News: ANZ UPDATE 2-CBA bad debts jump as mining slump hits Australian banks

• H1 cash profit A$4.80 bln va A$4.77 bln consensus
• Interim dividends unchanged at A$1.98 per share
• Loan impairment expenses jump 28 pct, most since 2009
• Don't see "endemic deterioration" in asset quality - CEO
• CBA shares down over 14 pct YTD vs 10 pct fall in S&P/ASX200

(Rewrites throughout, adds CEO comment, fund manager comment, shares)

Commonwealth Bank of Australia (CBA) on Wednesday reported the sharpest rise in bad debts in more than six years as first-half revenue slid, further evidence that Australian lenders are facing slower earnings growth after years of record profits.

CBA is the first of Australia's major banks to report earnings this year, providing pointers on how China's economic slowdown and the collapse of commodities prices are impacting a financial sector that emerged almost unscathed from the global financial crisis.

"We do need to understand as long as there is volatility there is the potential to impact on confidence and the underlying economy," CEO Ian Narev told analysts in a post-earnings call.

"We must be cognisant of the risks and not get complacent." Australia's four biggest banks doubled annual profits over the past five years but are now facing an uptick in bad debts, stricter capital rules and shrinking credit growth as Australia transitions from mining to service-led growth.

CBA, Australia's top mortgage lender, saw bad debt charges for the first half jump 28 percent, the most since June 2009, to A$564 million ($396.94 million), driven by arrears in mining towns of Western Australia and Queensland states.

The increase was 8 percent higher than expectations, said Omkar Joshi, investment analyst at Watermark Funds Management.

"Arrears rates in personal loans ... are noticeably worse than December 2014 which does not bode well for the economy or bad debts in general," Joshi said.

Even so, soured loans stood at 17 basis points of the bank's total book and Narev said he did not see signs of "endemic deterioration".

Australia is set for another year of sub-trend economic growth in 2016 following a global commodities price slump which has smashed the country's terms of trade, particularly with China.

National Australia Bank (NAB) and ANZ Banking Group (ANZ) missed expectations when they posted record annual cash profits in November. NAB will provide its first-quarter trading update on Feb. 16, with ANZ to follow a day later.

RECORD PROFITS CBA said its cash profit for the six months to Dec. 31 rose 4 percent to a record A$4.8 billion, in line with expectations. It declared an unchanged interim dividend of A$1.98 a share.

Net interest margin, a key gauge of profitability, remained flat at 2.06 percent, lower than expectations of 2.10 percent. Revenues slipped 4 percent to A$21.9 billion.

CBA shares have tumbled more than 14 percent so far this year while the benchmark (xjo) has lost a tenth of its value.

At 0228 GMT, they were up 0.81 percent at A$73.44 in a weak broader market, having dropped 4.6 percent on Tuesday. ($1 = 1.4209 Australian dollars)