CBA suspends demerger as it works on royal commission recommendations

One minute it was planning a $1 billion sale of some of its big-ticket businesses. The next minute, the plan was shelved, with a vague undertaking to revisit it in future. So what’s going on at the CBA?

The Commonwealth Bank has shelved plans to spin off its wealth management and mortgage broking businesses as it steps up efforts to find further cases of misconduct.

The bank said today that its plans for a demerger of the businesses had been suspended pending further work on its remediation obligations, as recommended by the banking royal commission.

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In a statement, the group said it was “prioritising the imple­mentation of these recommendations, refunding customers and remediating past issues”.

“Accordingly, CBA has suspended preparations for the demerger in order to support the focus on these priorities,” it said.

The CBA announced last year that it would spin off its wealth management, financial advice and mortgage broking operations into a separately listed company.

The move to suspend the demerger comes after CBA chief Matt Comyn last week told a federal parliamentary committee the bank was still inspecting records in its wealth management operations to see if there would be “further consequences” from its fee-for-no-service scandal.

Commonwealth Bank chief Matt Comyn. Picture: Britta Campion

Also today, the company provided a breakdown of its previously announced $1.46 billion in remediation costs linked to issues raised by the royal commission and other insurance and fee scandals during the past five years.

Of that amount, $610 million has been paid in refunds to customers and it has made a provision to pay a further $200 million in refunds.

The bank has also spent $650 million improving internal reporting procedures, computer systems, staffing and other resources to find affected customers.

This outlay is included in the total remediation bill.

Financial services royal commission Commissioner Kenneth Hayne. Picture: David Geraghty

The bank announced in 2017 that it was reviewing its Colonial First State Global Asset Management business, and considering options including listing the division as a separate company on the ASX.

Last June, it announced it would also demerge its superannuation, financial advice, wealth management and mortgage businesses, spinning them into a new company.

These included Colonial First State, Count Financial, CountPlus, Financial Wisdom, Aussie Home Loans and its share of Mortgage Choice.

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Late last year, it sold Global Asset Management to Japanese company Mitsubishi for $4.1 billion, leaving the remaining businesses to be included in the new company.

Those businesses were expected to generate about $150 million profit a year, potentially valuing the new company at $1 billion.

CBA shares fell 0.2 per cent today to $72.93.