CBA’s CET1 Holds at 12.3% as Credit Risk Weighted Assets Climb

Capital Strength and Regulatory Compliance

The Commonwealth Bank of Australia (CBA) has released its comprehensive Pillar 3 Capital Adequacy and Risk Disclosures as at 30 June 2025, reaffirming its position as one of Australia’s most resilient banking institutions. The Group’s Common Equity Tier 1 (CET1) ratio remained steady at 12.3%, comfortably above APRA’s minimum regulatory requirement of 10.25%. Tier 1 and Total Capital ratios also held firm at 13.9% and 20.9% respectively, underscoring the bank’s robust capital base.

These capital ratios reflect CBA’s disciplined capital management framework, which balances regulatory expectations, rating agency requirements, and shareholder interests. The bank’s Internal Capital Adequacy Assessment Process (ICAAP) continues to guide capital planning, ensuring buffers are maintained to absorb potential shocks.

Leverage and Liquidity Metrics Remain Strong

CBA’s leverage ratio, a non-risk-based measure designed to limit excessive balance sheet leverage, stood at 4.7% as at June 30, above the 3.5% minimum. This slight decline from prior periods was driven by increased exposures and the redemption of Additional Tier 1 capital instruments, partially offset by earnings-generated capital.

Liquidity metrics also remained robust. The Liquidity Coverage Ratio (LCR), which measures the bank’s ability to meet 30-day net cash outflows under stress, averaged 130% during the quarter, well above the 100% regulatory minimum. The Net Stable Funding Ratio (NSFR), assessing longer-term funding stability, was 115%, reflecting a well-diversified and stable funding base.

Credit Risk Exposure and Quality

The Group’s Risk Weighted Assets (RWA) increased by $13.8 billion to $496.1 billion, primarily due to volume growth across commercial lending, domestic residential mortgages, and New Zealand portfolios. While credit quality showed some improvement in risk weights, non-performing exposures rose modestly by 7% to $11 billion, attributed mainly to seasonal arrears in the well-secured home lending portfolio.

CBA continues to apply advanced internal ratings-based (AIRB) approaches for credit risk measurement, supported by rigorous credit risk frameworks and stress testing. The bank’s credit risk mitigation strategies include prudent collateral valuation, diversification limits, and active portfolio monitoring.

Operational and Market Risk Management

Operational risk capital increased by 5.9% to $47.6 billion, reflecting higher net interest income and lending growth. The bank’s operational risk framework encompasses comprehensive controls, incident management, and insurance programs to mitigate losses from internal process failures or external events.

Market risk, including traded and non-traded components, is managed through a combination of Value-at-Risk models and stress testing. Traded market risk RWA rose to $9.8 billion, driven by increased client activity, while interest rate risk in the banking book decreased slightly due to lower interest rates in Australia.

Regulatory Developments and Forward Outlook

CBA is preparing for upcoming regulatory changes, including APRA’s revised standards on interest rate risk in the banking book effective October 2025 and the phased removal of Additional Tier 1 capital from 2027. The bank’s capital planning and risk management frameworks are evolving to accommodate these changes while maintaining strong capital buffers.

External assurance by PwC over the Pillar 3 disclosures adds credibility to the reported figures, reinforcing market confidence in CBA’s risk management and regulatory compliance.