Australia’s biggest bank made $5.02 billion in cash profit after tax in the six months to December 31, down three per cent from the same time in 2022.

“Our lower cash profit reflects cost inflation and a competitive operating environment,” CBA chief executive Matt Comyn told shareholders.

The bank’s net interest margin, a key measure of profitability, dropped 11 basis points to 1.99 per cent, as customers switched to higher yielding deposits, wholesale funding costs increased and CBA’s New Zealand subsidiary ASB delivered a smaller contribution.

Operating expenses were up four per cent to $6 billion due to inflation and additional spending on technology, while loan impairment expenses dipped by $96 million to $415 million.

E&P Capital analyst Azib Khan said that while the $5 billion cash profit was 1.9 per cent better than consensus estimates, CBA’s announcement was silent on the outlook for profit and loss.

“We see risk of consensus core profit being downgraded by one to two per cent for each of the next three years,” he wrote in a client note.

Customer arrears in mortgages and credit cards ticked up but remain at historically low levels.

Just 0.52 per cent of customers were more than 90 days behind on their mortgage payments as of December, compared to the historical average of 0.65 per cent.

CBA’s Tier One capital ratio stood at 12.3 per cent at year-end, up from 12.2 per cent six months ago and well above regulatory requirements.

“Our balance sheet remains strong with high levels of provision coverage, surplus capital and conservative funding metrics,” Mr Comyn said.

CBA announced an interim dividend of $2.15 a share, fully franked, up from a $2.10 a share a year ago.

CBA executives are scheduled to give more details during a webcast on Wednesday morning.