Australia's biggest bank posts strong half-year profits

Australia's largest bank has beaten profit expectations in the most important set of results to be handed down this corporate earnings season.

Commonwealth Bank of Australia on Wednesday posted a net profit of $5.37 billion for the six months to December 31, up five per cent from the same period a year earlier.

Revenue rose six per cent to $15 billion, beating expectations of $14.81 billion.

It will pay a fully franked dividend of $2.35 a share, up four per cent from a year prior.

Chief executive Matt Comyn pointed to strength in the bank's lending and deposits arms as the national economy strengthened during the half.

"We are optimistic about the prospects for the economy and will pay our part in building a brighter future for all," he said in a statement.

CBA's preferred cash net profit measure was $5.45 billion and above the market consensus of around $5.20 billion.

In the first 20 minutes of trading, the bank's shares jumped 5.3 per cent to $167.10, their highest price since November.

"I thought it was a really clean set of numbers from CBA, and that should be, in my view, probably an inflection point for the stock," said James Gerrish, lead portfolio manager at Market Partners.

However, he noted its shares had underperformed Australia's those of other big banks over the prior six months.

Moomoo dealing manager Chris Strazzeri said the bank's profit boost had set the tone for a big day in markets.

CBA's results are closely watched as the bank is seen as a bellwether for the health of the overall banking sector, as well as the condition of the national economy.

The other big-four banks won't report their half-year results until May.

There was one worrying sign: CBA's net interest margin dropped slightly, falling to 2.04 per cent from 2.08 per cent.

The metric is used to gauge the profitability of banks and measures the difference between the income generated from loans and the interest expenses paid to depositors.

CBA said the slightly lower outcome was due to competition in home lending - where Macquarie has emerged as a fierce rival to the big four incumbents - as well as lower income from its treasury and markets arm.

Totality market strategist Aaron Zanchetta said the bank had overall shown disciplined lending and deposit volume growth across retail and business segments, as well as strong credit quality.

"Underlying margins were slightly compressed amid competitive pressures, but the bank's raised interim dividend reflects confidence in earnings resilience and capital strength," he said.