Commonwealth Bank chief executive Ian Narev takes home $12.3 million

DAYS after passing on just half of the RBA’s latest rate cut, the CBA has revealed its boss nabbed a 50 per cent pay rise.

COMMONWEALTH Bank boss has been crowned Australia’s highest paid big four banker, taking home $12.3 million in the last financial year.

While defending the bank’s reputation amid the CommInsure scandal — which prompted a renewed campaign for a banking royal commission — Ian Narev secured a 50 per cent pay rise.

The bank released the figures in its 2015-16 annual report released on Wednesday, within days of passing on just half of the Reserve Bank’s 25 basis point rate cut.

The bumper salary works out to be $260,000 a week, meaning it takes Mr Narev less than three days to earn what a typical Australian takes home in a year.

It includes an $8.77 million base salary, up 5.4 per cent from the previous year, topped up with performance-linked bonuses.

Some commentators have questioned the pay rise given the CommInsure debacle, in which it was revealed that doctors in the bank’s insurance arm were being pressured to change their assessments of customers to avoid payouts, and CBA’s earlier financial planning scandal.

Opposition consumer affairs spokesman Sam Dastyari suggested that Mr Narev share his earnings with “a long list of scandal victims (that I can happily provide him with)”.

“Some of these people have been waiting for years for their compensation,” Mr Dastyari told The Australian.

“I really do feel like we’re living in the 1980s film Wall Street.”

Mr Narev defended not passing the latest cash rate cut on in full, insisting the bank was paying heed to listen to all its customers — not just those with home loans. He said savers were struggling with minimal returns in the low-interest environment.

The difference between passing on the full cut would have been worth “low hundreds of millions of dollars”, Mr Narev told ABC’s 7.30.

“The reality is after our decision last week mortgage holders are paying less for their mortgage, depositors had the opportunity to get more, and shareholders are feeling safer about their $6 billion of dividend.”

A RECORD YEAR

The bank, which is Australia’s largest corporate taxpayer, unveiled a seventh straight record profit of $9.45 billion.

But Mr Narev sounded a cautious note about the country’s economic outlook in the low interest-rate environment.

“Income growth inside and outside Australia remains weak, so people are not feeling better off,” he said.

“When combined with ongoing global economic and political uncertainty, this makes households and businesses cautious, and hesitant to respond to monetary stimulus.”

Net profit was up two per cent to $9.23 billion while cash earnings for the six months to June 30 slipped three per cent compared to the July-December period.

Earnings from the retail banking division — the bank’s largest — rose 11 per cent to $4.44 billion, while business and private banking grew by five per cent for the period.

But CBA’s bad debts jumped 27 per cent, weighing on profits, on higher provisions for resource, commodity and dairy exposures.

The bank announced a final dividend of $2.22 per share, leaving the final payout to shareholders at $4.20, unchanged from the previous year.

BANKS UNDER PRESSURE

Banks’ profits have been under pressure in recent months amid uncertainties in financial markets and the economy, and over fears of rising bad loans.

Financial institutions are also having to deal with tougher regulations to dampen the housing market amid concerns the sector could overheat.

CBA said its common equity Tier 1 ratio — a measure of the capital it has available to absorb losses — rose 10.6 per cent compared to 9.1 per cent in the prior year.

The bank last year announced a plan to raise $5 billion to meet the capital buffer requirements, which are part of a global effort to make the financial sector more resilient to shocks.

Canberra has also stepped up pressure on the nation’s big four banks — CBA, ANZ, National Australia Bank and Westpac — to explain why they did not fully cut their home-loan rates when the central bank slashed the cash rate last week.

Prime Minister Malcolm Turnbull has announced that the four large lenders will have to face a parliamentary committee for an annual grilling to explain their actions.