By Roushni Nair

(Reuters) -Commonwealth Bank of Australia reported first-quarter cash earnings slightly ahead of market consensus on Wednesday, helped by improved volumes in its home lending and household deposits portfolio and buoyant margins amid high interest rates.

Transaction accounts increased by 121,000 in the retail bank segment and home loans grew by A$8.6 billion ($5.61 billion), despite deposit price competition and volatility ahead of a large loan repayment to the central bank in the second half.

The country's biggest lender cautioned that economic growth remains sluggish as elevated interest rates, at a 12-year high of 4.35%, dampen consumer spending.

"Inflation is moderating, but at a slowing pace, and global geopolitical tensions are creating uncertainty," CEO Matt Comyn said in a statement.

"We remain optimistic on the overall outlook and the Australian economy remains fundamentally sound."

While high interest rates have helped Australian banks fill their coffers, a fierce price war drive by rising living costs has forced them to choose between maintaining market share and preserving profit margins.

CBA said its cash net profit after tax was A$2.50 billion for the quarter ended Sept. 30, compared with A$2.50 billion a year earlier. That compares with a Visible Alpha consensus of A$2.48 billion, as per Citi.

Costs went up by 3%, mainly because of higher wages, more spending on improvements, and one extra day in the quarter.

Shares in CBA slipped 1.3% by 0046 GMT, while the broader financials sub-index was down 1.96%. Notably, the stock clocked the smallest decline among Australia's four main lenders amid a broad market decline.

The bank set aside A$160 million for potential loan losses in the quarter, with a slight increase in overall provisions.

CBA said the number of late payments on home loans remained steady while noting a small seasonal improvement in overdue unsecured consumer loans. The amount of problematic and non-performing loans saw a slight uptick.

Asset quality remains stable with low credit impairments and flat non-performing loans, while CBA maintains strong momentum in its consumer and business banking divisions, analysts at UBS said in a note.

CBA, which holds a quarter of the country's A$2.2 trillion ($1.46 trillion) mortgage market, logged common equity tier 1 ratio, a measure of spare cash, of 11.8% as at September-end.

Meanwhile, Australia's Finance Sector Union told Reuters that CBA was cutting 105 skilled technology roles across various departments.

($1 = 1.5326 Australian dollars)

(Reporting by Roushni Nair and Himanshi Akhand in Bengaluru; Editing by Maju Samuel and Subhranshu Sahu)