UPDATE 2-Australia's CBA cash profit rebounds from COVID slump

* Q3 cash profit of A$2.4 bln vs A$1.3bln in Q3 2020

* Higher revenue driven by lower funding costs

* Banking fees, CommSec trading fees & bad debt benefit contribute (Adds analysts reaction, shares)

By Paulina Duran

SYDNEY, May 12 (Reuters) - Commonwealth Bank of Australia's third-quarter cash profit almost doubled as a rapid economic recovery spurred lending and enabled the country's largest bank to reverse bad debt provisions made during the COVID-19 pandemic.

Australia's control over the pandemic, near-zero interest rates and government spending has allowed its banks to recover quicker than their global peers and move funds set aside for potential COVID-19 losses back into profits.

Last week, peers Westpac, National Australia Bank and Australia and New Zealand Banking Group together reversed nearly A$1 billion ($783.8 million) in bad debt provisions, boosting their half-year profits and dividends.

"Credit quality across our lending portfolios remained sound," CBA Chief Executive Officer Matt Comyn said in a statement on Wednesday.

"It is pleasing to see that the vast majority of customers have smoothly transitioned from the bank's COVID-19 temporary loan repayment deferral programme as it concluded in March."

The lender's cash net profit after tax from continuing operations rose to A$2.4 billion from A$1.3 billion a year earlier, helped by chunkier margins as at-call deposits with zero cost rose while wholesale funding kept declining.

Non-interest income was also 3% in the quarter, helped by higher retail banking fees as people spent more, and retail brokerage fees at its securities trading unit CommSec, the bank added.

This was better than what analysts at Credit Suisse and Goldman Sachs were expecting, with the bank also reporting a very strong core tier-one capital position of 12.7%, 10 basis points higher than at the previous quarter.

CBA shares, which have surged 12.9% this year, double the broader market rate, opened half a percent lower.

"While the operational trends are broadly consistent with peers and the balance sheet looks very strong, we struggle to justify the stock's ... 45% premium to peers vs 16% 15-year average," Goldman Sachs said in a note.

CBA, which follows a different reporting calendar than its rivals, said it booked a loan impairment benefit of A$136 million in the quarter, compared with a A$1.6 billion expense last year.

It lowered its total credit provisions to A$6.5 billion at the end of March, from A$6.8 billion at the end of December.

The bank said its adjusted net interest margin - a key metric of profitability - also benefited from an increase in zero-cost deposits and lower wholesale funding costs.

CBA, which aims to take the No.1 spot for business lending from NAB, said its quarterly business lending volume grew 8.1%, at more than three times the market rate. ($1 = 1.2758 Australian dollars) (Reporting by Paulina Duran in Sydney and Shashwat Awasthi in Bengaluru; Editing by Stephen Coates)