COMMONWEALTH Bank is likely to face pressure to return cash to investors through a special dividend or share buyback when it hands down its profit this week, as slow credit growth allows banks to build up surplus capital.
On Wednesday, the country's biggest lender is expected to hand down a half-year profit of about $3.7 billion, putting it on track for another year of record earnings.
The steady growth in bank profits comes as lenders have been forced to accumulate more capital to meet new regulations that came into effect in Australia last month.
Now that banks are meeting the standards, they are likely to face mounting calls from institutional investors to return excess capital to shareholders, which could be done through a special dividend, share buybacks or changes to their dividend reinvestment plans.
Morningstar head of banking research David Ellis said CBA's earnings per share were likely to expand by about 5 per cent this year, up from 2 per cent last year.
Although this is still below the faster annual growth of 2011, Mr Ellis said the bank was still likely to be generating surplus capital due to a combination of headline profit growth and weak demand for credit.
''Credit growth is moderating a bit but, because they don't have to provide additional capital to support stronger credit growth, they are building up extra capital,'' he said.
Mr Ellis said CBA might pay a special dividend or embark on a buyback within the next 18 months, while it would also raise its interim dividend this week. The consensus forecast among analysts is that CBA's interim dividend will be $1.62 a share, up from $1.37 last year.
Bank profit margins have also benefited in recent months from lower funding costs and lenders' decisions not to pass on cuts in the official cash rate in full.
JPMorgan analyst Scott Manning said CBA was also likely to face questions from investors over whether it retained the extra earnings from higher margins, or used the funds to chase extra customers.
''In the trade-off between profitability and growth they have demonstrated a preference for retaining profitability over market share. The question is, just how long they will be happy to grow sub-system,'' Mr Manning said.
The likely lift in the bank's interim dividend comes after CBA last year said it would aim to pay out 70 per cent of its profits as dividends.
Among the big four banks, ANZ and Westpac are also viewed as candidates to return cash to shareholders - though analysts say ANZ may instead use the funds to pursue growth in Asia.
ANZ, which reports its quarterly profit on Friday, held $11 billion in shareholder funds to strengthen its tier-one capital ratio in September last year.
Mr Ellis said the decisive factor for whether NAB would be able to return more cash to shareholders was the state of its banking business in Britain, which has been struck by the country's economic woes.