Commonwealth Bank hints at independent rate cuts

The head of Australia's biggest and richest bank has flagged the possibility of an independent interest rate cut for borrowers - but not just yet.

Commonwealth Bank chief executive Ian Narev has told AM that a rate cut outside official Reserve Bank decisions is "plausible over time".

The carefully-worded signal on the hot issue of borrowing rates came as Commonwealth Bank yesterday revealed another record half-year profit of $3.78 billion.

Mr Narev told AM there was constant pressure to deliver an independent rate cut but warned a still fragile global economy was a major consideration.

"One swallow doesn't yet make a summer so it's very important for us to see these conditions go on into this year," he said.

"If we do that I think there'll be a steady rebuilding of confidence in Australia.

"We'll continue to do what we've done right through, which is balance the interests of all the different stakeholders and see what our competitors are doing and consider our pricing in those contexts." When pressed on whether an independent rate cut is imminent because of falling borrowing costs, Mr Narev gave a highly-qualified response.

"I'm not allowed to give forward projections as you know on pricing, but it remains to say the Reserve Bank rate is one factor we take into account and it is quite plausible over time that moves could be independent of any move by the Reserve Bank." Mr Narev admitted borrowers had a right to question monster profits and to ask when the series of out-of-cycle rate rises would be returned to customers.

All banks hiked rates independently in the lead-up to and after the collapse of Lehman Brothers as the cost of global funds surged.

"I completely understand that borrowers, in light of the environments we've been and the fact that bank's funding is pretty complicated, there are a lot of borrowers out there who would obviously like to pay less," he said.

"That's something that we obviously do understand and one of the things we take into account when we are making our pricing determinations." Mr Narev said the Commonwealth would not be able to consider independent rate cuts until it was able to replace long-term funding sourced prior to the global financial crisis with less expensive funding.

Like other banks, the CBA is also in a cut-throat war to retain and lure depositors who now rank as highly as borrowers.

Mr Narev was also asked if he was more relaxed, given the apparent easing anxiety about the global economy with stability in China and less bad news from Europe.

"I sleep OK at night generally because I have to, but there's no doubt that when volatility around the world is a bit lower it makes it a little bit easier for us," he said.

"But we can't take that for granted because we've learnt in the history of the financial crisis things still can change pretty quickly."