The country's biggest lender signalled optimism about a "soft landing" for the Australian economy but indicated it was preparing for a pullback in home and business borrowing.
Chief executive Matt Comyn said on Wednesday the bank was conscious many customers were feeling significant strain from rising interest rates and the increasing cost of electricity, groceries and other household items.
This is a growing worry given the cash rate is likely to rise further in coming months and the bank's estimate households have only experienced about half the likely impact on monthly cash flows so far.
"We are watching closely for early signs of stress, particularly among high-risk cohorts," he told investors in a briefing.
"Home loan arrears are at near-record lows at 43 basis points, although leading indicators suggest arrears will start to trend upwards from here.
"Given the uncertain outlook, we remain well provisioned and capitalised for a range of economic scenarios."
The Reserve Bank of Australia last week lifted its benchmark cash rate for the ninth time to 3.35 per cent in its fight against inflation.
All the major banks, including CBA, have passed on the increases in full, raising fears of a spike in defaults as borrowers face higher repayments along with more stressed household budgets.
The lender says it has not seen customers falling behind on repayments so far but on Wednesday increased provisions for bad loans by $586 million.
Meanwhile, rising rates have helped boost the lender's half-year results thanks to growth in lending volumes and a recovery in margins.
CBA reported a cash profit of $5.15 billion for the six months to December 31, a nine per cent increase from the previous year and in line with analyst predictions.
Its statutory bottom-line result was up 10 per cent to $5.22 billion.
The bank's operating income for the half year jumped 12 per cent to $13.59b.
Net interest margin - the difference between what the bank charges on loans versus what it pays on deposits - climbed 23 basis points from the previous six-months to 2.1 per cent.
Mr Comyn said while margins had improved, they had not recovered to pre-COVID-19 levels and dropped back after peaking in October, dampening enthusiasm among investors of a continuing benefit from rising rates.
He blamed this on significantly higher funding costs and intense competition in the home loan market.
CBA shares slid more than six per cent on the news, dragging down other major bank stocks as well.
By 1430 AEDT, CBA shares were down 5.8 per cent to $102.90.
"We expect pressure to build on consumers in 2023 as a result of inflationary pressures and rising interest rates. Accordingly, the bank's loan impairment expense is normalising, rising to $511 million from a benefit of $75 million during the first half of 2022," ratings agency Moody's said.
CBA said its operating expenses rose five per cent to $5.8b on the back of more staff and technology spending during the six-month period.
The bank also reiterated its strong capital position highlighting a Common Equity Tier 1 capital ratio of 11.4 per cent at December end.
As a result, the bank announced it would increase its current on-market share buyback by an additional $1b.
CBA will also pay a fully franked interim dividend of $2.10 per share, an increase of 20 per cent from a year ago.
CBA'S SOLID HY PROFIT
* Cash earnings up nine per cent to $5.15b
* Net profit up 10 per cent to $5.22b
* Operating income up 12 per cent to $13.59b
* Fully-franked interim dividend $2.10 per share vs $1.75 per share a year ago.
