The Commonwealth Bank has posted a record profit on the back of rising interest rates, while predicting it could be months before rates start falling.

Australia’s largest lender on Wednesday reported a five per cent increase in full-year net profit after tax to $10.2 billion — breaking the $10 billion barrier to post its biggest-ever yearly profit.

That was slightly above consensus expectations of $10.1 billion.

“Margins increased year-on-year due to the rising interest rate environment, partly offset by the impact of increased competition, particularly in home lending,” said the CBA’s release.

Chief executive Matt Comyn warned that CBA expected interest rates to remain high for several months before the Reserve Bank made any move to start dropping the cash rate.

“We believe we are near the end of the rate-hike cycle, but that rates may remain high for some months to come,” he said.

Mr Comyn also told the ABC’s The World Today radio program that the first rate cuts were not likely until next year.

“I think there is some chance of cash rate reductions during calendar 2024,” he told the ABC.

“Obviously, that is still some time off for customers who are doing it tough at the moment.”

Mr Comyn said there were signs that rising mortgage rates coupled with cost-of-living pressures were having a “lagged impact” which could worsen.

“We are seeing consumer demand moderate and economic growth slow and we are closely monitoring the impact of reduced discretionary spend, particularly on our small and medium-sized business customers.”

The CBA reported that is operating income was up 13 per cent to $27 billion as the bank’s net interest margin—- how much it earns on loans minus how much it pays on deposits — climbed 17 basis points higher due to the Reserve Bank’s cash rate hike spree.

However, the margin dropped five basis points over the last six months, indicating bank profit margins are on the way down.

The proportion of customers whose mortgages were in arrears by more than 90 days increased slightly, but the share remained relatively low at 0.47 per cent, which the bank attributed to low unemployment and high savings levels.

The bank attributed borrowers’ resilience to low unemployment and high savings levels, but a worsening in credit card and personal loan arrears reflected mounting cost-of-living pressures.

Mr Comyn said the bank was well-positioned to ride out economic headwinds with a conservative balance sheet and a resilient Australian banking system following the implementation of regulatory reforms.

The bank paid a dividend of $2.40 per share fully franked, taking its full-year dividend to $4.50.