Commonwealth Bank Q1 Profit Rises 8% to $2.8 Billion as Mortgage Arrears Climb and Applications Drop 16%

Commonwealth Bank Q1 Profit Rises 8% to $2.8 Billion as Mortgage Arrears Climb and Applications Drop 16%

Commonwealth Bank posted a first-quarter cash profit of $2.8 billion, up 8% year-on-year, but the result was flat against the second half of FY26 and shares fell 1.2% to $166.95 as loan impairments jumped 28% and mortgage arrears climbed.

The bank’s September quarter trading update showed operating income of $7.6 billion (+3%), net interest income of $6.4 billion (+4%), and operating expenses of $3.4 billion (+3%). Business lending surged 13.6% year-on-year (+$24.6 billion, 1.3x system) while home lending grew 6.6% (+$39.8 billion, 1.1x system). However, home loan applications dropped 16% year-on-year across CBA and Bankwest, and by October 23 the four-week rolling application pace had plunged 26% year-on-year (-31% spot).

For CBA’s 780,000 retail shareholders, the bank’s 11.5% CET1 capital ratio and 13.6% business lending surge keep dividends well supported, but flat sequential profit ($2.768 billion) and a 28% jump in loan impairment expenses ($300 million) leave little room for error at ~$166.95 per share. For variable-rate borrowers, Friday’s RBA rate hike implementation to a 4.85% cash rate arrives just as 90+ day mortgage arrears hit 0.80%.

October Application Plunge, Broker Share Surge, and ASIC Lawsuit

Three primary-filing details competitors missed sharpen the picture. By October 23, CBA’s four-week rolling home loan applications had plunged 26% year-on-year (-31% spot). Victoria (+11 basis points year-on-year) led the 90+ day arrears rise partly due to “periodic pauses to evictions” slowing recoveries. Simultaneously, ASIC sued CBA on November 12 for allegedly overcharging 42,000 businesses $8.5 million in undisclosed CommBiz transfer fees. Mortgage brokers captured 38% of CBA-branded new loans (up from 33% in 1H26), eating into CBA’s in-house channel that generates 20–30% higher profit margins.

CBA added $105 million to collective provisions not because unemployment surged, but because falling Australian house prices eroded mortgage collateral values (increasing Loss Given Default) while periodic eviction pauses kept 90+ day arrears elevated at 0.80%.

Why did CBA shares drop if first-quarter cash profit rose 8% to $2.8 billion? Although CBA’s $2.8 billion first-quarter cash profit rose 8% year-on-year, it was completely flat compared to the second half of FY26. Investors sold the stock down 1.21% to $166.95 because loan impairment expenses jumped 28% to $300 million, 90+ day mortgage arrears climbed 7 basis points to 0.80%, and home loan applications dropped 16%.

CEO Matt Comyn faces the House Economics Committee on Friday, November 13, with 1H27 results due February 10, 2027.