Will the CBA share slide erode your retirement savings?

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Since financial intelligence watchdog AUSTRAC signalled early this month that it was taking the Commonwealth Bank of Australia (CBA) to court, the bank’s shares have lost tens of billions of dollars in value.

A big chunk of that loss has been borne by retirees, either through their superannuation funds or individual investment portfolios, financial analysts say.

Australian Securities Exchange (ASX) transactions in the stock have been in a frenzy since the bank was accused of allegedly not disclosing potential money laundering activities. Those transactions appear to have occurred at some of CBA’s intelligent deposit machines (IDM).

Some analysts put the size of the share rout in the days that followed AUSTRAC’s action at $6 billion. Bank analyst David Ellis from investment firm Morningstar now estimates that figure at around $12 billion. And the stock’s price continues its free fall in the wake of Monday’s announcement of a regulatory inquiry into the bank.

Releasing details of the probe, Australian Prudential Regulation Authority (APRA) Chairman Wayne Byers said: “The Australian community’s trust in the banking system has been damaged in recent years, and CBA in particular has been negatively impacted by a number of issues that have affected the reputation of the bank.

“Given its position in the Australian financial system, it is critical that community trust is strengthened. A key objective of the inquiry will be to provide CBA with a set of recommendations for organisation and cultural change, where that is identified as being necessary.”

Morningstar’s Mr Ellis told YourLifeChoices that the bank regularly acknowledged that “superannuation funds, both self-funded and retail or industry ones, formed a large part of its investor base”.

“About 800,000 investors make up the 53 per cent of CBA stock holders who are not big institutional companies. Among those retail shareholders, there will be thousands of mums, dads and retirees who have seen the value of their investment fall this month.”

Mr Ellis said that while APRA’s inquiry – the first time the regulator has launched one of this magnitude – was welcome news, he wondered about its timing.

“APRA is the sole regulator of many banking practices and some of the questionable practices have taken place over many years. Why has it waited until now to do what it should always have been doing? Because that is their role, to monitor prudential behaviour and risk management in banks.

“I wonder if the Government was behind APRA’s decision to act now,” Mr Ellis said.

Australian Shareholders Association (ASA) board member Judith Fox has not ruled out the group raising CBA’s share price decline at the bank’s annual general meeting in November.

“We will have a discussion ahead of the meeting with CBA chairman (Catherine  Livingstone) around a number of issues that have affected the share price and thus affected the value of shareholders’ investments,” Ms Fox told YourLifeChoices yesterday.

“There are lots of self-funded retirees, both directly or through their super, who are invested in CBA.

“I have no doubt that CBA is high on their share portfolio list.”

Yesterday, the stock was trading at around $75, a dip of $12 or nearly 15 per cent off the highest point it reached in the past year.

The fact that some major shareholders waited weeks to sell their holdings possibly indicates that they are increasingly nervous that CBA will not avoid a court penalty of titanic proportions.

With 53,000 alleged breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act, each carrying a maximum fine of $18 million, the upper end of the penalty would see CBA having to pay almost $1 trillion.

While the top 20 shareholders in CBA are large, wealthy financial institutions, Australian superannuation funds could easily be the next biggest group of investors in the stock.

The top 20 shareholders account for almost 50 per cent of the stock, thus half of the share decline up until now has been wiped off their investments.

The other estimated $6 billion in lost value will be sliced off superannuation shares and smaller investors’ portfolios.

CBA’s alleged money laundering breaches came in the same month the bank announced it would make refunds to customers and staff who lost out on millions during its ‘systemic’ regulatory issues going back for years. This comes after an Australian Securities and Investment Commision (ASIC) investigation into practices the bank itself reported to the regulator.

The refunds will return a minimum of $16.7 million in superannuation payments to 36,000 staff plus millions more to deceased estates and customers sold inappropriate insurance.

Opinion: Why was the CBA allowed to betray those who trusted it?

The black stain on CBA’s yellow logo now seems like a metaphor for its blighted reputation caused by a long list of questionable practices.

And its long-running marketing campaign – ‘CommBank’ CAN – ironically reveals the potential breadth of that which the bank thought it could get away.

Growing up, the Commonwealth Bank seemed to me like the sensible, old-fashioned relative in the family. Its views and manners were outdated but it had a big, warm heart that only wanted to take good care of you. Back then, it was still government-owned.

