CBA faces $212m provision hit on Bankwest restructure and compensation scheme

The banking major will incur a $212m provision on its Bankwest restructuring and a one-off levy for the Albanese government’s financial redress compensation scheme.

Commonwealth Bank will take a $212m before-tax provision hit on its full-year results from costs associated with its restructure of Bankwest and a one-off levy for the Albanese government’s financial redress compensation scheme.

Australia’s largest lender is expected to post a 6 per cent increase in full-year profit to $10.2bn next week, according to consensus estimates from Visible Alpha.

But on Tuesday, the bank said costs associated with transitioning the business banking operations of its Bankwest subsidiary into the wider CBA business, as well as expenses from “other changes in (its) operating model”, would hurt the bottom line.

Last year, Bankwest announced the capitulation of its business banking business and said it would no longer offer business lending products under its brand name. Instead, business customers are being transferred to the Commonwealth Bank parent.

A one-off charge for the recently approved Compensation Scheme of Last Resort is also included in the charge, CBA said in a statement.

The CSLR offers compensation of up to $150,000 to consumers with a favourable determination from the Australian Financial Complaints Authority, in cases where financial losses are still outstanding due to the insolvency of their adviser, stockbroker or lender.

Both costs will be included in its “operating expenses” for the second half of the year.

“In order to present a transparent view of the business’ performance,” the bank said it would also present a separate line for “underlying operating expenses” that excludes the two cost items.

“The group will present operating expenses both on an underlying and headline basis.”

CBA will open the banking reporting season on Wednesday August 9, with investors expecting to see evidence of fierce but cooling competition during the year, capping net interest ­margins.

The end of near-zero funding for the banks and fast cash rate increases by the Reserve Bank have driven a spike in funding costs that has forced banks to refocus on margins rather than volume.

Statistics from the Australian Prudential Regulation Authority this week show home loan growth at the Matt Comyn-led bank has slowed to 0.3 per cent for the month, half the sector rate, and below its major rivals.

That is likely to be good news for its profitability, but analysts caution against expecting big benefits to come through at the result, given deposit competition looks to be intensifying.

With household deposits falling by $7bn in June – the first monthly fall since May 2021 – analysts at UBS expect the “declining deposit balances could reignite another round of sharper deposit pricing”, which would hurt margins.

NAB provides a third quarter trading update on August 15.