Terry McCrann: CommBank chief has great timing on eve of royal commission evidence

COMMONWEALTH Bank chief executive Matt Comyn has hit the ground running with his first big deal just as the CBA faces a grilling before the royal commission, writes Terry McCrann.

WELL, well, new — CBA CEO Matt Comyn has certainly hit the ground running.

He also has an exquisite sense of timing.

Barely a week into the job and he’s unveiled his first big deal. And he’s done so the very evening before the CBA goes formally into the dock (not of the bay, but of the royal commission) to effectively answer for not having done this deal a long, long time ago.

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If it had done it a long time ago, or indeed never done it at all, it would have avoided all the sins (or at least many) of both omission and commission, which it is going to be excruciatingly hauled through this week, in an exact replica of the way the AMP has been over the past two days.

Getting into the business of both advising its — bank — customers on where they should direct their investment savings and superannuation, and then doing the investing as well, seemed like a “good idea at the time”, back in the mid-1990s when CBA bought Colonial First State.

The CBA — just like its fellow big banks, which were all embarked on the same attempt to steal the lunch (and indeed dinner) of the AMP and the other, for want of a better term, “purer” investment advisory and management businesses — would “clip the ticket” in, first, the advice to the customer, and then clip it again each year on the investment management.

The Commonwealth Bank’s new chief executive, Matt Comyn. Picture: James Croucher

For very little additional cost on what a bank already had invested in both infrastructure and people, it could add whole new revenue streams and it could do so via its unique access to millions of people who already entrusted their money to it.

The — perhaps elegant, but certainly revealingly honest — descriptive term for banks moving into the full range of financial services such as financial advice, funds management, and all the various forms of insurance, was to gain a “bigger share of wallet”.

As we are seeing in excruciating detail, the concept of leaving the actual customer with even just a “share” far less the “bigger share” of their own wallet was not exactly front of mind.

Well, as I wrote yesterday, it just hasn’t turned out well.

The banks have done very well over the past 20 years, but they have done well out of their basic banking businesses: borrowing money at X per cent and lending it out — mostly to buy property — at X-plus per cent.

Setting aside the ethical issues of conflicts and failing to provide effective or proper, or indeed even any service for the money being charged, the whole “wealth” or “bancassurance” exercise just hasn’t turned out to be either that profitable or that synergistic.

Then add on those ethical issues and it’s essentially been a continuous negative branding exercise: it’s well and truly time to go back to a purer banking future. This will also enable the bank to be far more nimble in both meeting and exploiting the digital challenge.

The cleanest way to have done so might seem to have been for CBA to sell CFSGAM to another player. Except three of the biggest “other players” — its fellow big banks — are themselves also sellers not buyers.

And the AMP is in no position to consider doubling down.

The Commonwealth Bank is hiving off its Colonial First State Global Asset Management

Indeed, what these two weeks of the RC is showing — exactly as I wrote yesterday — is that while, yes, the big banks have to get out of the (so-called) wealth business, they at least have a very nice banking business to fall back on.

The AMP does not: it is decidedly “long” wealth. It’s got nowhere else to go. It’s got to fix what needs fixing — not simply in the sense of ceasing to rort its customers, but finding a viable business on the other side of that.

Although, to again stress — what its spokesman sent into the RC dock this week seemingly was unable to do — if you put the AMP’s sins into the appropriate context they were more incidental than core.

So not only was there a dearth of willing buyers for CBA’s wealth biz, but a “trade sale” would have been very complicated given all these legacy issues.

The easiest separation is the one the CBA has chosen: give every CBA shareholder a pro-rata stake in a new separate wealth vehicle.

They can then sell, hold or buy. The new vehicle itself can then chart its own future — continue independently, be bought or do the buying.

But it will do that charting on a full arms-length basis from CBA.

DEPUTY DIMWIT OUTS HIMSELF

NICE to know that the Nationals have a leader and the government in consequence has a deputy prime minister who just isn’t ready for prime time.

Michael McCormack — the man who is acting-PM in Malcolm Turnbull’s absence and would be the actual PM, even if very temporarily, if Turnbull went under the proverbial (or indeed, an actual) bus — “thought” he could celebrate his elevation by announcing that treasurer Scott Morrison would be like Santa Claus handing out “goodies” in next month’s federal Budget.

Thanks very much deputy-dimwit, Morrison all-but said: I won’t be Santa and I won’t be handing out goodies.

MORE TERRY McCRANN

What I w ill do is deliver a responsible Budget.

Now, it would take far too many words to explain — far more than should be wasted on such a dimwit — why McCormack’s comments were “unhelpful”.

OK, hopelessly, embarrassingly inept.

Sort of makes you pine for the clarity and considered thoughts of his predecessor, Barnaby Joyce.

Oh right, I should have been more specific: McCormack’s not ready for prime time, in Wagga Wagga.