But, oh boy, has this member quickly transformed into a black sheep since it was privatised in 1991.

The type of unconscionable behaviour of which CBA is being accused sounds more like the type of activity conducted by a Wolf on Wall Street than your local suburban bank. This iteration of the bank is far removed from the one that had your back when you took your tin money box into a branch and opened a ‘Dollarmite’ account.

Not only has the ASX’s biggest company by market value – $130 billion – allegedly failed to consider risk management and compliance with the law, thus shredding the investments of thousands of retirees, it has also admitted to ripping off many people.

Following an ASIC investigation this month, CBA has undertaken to return money it ‘systemically’ lifted from the pockets of its own employees, in the form of underpaid superannuation contributions. It’s also refunding the wallets of many to whom it sold unnecessary insurance. And the list of those who will receive refunds goes on.

Opposition Leader Bill Shorten’s longstanding calls for a royal commission into the banking sector are surely now validated.

The APRA inquiry is too little, too late … not least because it will not be probing the AUSTRAC allegations. APRA should have been monitoring the bank’s governance and compliance with regulations – like the money-laundering law – all along. That’s its job. Why did it wait for the AUSTRAC bombshell to get off its haunches?

Perhaps it is APRA which ought to be investigated, so we can understand why it has not carried out its role more thoroughly in the past.

Do you think the banks are too loosely monitored? Should CBA have been deregulated? Will you be getting a refund from CBA for an insurance policy you did not want nor need? How has the fall in CBA shares affected your retirement nest egg?

 

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RELATED LINKS

Will CBA scandal break the bank?

The CBA has allegedly enabled criminal syndicates to launder millions of dollars.

CBA releases list of regulatory ‘issues’ – are you a victim?

Commonwealth Bank announces refund program for customers and staff.

Money laundering scandal costs bank executives their bonuses

Commonwealth Bank board takes action over AUSTRAC scandal.

Written by Olga Galacho

44 Comments

Total Comments: 44
  1. 0
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    Just imagine, the PM pulled bank CEOs to Canberra and waved the finger at them and this still happened. Go figure.
    Now we are seeing the same BS with the electricity industry. Last night’s pathetic public relations exercise on A Current Affair was the next public relations exercise presided over by one of the right wing media outlets which push their man. More of the same so don’t hold your breath about electricity prices coming down. They won’t.

    • 0
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      Yes – might get a phone call on how to get a better deal – trouble is on a contract it costs you to get out and move elsewhere, and there is no guarantee that the new provider won’t jack up the prices once you’re stuck in the web.

      That’s how marketing works – price low to get people signed up, then raise the prices etc.

      The problem always has been the proliferation of provider companies under ‘privatisation’ – that failed policy…

    • 0
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      They will send a letter or ring up and both will be treated by most people as scams so I can’t see any benefit in this as far as electricity prices are concerned.

      I for one have not been able to make any sense out of the energy made easy website either. Only way to compare electricity deals is use a spreadsheet and your own data.

    • 0
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      Yes I’m waving a finger at the PM. Can you wave the middle one?

    • 0
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      And going back to the horrendous Rudd/Gillard/Rudd years, didn’t Swan tell all the media that he was keeping a close eye on the banks? As I posted below, we need to have more regulations on the banks, external audits and a stronger oversight from the relevant authority.

  2. 0
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    Will those rainmaker CEOs take a bullet for the share slide?

    Thought not….

  3. 0
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    Anyone who bought shares in the float at $5.40 would be paying more capital gains tax than any loss made. They would also be making more in dividends per year than they paid for them. Under $70 I see them as a screaming buy.

  4. 0
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    Ah the benefits of privatisation. If they had the gonads to do it the government should be seeking a custodial sentence for the responsible person at CBA for this incredible stuff up would send a serious message to all in the Financial Industry. Oops sorry they are big donors to the political parties aren’t they.
    Bring on a Royal Commission.

  5. 0
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    I worked for CBA for 35 years, ending 15 years ago. In the early days it was about customers and staff. With privatisation it became about shareholders and bosses, profits and bonuses. This changing philosophy required a very careful balancing act between pushing sales and maintaining credit control.

