The Commonwealth Bank of Australia (ASX: CBA) share price is on watch after the ASX bank share reported its FY25 third quarter.
CBA FY25 third quarter update
The bank reported that it generated a statutory and cash net profit of $2.6 billion. The cash profit was flat compared to the quarterly average of the FY25 first half and up 6% on the FY24 third quarter.
CBA reported operating income rose 1%, thanks to lending volume growth and higher trading income, largely offset by two less days in the quarter.
Regarding its net interest margin (NIM), the bank reported that (excluding non-recurring earnings), it was stable. This tells investors how much profit (in margin terms) a bank is making on its lending, which includes the cost of that money (such as term deposits and savings accounts).
Operating expenses also increased 1%, driven by increased investments in technology and frontline staff. Ongoing productivity initiatives are also helping.
Turning to the health of its loan book, CBA revealed a loan impairment expense of $223 million, with collective and individual provisions “slightly higher”. The bank noted that portfolio credit quality has remained “sound”, with increases in consumer arrears and corporate troublesome and non-performing exposures. In other words, some borrowers are still doing it tough.
Loan performance
A key input for CBA’s profit growth is how much its loan balance grows.
The ASX bank share told investors how it performed in the March 2025 quarter compared to the December 2024 quarter.
CBA’s business lending grew at an annualised rate of 9.1%, which was 1.3x faster than the overall loan system. Residential property lending rose by 4.1%, 0.9x as fast as the overall loan system. Household deposits increased by 4.8%, 0.8x as fast as the overall loan system.
Impressively, 68% of CBA’s home loans came through its own channels, rather than relying on brokers. CBA said it was disciplined with its volume growth during the quarter.
The bank pointed out there is deposit competition, which was one headwind for its profit.
CBA reported that home loan arrears increased over the quarter to 0.71%, up from 0.61% a year ago. During the quarter, it reported personal loan arrears increased 19 basis points (0.19%) and credit card arrears slightly increased.
Final thoughts on the CBA share price
CBA’s CEO said there is heightened risk to the global economy from geopolitical and macroeconomic uncertainty which could slow the domestic economy, though Australia is in a “relatively strong position” to navigate the challenges, as well as being an attractive place to live and work.
The bank pointed out that underlying inflation is moderating – this may encourage further RBA rate cuts. CBA said it continues to remain disciplined.
CBA is undoubtedly one of the best banks in the world, but the valuation is also world-leading. The CBA share price could certainly keep rising, but I don’t think it’s attractive. There are plenty of ASX dividend shares I’d rather buy for my portfolio which could deliver more growth (and dividend income).
