* Q3 profit at A$2.2 bln vs analysts' estimate of A$2.1 bln
* CBA says credit quality stable, margins shrink
* Shares hit a record A$80.1 in opening trades (Adds earnings details, analyst comment, share performance)
By Swati Pandey
SYDNEY, May 14 (Reuters) - Commonwealth Bank of Australia, the country's top lender by market value, on Wednesday reported a 16 percent rise in unaudited cash earnings for the third quarter and flagged intensified competition in lending.
CBA's earnings were broadly in line with Australia's other "Big Four" banks - New Zealand Banking Group Ltd, National Australia Bank Ltd and Westpac Banking Corp - as profits rose strongly amid margin pressures.
Lending margins at the major banks are headed for all-time lows, thwarted by competition for a share of the fast-growing housing market and as cash-rich corporates rein in bank borrowing amid a sluggish economy.
Sydney-based CBA posted record cash profit of A$2.2 billion ($2.06 billion) for the three months to March. That compared with A$1.9 billion in the year-ago quarter and an analysts' consensus forecast of A$2.1 billion.
Cash profit, which excludes one-offs and non-cash accounting items, is closely watched by investors.
CBA reports on a different schedule to its three peers, which in recent weeks posted second-half earnings that took the quartet to a record half-year total of A$14.8 billion.
Tier I capital, a measure of a bank's ability to absorb unforeseen losses, rose to 11.6 percent from 11.4 percent in the preceding quarter.
The third-quarter trading update provided limited information but did reveal that credit quality was stable, with impaired assets unchanged at A$3.9 billion.
CBA said mortgage credit growth was moderate, as support from lower interest rates was balanced by higher levels of loan repayments. Commercial lending remained subdued, it added.
"They are not chasing market share and they are happy to manage margins, going forward. So, that's always a good sign," Bell Potter analyst TS Lim said.
"I think they'd probably be looking at a very good year coming up."
Shares of CBA, valued by the market at A$129.5 billion, hit a record A$80.4 in early deals on Wednesday. At 1242 GMT, they were up 0.45 percent at A$80.26, in a broader market that was down 0.22 percent.
Of the Big Four, CBA offers the strongest returns to its shareholders, with a return on equity (ROE) of 18.3 percent.
ANZ has an ROE of 14.9 percent, Westpac delivers 15.3 percent, followed by 12.1 from NAB, according to Thomson Reuters Starmine. ($1 = 1.0682 Australian Dollars) (Editing by Stephen Coates)