Commonwealth Bank makes new $300m provision for financial advice
Commonwealth Bank’s financial advice remediation bill is edging closer to $1bn, with the announcement of a new $300m provision.
Commonwealth Bank has announced a new $300m provision being made to pay remediation to customers for problematic financial advice highlighted by the Hayne royal commission, including charging fees for no service and providing inappropriate advice.
The provisions cover financial advice provided through CBA’s “aligned” businesses,
including Count Financial, Financial Wisdom and CFP-Pathways.
The bank announced it would book the charge in the second half of its 2020 financial year. The bank had already recorded provisions worth $534m during the first half of the 2020 financial year. it is due to report its full-year financial results on 12 August.
“The total to-date aligned advice remediation provision recognised is $834 million, which includes $698 million in customer refunds (including $280 million of interest) and $136 million in program costs,” a statement issued by the bank to the ASX said.
“The provision assumes an average refund rate of 37 per cent (excluding interest) of the ongoing service fees collected between FY09 and FY19 (61 per cent including interest).”
The banks said it believed it had “adequately provided” for the issues but would continue to monitor the need for more remediation.
The bank also announced a number of accounting changes that would be reflected in its full year results.
In a separate announcement, ASX-listed CountPlus, which acquired Count Financial from CBA in October 2019, said it welcomed the new provision. As part of the sale CBA provided an indemnity of up to $200m to CountPlus to cover any historical problems with financial advice provided by Count Financial.
In December CountPlus announced it had made a provision of $143.3m in relation to the issue, but said on Thursday it expected this figure to be revised to $195m. But remediation would be subject to the review of individual cases, CountPlus said.
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