(Reuters) -Commonwealth Bank of Australia ( CBAUF ) said on Wednesday its first-quarter cash earnings remained largely flat, but flagged that cut-throat lending competition and rising costs were causing volatility in margins.

Despite deposit price competition and temporary volatility from preparing to repay a large loan from the Reserve Bank of Australia in the second half, CBA clocked improved momentum in volumes across home lending and household deposits.

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.

The country's biggest lender said its cash net profit after tax was A$2.50 billion ($1.63 billion) for the quarter ended Sept. 30, compared with A$2.50 billion a year earlier. That compares to a Visible Alpha consensus estimate of A$2.48 billion, as per Citi.

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

($1 = 1.5307 Australian dollars)