The Commonwealth Bank of Australia (ASX: CBA) share price is on watch after it reported 8% profit growth in the FY26 result.
Commonwealth Bank is the largest bank in Australia and New Zealand, with a focus on household lending. Additionally, the ASX bank share serves businesses, as well as having a leading share brokerage offering called Commsec.
FY26 result
Here are the highlights from the 12 months to 30 June 2026:
- Operating income up 6.2% to $30.2 billion
- Operating expenses up 5.6% to $13.6 billion
- Pre-provision profit up 6.5% to $16.5 billion
- Loan impairment up 9% to $788 million
- Cash net profit up 7% to $11 billion
- Statutory net profit up 8% to $10.9 billion
- Final dividend per share of $2.70, up 3.8%
- Full-year dividend per share of $5.05, up 4%
What happened in this result?
A key driver of the result was the bank’s lending growth.
It grew at the same speed of the overall banking system’s home lending growth and household deposit growth. Home lending grew by 7% to $636 billion. The business boasted that a third of Australians describe CBA as their main financial institutions and that around 65% of its home loan lending came through proprietary channels – it didn’t need a broker for this volume, which can mean a better margin.
Business lending increased by 13% to $180 billion – this growth rate was 1.3x the speed of the overall banking system. CBA also said that 79% of business loans came through proprietary channels, with “better risk-adjusted returns”.
Another key element of a bank’s profitability is the net interest margin (NIM). This is the profit margin, in percentage terms, that a bank makes on its lending. The NIM includes both the loan rate and funding costs (like savings accounts and term deposits). CBA’s underlying NIM slightly improved to 2.05% despite a competitive banking landscape.
On the expense side of things, there was a 6% rise of operating expenses because of inflation, investment in technology, fraud, scams and financial crime, partly offset by productivity initiatives and a favourable foreign exchange.
The investment spending was up 6% to $2.4 billion as it invested in its technology infrastructure, modernisation and AI capabilities. This is expected to be maintained at $2.4 billion in FY27.
Loan arrears
Commonwealth Bank’s 9% increase in the loan impairment expense isn’t ideal but largely expected because of loan book growth, cost of living pressures, increased geopolitical risk and wider economic uncertainty.
CBA said that its home loan arrears increased to 0.73% and personal loan arrears rose to 1.72% amid the cost of living pressures. Will this continue rising or has it peaked? Time will tell.
Outlook for the CBA share price
Commonwealth Bank said the Australian economy has remained resilient, supported by low unemployment and longer-term investment. But, growth is slowing and higher interest rates and inflation are placing “uneven pressure on household income and economy activity”.
While ‘housing activity” has softened from a high base, Commonwealth Bank has seen application volumes stabilise in recent weeks.
CBA is certainly a high-quality bank, but competition in the sector may mean earnings growth is slow going, combined with the headwind of the Federal tax changes which may impact FY27’s lending volumes.
For me, there are other ASX dividend shares I’d buy first that could offer a higher yield and/or a stronger dividend growth rate.
