Commonwealth Bank invests in Afterpay rival

The Commonwealth Bank has invested $147 million in a European rival to Australia’s booming ‘buy now, pay later’ sector. But it came as the bank revealed a $1.2bn hit to its bottom line.

The Commonwealth Bank is pushing into the booming ‘buy now, pay later’ sector, taking a stake in a rival to market leader Afterpay.

The deal was announced as the nation’s biggest bank revealed its full-year profit was down by close to 5 per cent as it took a $1.2 billion hit from the banking royal commission.

CBA this morning announced it had invested $US100 million ($147.9 million) in European payments fintech Klarna that provides ‘buy now, pay later’ services to 60 million customers.

CBA will help Klarna launch in Australia and New Zealand in a move set to shake up the fast growing sector which has generated a slew of players including Afterpay, Zip Pay and Humm.

CBA made the investment as part of a capital raising for Klarna which values the company at $US5.5 billion.

“We will become Klarna’s exclusive partner in Australia and New Zealand and intend to further invest at the parent and local level to support this partnership,” CBA said this morning.

The bank will help Klarna, a major player in the ‘buy now, pay later’ sector, launch in Australia and New Zealand.

Net profit fell 4.7 per cent to $8.49 billion for the year to June compared to the same period a year earlier, CBA said this morning.

The dent to the bottom line came as the bank booked $918 million in customer remediation expenses for the year, as well as an additional $358 million for risk and compliance programs related to failings such as those heard at the royal commission.

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But operating income also slipped 2 per cent to $24.4 billion, with a rise in lending and deposits offset by a five basis point decline in its net interest margin – broadly the profit it makes on its lending – to 2.1 per cent.

Operating expenses increased by 2.5 per cent to $11.37 billion as the bank added 600 risk and compliance staff during the year as well as additional staff to work on remediation programs.

— with AAP