Comment

A pedestrian walks past a Commonwealth Bank branch in Central Melbourne May 11, 2011. Commonwealth Bank of Australia (CBA), the country's top home loan lender, joined rivals by saying soft loan demand could improve after posting a 13 percent rise in third-quarter cash profit on lower bad-debt charges and a mortgage rate rise.    REUTERS/Mick Tsikas  (AUSTRALIA - Tags: BUSINESS)

CBA's growth in deposits is now fully funding new lending. Photo: Reuters

The Commonwealth Bank has delivered a sufficiently strong result that consumers could start applying pressure for it to front up with out-of-cycle mortgage rate cuts.

It was the fourth of the big retail banks to deliver its performance to the March period and it's abundantly clear that all are faring well despite the sluggish economy.

While there is historically low growth in loans in Australia, the banks including the Commonwealth are receiving the benefit from a very benign market for impaired loans and a decline in the cost of their funding.

Since the Reserve Bank cut the cash rate earlier this month some banks have hinted that they may give customers a little extra in rate cuts if they are affordable.

The ANZ passed on a cut of 27 basis points after the RBA cut only 25 basis points. The other three matched the RBA.

CBA earned $1.9 billion in cash earnings for the quarter which is up on the $1.75 billion it made in the corresponding period last year.

It has been careful with costs and has been careful to avoid chasing unprofitable market share. However, in this latest quarter it gained a little share - which was probably a reflection of a less aggressive competition from others in the market - in particular the National Australia Bank.

The CBA said its net interest margin - which reflects its funding costs against the amount it charges in interest - rose in the quarter but the amount was not specified.

This was mainly due to not passing on the RBA’s 2011 and 2012 rate reductions in full.

And this explains why the pressure will be on to give customers a bigger discount on rates.

The growth in deposits is now fully funding new lending, which takes the risk out of external funding which has eased to its lowest points in five years - prior to the global financial crisis.