Aug 12 (Reuters) - Commonwealth Bank of Australia posted record full-year cash earnings that topped market expectations on Thursday, driven by robust lending volumes, but flagged a steep decline in mortgage demand since the government's tax changes in May.
The country's biggest lender by market capitalisation and mortgage share also warned of a slowing economy as high interest rates and inflation pressured household budgets and economic activity.
"Growth is slowing, with higher interest rates and inflation
placing uneven pressure on household incomes and economic activity," CEO Matt Comyn said.
The Reserve Bank of Australia lifted interest rates to post-pandemic highs earlier this year, which has put pressure on borrowers already grappling with cost-of-living strains.
Housing demand has also softened since the government scrapped tax concessions for property investors, a major headwind for Australian banks as they control more than 70% of the national mortgage market and count on home loans as a core profit engine.
CBA, which writes a quarter of the country's A$2.4 trillion mortgages, said new home loan applications declined 15% since May, and investor applications fell 28%.
Earlier this week, smaller rival Westpac reported a 20% fall in mortgage applications and forecast investor housing credit growth to halve next year, sending its shares down 5.9% on Monday.
In the year to June 30, CBA's home lending and business lending volume growth outpaced gains in the industry.
"In FY26, CBA grew at or above system in each of our five core domestic product categories: home lending, business lending, consumer finance, household deposits and business deposits," the bank said.
The lender posted a record full-year cash earnings of A$10.98 billion ($7.75 billion), surpassing the Visible Alpha consensus estimate of A$10.85 billion and last year's A$10.25 billion.
It also declared a record final dividend of A$2.70 per share, compared with A$2.60 apiece it paid last year. Its annual net interest margin, a key measure of profitability, fell 3 basis points to 2.05% from last year.
($1 = 1.4166 Australian dollars)
(Reporting by Roshan Thomas in Bengaluru; Editing by Shinjini Ganguli)
