Commonwealth Bank flags $169m hit to first-half earnings from sales, currency swings

CBA has alerted investors to a $169m hit to its first-half earnings stemming from currency swings and sale losses.

A Commonwealth Bank branch in Sydney. Picture: AAP

Commonwealth Bank of Australia has disclosed a non-cash profit hit of $169 million in its first-half, along with a shake-up of several business units which reflects its divestment spree and a simplification program.

In an ASX statement today, CBA (CBA) said non-cash losses totalling $169m, post-tax, would be included within the statutory net profit in its interim result to be handed down in February. The announcement overhauled the structure of CBA’s divisions in preparation for a post-Hayne royal commission landscape and follows the bank’s retreat from several of its wealth businesses.

The losses stem from the sale of a string of businesses amounting to $74m, and transaction and separation costs on the sale of its global asset management arm and life insurance division and the upcoming demerger of its financial planning and mortgage broking units.

Transaction and separation costs related to the sale of Colonial First State Global Asset Management (CFSGAM) were $100m post-tax while CommInsure Life caused a $38m expense. The profit hit also included a loss on the disposal of South Africa’s digital bank TymeDigital and project costs and hedging and accounting treatment “volatility losses” of $91m, post-tax, “mainly due to the depreciation of the Australian dollar against the New Zealand dollar,” the statement said.

CBA did make a gain on sale of its life insurance unit in NZ Sovereign, which it said amounted to $113m after tax.

Hong Kong-listed insurer AIA Group acquired CBA’s CommInsure and Sovereign life insurance businesses while Japan’s Mitsubishi UFJ Trust and Banking Corporation has agreed to buy CFSGAM for $4.13 billion.

The bank also outlined a raft of changes to its business unit structures.

“In line with CBA’s commitment to becoming a simpler, better bank, a number of changes to CBA’s operating model have been made during the current half, which realign businesses across operating segments. These changes have not impacted CBA’s cash net profit after tax (NPAT), but result in changes to the presentation of the income statements and balance sheets of the affected divisions,” the statement said.

They included enveloping Perth-based Bankwest within CBA’s Australian retail businesses, a decision which ends the units separate reporting disclosures within the accounts.

The bank is also moving its small business banking arm out of its retail division to its business and private banking unit, and shifting Commonwealth Financial Planning from wealth management to the retail banking division.

The financial planning unit is scheduled to be spun out of CBA along with its mortgage broking businesses, including Aussie Home Loans.

The CBA general insurance business, which is subject to a strategic review and may be sold, moves out of wealth management to the retail banking division.

At 10.43am (AEDT), shares in CBA were up 23 cents, or 0.32 per cent, at $73.