CBA avoids strike on pay, pledges to keep 'as many as possible' in their homes

The Commonwealth Bank has managed to fend off a protest vote against executive pay, as chief executive Matt Comyn gave the first indication that loan deferrals cannot go on forever.

At the bank's virtual annual general meeting on Tuesday, more than 20 per cent of shareholders voted against the company's remuneration report. This included Mr Comyn receiving a fixed salary of $2.1 million and short-term bonus of more than $2.4 million for the year.

The bank's executives would receive an increase in fixed remuneration, but chairman Catherine Livingstone said changes to long-term bonuses would see a 19 per cent overall reduction in take-home pay.

CBA chief Matt Comyn said the bank will work through individual customer circumstances. Credit: Dominic Lorrimer

Proxy firm ISS advised shareholders to vote against the company's remuneration report with head of research Vas Volesnikoff arguing senior executives should not be rewarded for fixing misconduct. Thirty per cent of Mr Comyn's bonus was tied to the bank's completion of key milestones to address systemic governance failures identified by the prudential regulator.

Ms Livingstone said the restructured remuneration framework, that includes increasing long-term shares ownership, was an attempt to "more closely align management incentives with shareholders' experience".

Some CBA staff queried why staff had only been offered a 1.5 per cent to 2 per cent pay increase. "I support the remuneration report, but I would like to know why the board does not think I deserve a modest 3 per cent increase in line with what our competitors pay their employees after what’s been a very difficult year?", one employee said.

On loan deferrals, when Mr Comyn was asked about the "legal" but "unfair" practice of home repossessions, he said CBA would prioritise mediation over court action, in the first indication big banks could use foreclosures to recoup unpaid loans once deferral periods come to an end.

"Of course fairness is absolutely central with the way we want to deal with our customers in any circumstance," Mr Comyn said. "We participate wherever we possibly can in any form of mediation process to get a satisfactory outcome.

"I think it’s important at this particular junction in the economy – we intend to work very closely with all of our customers and keep as many as possible in their homes."

The latest figures from CBA show it has $42 billion in deferred loans, including 93,000 home loans totalling $37 billion as at the end of September, of which more than half are due to expire at the end of October. The bank said it was in possession of only a few hundred properties, the lowest figure in 10 years due to pandemic-related loan relief.

CBA has started to contact customers affected by the pandemic to encourage partial or full repayments. It has hired 1000 more staff in the past six months, which has contributed to total deferrals dropping by almost 40 per cent from June to September.

Ms Livingstone said the bank would hope to restore the dividend payout to between 70 and 80 per cent of net profit after tax. "The decision on dividends are made every six months in the context of circumstances at that time."

CBA paid shareholders a final dividend of 98 cents per share, which was higher than market expectations but 31 per cent lower than the previous year.

Commonwealth Bank chairman Catherine Livingstone has said a pivot from wealth management has helped CBA focus on its core business. Credit: Edwina Pickles

Asked about the bank's climate policy, including funding appetite for projects such as the Narrabri gas project in NSW, Ms Livingstone said CBA would only support projects that assisted the transition towards low-emissions technology. "We are very focused on the transition to net zero," she said. "We support gas as a transition fuel."

Ms Livingstone told shareholders the bank's pivot away from wealth management has allowed it to focus on retail and business banking through the challenging pandemic conditions.

Like many of the big four banks, CBA has pursued a strategy of simplifying its operations and in May announced it would sell 55 per cent of its superannuation arm, Colonial First State, to private equity firm KKR.

"We have now substantially divested, or ceased, our wealth management businesses," Ms Livingstone said. "This has allowed management to focus on driving operational excellence in retail and business banking, and on maintaining the bank’s leadership in digital banking and innovation."

Market Recap

A concise wrap of the day on the markets, breaking business news and expert opinion delivered to your inbox each afternoon. Sign up for the Herald's here and The Age's here.