(Adds analyst comment, shares) Commonwealth Bank of Australia...

(Adds analyst comment, shares)

Commonwealth Bank of Australia (CBA), the nation's No.2 lender, posted a record annual cash profit on Wednesday but left dividends flat and warned weak wages growth and political uncertainty are threatening Australia's economic strength.

Australia's banks are preparing for a new era of slowing growth after years of record profits, as a mining downturn leads to higher corporate defaults, tougher capital requirements force up costs and wages rise at a record low pace.

CEO Ian Narev warned of the "impact of weaker demand, strong competition and increasing regulation" as the bank announced cash profit of A$9.45 billion ($7.27 billion) for the year to June 30, up 3 percent from the previous year and a seventh-straight record.

"Income growth inside and outside Australia remains weak, so people are not feeling better off. When combined with ongoing global economic and political uncertainty, this makes households and businesses cautious and hesitant to respond to monetary stimulus," Narev said in a statement.

Australia's top lender by market value declined to raise dividends for the first time since 2009, unveiling a A$2.22 per share payout for a full-year dividend of A$4.20.

Loan impairment expense (LIE) rose 27 percent largely due to higher provisioning for resource, commodity and dairy exposures, it added. The ratio of LIE to gross loans was 19 basis points, still near record lows.

Net interest margins, a key gauge of profitability for banks, fell 2 basis points to 2.07 percent. Cost-to-income ratio improved by 40 basis points to 42.4 percent.

"Overall the result was okay but it is evident that CBA has had to work harder on costs to deliver the numbers as profits are under pressure," said Karen Jorritsma, director of equities sales at Citi Global Markets.

Australia's banking sector - dominated by CBA, Westpac Banking Corp (WBC), ANZ (ANZ) and National Australia Bank (NAB) - has badly underperformed the benchmark index so far this year as their costs of doing business have mounted.

Adding to the sense of gloom, the banks are under political pressure to rein in more aggressive sales tactics and reform what many see as unethical corporate behaviour following a series of scandals including insurance fraud and interest rate rigging.

On Tuesday, No.4 lender ANZ posted a small drop in 9-month cash profit. Top lender National Australia Bank Ltd (NAB) will report on Aug. 15.

Shares in Sydney-based CBA were choppy. At 0134 GMT, they were down 0.7 percent at A$77.90, in line with a weak overall market (xjo). ($1 = 1.3002 Australian dollars)