    David Murray managed this well; he’d grown up with the bank – knew it thoroughly – and had it’s long term future in mind; he was also a master strategist with a brilliant mind. The people following him have been progressively less so, with their focus increasingly being on making a motsa and moving on.

    About 10 years ago I started thinking: how long before these greedy jugglers start dropping the balls? And here are…

    • 0
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      The new CEO will fix it all up just like he did in his old job.

    • 0
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      The banking industry has been getting worse every year since the CBA was privatised. The CBA competition once kept them honest, not any more. Privatisation of the CBA was on of the biggest mistakes we’ve made.

    • 0
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      Yes Tib and if there was any sense or planning they’d have a new government owned bank and a dedicated Australian crypto being issued and traded inside it already but of course with the conservatives we never seem to be able to get out of the 60s.

  6. 0
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    Greed is good! (Gordon Gecko). Banks used to be regulated and their rates were tied to the Reserve Bank and add to that the Commonwealth Bank was government owned. Each state had their own bank which was also government owned. First there came deregulation but government ownership of some of the banks steadied the ship until state banks either went under or were sold and the federal bank was privatised.

    As McGroger has pointed out it became all about shareholders and bonuses. Experienced staff were made redundant (sacked is more precise a description) to reduce the costs, branches were closed and fees and charges were either brought in or increased. They all became market driven, not customer focussed and we have come down to this debacle. It follows onto the disastrous loss of investors funds by employees, who can best be described as cowboys, without any apparent oversight. As yet, no sackings have been made although some have moved on by their own choice.

    As I see the problem, there has to be regulation introduced back into the banking industry to ensure that there is oversight from outside. Internal auditing still needs to be signed off internally and if any problems arise they are still dealt with “in-house”. External auditing to ensure regulations are adhered to is part of the answer as well as the ACCC being given stronger powers, more staff and more proactive leaders.

    • 0
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      Agree with your summary, OM. The external-controlled regulations need to be tightly controlled & reported on by APRA who should be doing their job seriously.
      Also, the “cultural change” the APRA boss is talking about will not happen until the excessive “Greed is Good” mentality is changed – will only happen by capping CEOs salaries to say $1Mil + any Bonus / etc to say not more than 20%. Customers AND Shareholders have been betrayed and such drastic action is needed.

  7. 0
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    I think that much of this push against banks in general and CBA in particular is simply leftie, politics of envy at work – just like the revisionist historians who want to tear down statues just because they are there.

    After all, APRA, ASIC etc are really quasi government, civil servant type outfits looking mainly to justify there existence by going after the easy targets – they don’t have the expertise to take on the hard targets.

    This is compounded by those who look for a scandal at all costs – after all, where are we on the world stage if the our banks don’t have a scandal.

    Our big four banks are strong organisations by any international measure all of whom came through the GFC in good order – all down to good management.

    And yes, CBA et al are very important to my super – woe betide those who mess with that, as any person who keeps an eye on their super will attest.

  8. 0
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    Conspiracy theory. First Australia had to be disarmed. Then our economy was too strong for our Pacific trading partners, including our banks that survived the Global Financial meltdown, so the banks had to be brought down. First Turnbull made the banks increase the cash reserves ( in case he said there was a run on the Australian banks yea right ) then he hit them with the $6.9 billion bank theft, now he is attacking the CBA. Of course remembering that Hockey destroyed the retirement plans of the working middle class, so they could be controlled better. Its all a matter of control. yes its all comming to plan

  9. 0
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    I suspect within a month we will be at war. Maybe a real one. If that’s the case I won’t notice the CBA slide in my super fund. Who notices a slide when your free falling.

  10. 0
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    CBA share slide has not affected super much
    Other shares in ones portfolio would have more than compensated for CBA poor performance since the banks “crisis”
    And in a few months CBA price increase will give the super balance a nice boost

    • 0
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      Hmm – I thought super run by the CBA was dependent on investments made by CommSuper….. not on the handling of the bank itself in the storm…. apart from the shares CommSuper may have IN CommBank proper….

      You might know more – let me know…

    • 0
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      You’re so bloody ignorant it’s not funny

    • 0
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      Sorry Trebor
      Didn’t realize you and I were saying the same thing
      Your last sentence threw me off

    • 0
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      Just a request for information – I don’t know the nuts and bolts of CommSuper… no problem.

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