Commbank takes hit over laundering

Commonwealth Bank’s fines over regulatory misdemeanours have sliced almost five per cent from its net full-year profit, newly minted chief executive Matt Comyn said yesterday.

And wealth manager AMP, which has also been embroiled in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry scandal, yesterday reported its half-year result had been sharply carved back by 74 per cent to $115 million.

The more than $300 million plunge in earnings resulted from being forced to compensate AMP customers affected by its fee-for-no-service fiasco.

Meanwhile, Mr Comyn said CommBank’s $9.2 billion result was still impressive, adding that if it hadn’t been for the corporate watchdog penalties, the bank would have produced a profit that was 3.7 per cent better than last year’s bumper $9.9 billion, setting another record two years in a row.

In other words, the cost of CommBank’s misconduct has amounted to about $1billion less in earnings than it would have collected if the authorities and the public had not insisted on action.

Despite this, the bank has managed to reward its shareholders handsomely, flagging that it will pay full-year dividends higher than last year’s pay out – $4.31 a share versus $4.29 last year.

“The headline level is down 4.8 per cent, although there has been a number of one-off items that have impacted the result, including a couple of large penalties that we have resolved,” he said.

“If you strip some of those out, actually the result looks more from an underlying perspective up 3.7 per cent. I think given the context of what we have had to operate in, it really does show the resilience of our core franchise.”

Mr Comyn took over as chief executive from Ian Narev four months ago and has had to weather most of the reputational damage the bank has suffered this year.

Among the hits CommBank has sustained in the past 12 months are the $700 million penalty to the Australian Transaction Reports and Analysis Centre (AUSTRAC) for failing to notify the authority about suspected money laundering activities at its terminals, a settlement with Australian Securities and Investments Commission (ASIC) over the bank bill swap rate matter, and $155 million to deal with costs arising out of the Australian Prudential Regulation Authority (APRA) inquiry and the Banking Royal Commission.

The bank has also pared back its activities to reduce conflicts of interest by flagging the sale of its life insurance business, the demerger of its wealth and mortgage broking operations, and its recently announced exit from South Africa.

After gloating about the result, Mr Comyn seemed to change tact, admitting the bank had not done a “good enough job for our customers”.

“We got some things wrong. We have made mistakes. We absolutely need to make sure we do not make them again. And a big part of my job of course is making sure we are a simpler and better bank for our customers, working closely with any customers who have not had a good experience,” he said.

Since the royal commission hearings, AMP has lost its chairman, chief executive and several directors and executives, and its market value has plunged $4 billion.

Yesterday, AMP acting chief executive Mike Wilkins said: “The events around the royal commission into financial services have challenged our reputation and, while we continue to monitor the impacts, we have taken action to stabilise the business and move forward.

“Headwinds remain for the second half of the year, but our focus is clear. We’ll continue to prioritise our customers, putting their interests first.”

Do you think that the price CommBank has paid for its misdemeanours is fair, given that its shareholders will get higher dividends than they did last year? How genuine do you think that the bosses of CommBank and AMP are when they vow to put customers’ interests first in future?

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Written by Olga Galacho

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