Australia's biggest bank optimistic on national economy

Australia's largest bank has lifted its interim net profit on the back of lending and deposit growth after the national economy strengthened during the half.

Commonwealth Bank handed down its results for the six months to December 31 on Wednesday, in an announcement that has implications for the health of the banking sector and national economy.

CBA posted a first-half bottom net profit of $5.37 billion, up five per cent on the previous corresponding period, after revenue rose six per cent to $15 billion.

Its preferred cash net profit measure was a bit higher than $5.45 billion and above the market consensus of around $5.20 billion.

"Economic growth strengthened during the half, driven by increases in consumer demand and rising investment in AI (artificial intelligence) and energy infrastructure," CEO Matt Comyn said in a statement.

However, constraints on the supply side means the economy is struggling to meet that demand, with CBA expecting inflation to remain above the Reserve Bank of Australia's target band of two-three per cent "for some time".

That increases the prospect of further interest rate rises by the central bank.

But overall, Mr Comyn said: "We are optimistic about the prospects for the economy and will pay our part in building a brighter future for all."

The consensus estimate was for revenue to grow 5.1 per cent year-on-year to $14.81 billion.

CBA's net interest margin was down four basis points to 2.04 per cent on an underlying basis compared to the same period last year.

The net interest margin is used to gauge the profitability of banks and measures the difference between the income generated from loans and the interest expenses paid to depositors.

CBA said the slightly lower outcome was due to competition in the home lending and lower income from its Treasury and Markets arm.

After CBA posted its full-year results for 2024/25 on August 13, its shares fell 5.4 per cent to $169.12, from $178.80.

The stock has since remained under that level, changing hands on Tuesday afternoon at $159.17, down 0.45 per cent from Monday and down 10.9 per cent for the past six months.

IG analyst Tony Sycamore said the August 2025 sell-off came even as the bank posted solid numbers, including growing its full-year profit by four per cent to $10.25 billion and holding its net interest margin steady at 2.08 per cent.

CBA shares had hit a record high of $192 in June after changing hands around the $100 level from mid-2021 until late 2024.

But even after the fall in CBA's share price, it was still expensive, Morningstar market strategist Lochlan Halloway said.

CBA traded on Tuesday at a price-to-earnings ratio of 26.7, making it the most expensive bank in the developed world according to market capitalisation.

Its Australian peers trade at a PE ratio in the teens, as does US banking giants such as Morgan Stanley and Bank of America.

"As the only big-four bank reporting in this cycle, CBA is the bellwether," Mr Sycamore said.