CommBank posts record $9.9 billion profit

CBA has posted a record profit of nearly $9.9 billion, a day after slashing executive bonuses over a money laundering scandal.

CBA has announced its eighth record profit. Picture: Peter Parks/AFP

COMMONWEALTH Bank has posted a record profit of $9.9 billion.

Announcings its annual results on Wednesday, the bank said net cash profit rose 4.6 per cent to $9.881 billion in the 2017 financial year, with its statutory profit up 7.6 per cent to $9.928 billion.

It’s the eighth record annual profit in a row for the nation’s largest bank, and comes amid allegations by the Australian Transaction Reports and Analysis Centre (AUSTRAC) of more than 53,000 breaches of anti-money laundering and counter-terrorism financing laws.

On Tuesday, CommBank announced it had stripped chief executive Ian Narev and other executives of their bonuses to demonstrate “collective accountability”, although it has blamed the breaches on an IT error.

“Commonwealth Bank’s performance this year has again contributed to the financial wellbeing of our customers, shareholders, our people and the Australian economy,” Mr Narev said in a statement. “This is the result of our consistent focus on customer satisfaction, innovation and financial strength.”

But despite increased interest rates for investor and interest-only home loans following a crackdown by the prudential regulator earlier this year, the bank’s net interest margin fell by three basis points to 2.11 per cent.

The bank said higher wholesale funding costs and increased competition in home and business lending “more than offset” asset repricing. CommBank has declared a dividend of $4.29 for the year, up from $4.20 per share.

On the outlook for the coming year, Mr Narev said headline indicators showed the Australian economy remained “sound overall, albeit variable”. “However many households are concerned about job security, wages and the cost of living,” he said.

“Cyclical investment in mining and construction has underpinned our economy for some time. The next wave of more broadbased business investment that we need to secure jobs and lift wages is important. Business balance sheets have the capacity, and we have a strong banking system.

“But global caution remains high due to geopolitical change and less expansionist monetary policy. So all of us need to focus on working together to create an environment where businesses continue to invest to create rewarding jobs.

“For our part, we will continue to strengthen our balance sheet to ensure that we can support our customers through a variety of economic scenarios.

“We will also maintain our focus on our long term sources of competitive advantage in our customer base and in technology, while accelerating the focus on productivity that we need to remain competitive for the long term, and listening more to our community to strengthen trust.

“And above all, we will continue to invest in our people, who are the most critical determinant of long term success.”

BEHAVIOUR ‘NOT DELIBERATE’

In a statement on the AUSTRAC case, CommBank chairman Catherine Livingstone said the bank had made “significant progress” on a “program of action” since the second half of 2015 when the allegations were first raised.

That included fixing the ATM “coding error”, changing “senior leadership in the key roles overseeing financial crimes compliance”, and recruiting more than 50 financial crime compliance professionals.

The bank has also rolled out a “specialist hub” to improve customer on-boarding at the cost of $85 million, and upgraded its financial crime technology used to monitor suspicious activity at a cost of $40 million.

She said in addition to stripping bonuses, the board would “take an active role in addressing any further management accountability for the alleged actions or omissions”. “The board notes that it has no reason to believe that the allegations arose from deliberate or unethical behaviour, or any commercial motive,” Ms Livingstone said.

CommBank has also floated the potential sale of its CommInsure life insurance arm. Big Four rivals ANZ and National Australia Bank have already cut their exposure to wealth management.

The corporate watchdog in March cleared CommInsure of allegations its managers pressured doctors to alter medical opinions so it could deny claims but said some practices were “out of step with community expectations”.

“CommInsure and Sovereign are strong businesses with scale, expertise, competitive products and access to attractive distribution channels,” CBA said in a statement.

“While the discussions may lead to the divestment of those businesses, we will also consider a full range of alternatives, including retaining the businesses, reinsurance arrangements or other strategic options.”

— with AAP