CHARTS: CBA's margin woes explained

Photo by Matt King/Getty Images

Commonwealth Bank of Australia, while posting a 2% increase in first cash profit to another record also flagged the continued decline in lending margins.

The lender blamed higher funding costs for the slip. It also cited the change in its loan portfolio and the cost of meeting new regulation for its woes.

This morning, separate to its market announcement on its results, the bank announced it was increasing interest rates on investor interest-only loans by 12 basis points. The new interest only standard variable rate for investors will be 5.68%.

The following charts explain the movement in the margins, a the difference between interest earned on its loan book and the interest paid by the bank.

CBA is not alone though. The largest Australian banks have seen their lending margins drop to an 8-year low amid higher funding cost and competition for deposits. National Australia Bank last week flagged stable margins while Bendigo and Adelaide Bank said the measure had dropped.

The lenders raised mortgage rates earlier this year to reverse the trend.

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