CBA’s shame kitty: Bank sets aside $575m for Austrac legal action, fallout from scandals
AUSTRALIA’S biggest bank has set aside a $575 million kitty to cover any costs from its succession of scandals, including its legal war with the dirty-money watchdog.
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THE Commonwealth Bank has eked out a higher first-half profit despite setting aside cash for potential penalties in its legal battle with the anti-money-laundering watchdog.
Reporting its final set of results under chief executive Ian Narev, Australia’s biggest bank today posted a net profit of $4.91 billion for the six months to December.
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That was up 0.2 per cent from the same period a year earlier.
The CBA announced it had made a $375 million provision for penalties that could result from allegations that it breached anti-money-laundering and terrorism-funding laws.
It also made a $200 million provision for what it said were “currently known” regulatory, compliance and remediation costs, which include the banking royal commission starting next week.
“We have focused a great deal of effort on fixing our mistakes, and becoming a better bank,” Mr Narev said in a statement.
“We recognise, and regret, that these costs arise from our failure to meet some standards that we should have.”
Mr Narev said the $375 million provision was a reliable estimate of the potential civil penalty related to allegations by the Australian Transaction Reports and Analysis Centre, or Austrac, that the bank breached reporting rules on more than 53,000 potentially suspicious transactions.
Analysts have estimated the cost could be in the region of $1 billion.
The bank said its underlying earnings, which exclude costs such as the provision, rose 5.8 per cent to $5.11 billion.
That narrowly missing analyst expectations of $5.2 billion — and the bank lifted its interim dividend 1c to $2.
Its cash profit, which is closely watched measurement of underlying earnings in the banking industry, fell 0.7 per cent to $4.87 billion.
The group’s net interest margin — a key measure of profitability — rose 0.06 percentage points over the six months to December, to 2.16 per cent.
That was helped by mortgage “repricing” to help sway borrowers away from interest-only loans.
Owner-occupier lending grew 7.5 per cent over the year to December, while investor lending inched up just 0.5 per cent in the same period.
The CBA also trimmed its exposure to apartment development amid widespread concern of oversupply, to $4.06 billion worth of loans.
That was down from $4.51 billion the previous half and from $5.24 billion a year earlier.
Mr Narev, who retires in April, said the CBA remained positive about Australia’s economic prospects but warned about continued market volatility that could affect the country — and the bank under his successor, Matt Comyn.
“Market volatility remains a risk given ongoing global uncertainty as to the pace and extent of rate rises,” Mr Narev said.
“Market movements over recent days highlight this risk.”
AAP