CBA flags $298 impairment from Indonesian bank sale, $89m provision from Bankwest

Australia’s largest lender has put shareholders on notice over significant items in its upcoming results.

Australia’s largest lender has put shareholders on notice over significant items in its upcoming results. Picture: Lisa Maree Williams/Getty Images

Commonwealth Bank has warned investors it will book a combined $387m hit from the divestment of Indonesian Bank subsidiary PT Bank Commonwealth and transition of Bankwest, unveiling a series of hits to its looming full year results.

In a market update on Thursday, CBA told shareholders the $298m haircut was a result of the bank’s efforts to focus on its core Australian and New Zealand banking assets.

CBA sold its PTBC stake on May 1, after announcing the deal in November last year.

This saw CBA offload the stake it had held since 1997 to PT Bank OCBC NISP Tbk a subsidiary of Oversea-Chinese Banking Corporation, a Singaporean multinational banking group.

CBA told shareholders the deal will see it book a $298m post-tax hit across several periods.

This will include a $133m impairment loss booked against the banks’ first half results, as well as a further $100m recognised against the bank’s second half results.

CBA will also book a further $65m in separation costs for the bank sale, of which $53m had been provisioned in the bank’s first half results.

The bank also warned investors it would recognise a further $89m hit from its shake-up of subsidiary Bankwest as a pure play digital lender, with provisions for the move to be marked up against the half.

CBA CEO Matt Comyn. Picture: Jane Dempster/The Australian

CBA announced its plans in March for Bankwest, which the lender scooped up in 2008 amid distress from British owner Lloyds TSB – now Lloyds Bank.

This sees CBA shut 45 of its branches, with plans to convert a further 15 to CBA only banks in a bid to shift the business online.

But CBA said it would exclude the $89m in provisions from its underlying result “to present a transparent view of the business’ performance”.

CBA is set to announce its full year results on August 14 in what will be a major read through of the economic cycle in the earnings season.

The bank, Australia’s largest lender, has continued to soar on markets despite gloomy analyst sentiment amid warnings CBA was overvalued.

Shares in the group closed down 0.9 per cent on Thursday, at $136.27, against a modest rise in the benchmark S&P/ASX 200 index.

Macquarie banks analyst Victor German in a note to investors said the banking sector had “limited scope… to materially surprise to justify elevated multiples”.

“The odds of achieving a soft landing are low, and we see limited opportunities for banks to grow into a more reasonable multiple,” he said.

Mr German said CBA had seen the weakest growth in household deposits over the last three months of the Big Four lenders.

But he noted the bank was among the strongest business lenders in the period, expanding twice as fast as NAB and ANZ.