Commonwealth Bank of Australia’s earnings to remain robust over next 2 years: S&P

Housing risks lessen as local house prices continue its correction.

The Commonwealth Bank of Australia’s (CBA) earnings are expected to remain strong over the next two years, benefiting from the rising interest rates, according to S&P.

CBA’s interest margins are expected to improve over the period, whilst credit losses will remain low at about 15 basis points over the period.

“Rising interest rates and a relatively benign outlook for the Australian economy will continue to support Commonwealth Bank of Australia's strong and stable earnings,” the ratings agency said in a media note. “We consider that CBA's strong franchise will continue to sustain its core businesses.”

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The relatively benign economic outlook, low unemployment, and strong household balance sheets should temper the risks to the Australian banking system from rising inflation, geopolitical uncertainties, and low business and consumer confidence, it added.

“We expect the ongoing orderly correction in Australian house prices to continue for the next 12 to 18 months, alleviating the risk of a sharp fall and consequent blow to the economy and financial system,” S&P said.