By Stuart Condie

SYDNEY--Commonwealth Bank raised its first-half profit by 6.1% as Australia's largest bank lifted lending volumes and cut loan impairments despite pressure on consumers and businesses from inflation and elevated interest rates.

The lender on Wednesday reported a net profit for the six months through December of 5.13 billion Australian dollars, or about US$3.22 billion. Revenue rose by 3.8% to A$14.10 billion.

The average analyst forecast had been for a statutory net profit of A$5.05 billion, according to data compiled by Visible Alpha.

The board lifted the interim dividend to A$2.25 from A$2.15, slightly ahead of the A$2.24 expected by analysts.

Profit rose 2.3% to A$5.13 billion on a cash basis, which strips out discontinued operations and other one-off items. Net interest margin, a key measure of lending profitability, rose to 2.08% from 1.99% a year earlier.

Operating expenses rose 6.0% to A$6.37 billion, with the bank citing wage inflation, technology spending, and investment in artificial intelligence and data infrastructure. This was offset by productivity initiatives, it added.

Loan-impairment expenses fell to A$320 million from A$387 million at June 30, and from A$415 million a year earlier. The bank cited disciplined lending practices, lower expected consumer-finance losses and rising house prices.

The average Australian home price rose by 4.9% over the 12 months through December, according to property analytics firm CoreLogic. The pace of growth eased from 8.0% in 2023 but prices still ended 2024 some 38% higher since the onset of the Covid-19 pandemic in early 2020, CoreLogic said.

Chief Executive Matt Comyn said that consumers had struggled with the impact of inflation and elevated interest rates, but said that the lender anticipated near-term relief. Economists expect the Reserve Bank of Australia to start cutting rates as early as this month.

"Underlying inflation is now moderating towards the target range and we expect Australia will follow offshore economies with an easing cycle starting in 2025," Comyn said. "This should provide some relief to many households and improve business confidence."

Even so, analysts say that major Australian banks' valuations have become stretched by investors' desire for dividends and lower-risk stocks, coupled with a cyclical pivot from local mining stocks hurt by lower commodity prices and uncertain demand.

Commonwealth's shares have hit a series of record highs since December 2023, rising about 45% to become what analysts at Australian investment bank Barrenjoey recently said was the most expensive developed-market bank stock ever.

The stock is widely rated at sell by analysts, with an average target price of A$103.54, according to Visible Alpha.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

February 11, 2025 16:18 ET (21:18 GMT)

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