltd., the nation's largest lender, reported Wednesday a 5 percent rise in half-year net profit to 3.05 billion Australian dollars ($3.1 billion), but said credit demand remains subdued and funding costs are increasing.

Cash profit for the six months to Dec. 31, the bank's preferred measure, was up 13 percent on the previous corresponding period to AU$3.3 billion.

Analysts had forecast that both cash and net profits would be around AU$3.2 billion.

The results are driven by falls in bad debt provisions since the global economic crisis, down from AU$1.4 billion in the second half of 2009 to AU$722 million in the latest six months.

Australia has a tight regulatory regime in the financial sector and its banks proved resilient to the global downturn.

Chief executive Ralph Norris said all divisions of the business performed well in a period characterized by subdued credit demand and intense competition for deposits.

"Underlying credit growth remains subdued with both consumer and corporate confidence fragile," Norris said in a statement.

"Competition is intense, with depositors benefiting from historically high margins, while wholesale funding costs also remain at elevated levels," he added.

The bank's total average interest earning assets, or the money it lends, grew by AU$26 billion to AU$574 billion.

Chief financial officer David Craig said funding costs would continue to rise for another year.

"The funding costs will continue to rise, but probably not at the same pace as they have been rising," he told reporters.

Demand for home loans remains robust, Craig said.

But business lending remains subdued, and the impacts of record flooding and cyclones along the Australian east coast since November will not help, he said.

The bank's shares rose almost 3 percent in early trading on the news Wednesday to AU$55.36.

The result drove the Australian bourse higher in early trading. The benchmark S&P/ASX200 index rose almost a percentage point to 4,925.4, while the broader All Ordinaries index had a similar rise to 5,015.3 points.