Commonwealth Bank on Wednesday said it had raised its credit provisioning level by $200 million to $6.5 billion, affecting its bottom line.
CBA said it made $2.7 billion cash profit in the March quarter, up four per cent from a year ago but down one per cent from its first-half quarterly average and about two per cent less than analysts had expected.
CBA investors responded by dumping the stock, which closed down 10.4 per cent to a three-month low of $153.67.
That is its worst single-day loss ever, exceeding plunges at the start of the COVID-19 epidemic and the global financial crisis.
"This pessimism highlights growing unease around the outlook for Australian banks," VanEck senior portfolio manager Cameron McCormack said.
"We are starting to see early signs of stress emerge more broadly," he said, noting the banks were dealing with inflation and higher interest rates as well as fallout from the Middle East war.
Citi analysts said the CBA's earnings were a miss to forecasts because of the "modest" provisioning top-up, but its core earnings drivers and underlying credit looked consistent with expectations.
CBA indicated its operations had been running smoothly, with operating income and underlying net interest margin broadly stable in the three months to March 31.
The bank said it had, however, revised its macroeconomic forecasts and increased its weighting of a downside scenario for Australia's economy.
"Notwithstanding an already strong level of provisioning, we have chosen to further top up our collective provisions in the quarter to reflect heightened macroeconomic risks," chief executive Matt Comyn said.
"Our deliberate and long-term approach to balance sheet settings enables us to support our customers and the economy."
The country's other major banks have also set aside hundreds of millions more in cash for credit provisioning, the buffer that banks set aside to protect from loan defaults, because the US-Israeli war on Iran has disrupted supply chains and caused sharply higher fuel costs.
Commonwealth Bank's actual loan losses have thus far been small.
Just $6.5 billion in corporate lending was flagged as "troublesome and non-performing", as of March 31, representing 0.94 per cent of its total committed exposure.
That is slightly more than the $6.1 billion in the December quarter, but less than the $6.6 billion a year ago.
In retail lending, the percentage of consumers more than 90 days behind on their personal loans grew to 1.71 per cent, the highest level in since before the pandemic, but CBA said this reflected deliberate decisions by the bank involving credit, pricing and acquisition mix.
The percentage of consumers behind on their home loans and credit cards remained low and broadly stable from previous quarters, at 0.69 per cent and 0.68 per cent, respectively.
Australia's economy was demonstrating resilience, but supply chain disruptions, higher prices and interest rates are expected to weigh on household spending and business activity, Mr Comyn said.
"We will continue to adjust our settings as appropriate and remain focused on executing our strategy," he said.
