Morningstar analyst Nathan Zaia has left his $80 fair value estimate for Commonwealth Bank intact and says the bank’s dividend remains attractive and sustainable.

Zaia said Tuesday’s first-quarter 2020 update proves it’s possible for the banks to return to growth following the remediation costs and other disruptions linked to last year’s banking royal commission.

“We see this as a positive start to fiscal 2020 and believe the bank is performing satisfactorily across all key areas,” said Zaia, who maintains his $80 fair value estimate for CBA. At 11.15am on Wednesday, CBA was trading at $80.17.

CBA (ASX: CBA) on Tuesday declared unaudited cash earnings for the three months to September 30 of $2.26 billion.

That was 5 per cent up on the average of the preceding two quarters, the bank said in a trading update, but that was 9.6 per cent down on the prior corresponding period's $2.5 billion.

Mortgage lending rose 3.5 per cent over the quarter on an annualised basis, while household deposits grew 10.4 per cent.

Factoring in the $1.5 billion gain from August's sale of Colonial First State Global Asset Management to Mitsubishi, unaudited statutory profit for the period rose 55 per cent on last year's $2.45 billion to $3.8 billion.

Zaia said the rise in mortgage lending and business loan growth was impressive and the bank’s fully franked dividend yield of 5.5 per cent ($4.31 a share for the year) was sustainable.

“Annualised home loan growth of 3.5 per cent is well above system at around 1.6 per cent, and business loan growth of 2.8 per cent also commendable given the continued headlines about a lack of business confidence and unwillingness of some to lend,” he said.

“Despite the ongoing pressure on interest income, we view the dividend as sustainable and the fully franked dividend yield of 5.5 per cent attractive. While some peers recently lowered payout ratios and raised capital, we remain comfortable with Commonwealth Bank on both fronts.”

In announcing the update, the bank’s chief executive Matt Comyn signalled he would avoid using the historically low cash rate of 0.75 per cent to justify a cut in dividends.

Comyn said he was mindful that many people relied on CBA dividends for their income and would not prioritise one group of stakeholders over another.

"In a low interest rate environment we will continue to maintain a disciplined approach that delivers balanced outcomes for all our stakeholders, including over six million savings customers, 1.6 million home loan customers and 800,000 retail shareholders, including many retirees, who rely on our dividend," Comyn said.

Rivals Westpac (ASX: WBC) and NAB (ASX: NAB) both cut their interim dividends last week, both citing low rates as their profits were dragged down by the huge cost of remediating customers over various longstanding issues.

CBA announced operating income rose 3 per cent on the average of the preceding two quarters, outpacing the 2 per cent growth in operating expenses, both excluding one-off items.

Troublesome and impaired assets edged slightly higher, with pockets of stress "similar" to those noted at the FY19 results in August, when the bank called out weakness in sectors linked to consumer spending, agriculture and construction, plus home loan impairments in Western Australia and Queensland.

Commonwealth Bank has set aside $2.2 billion for remediation and related work, $1.2 billion of which is for customer refunds.

The bank on Tuesday said remediation work for aligned advisers between FY09 and FY18 is still ongoing, with a $534 million provision already recognised in August's full-year results.