Commonwealth Bank to take on NAB in business banking

Commonwealth Bank creates new unit to help drive assault on rival NAB in the lucrative business customer segment.

CBA’s half-year profits will be presented by chief executive Matt Comyn on February 10. Picture: Britta Campion / The Australian

Commonwealth Bank has shed light on its ambitions to take on National Australia Bank in the lucrative business customer segment, creating a new unit to help drive a planned assault on its rival.

In a statement to the ASX on Tuesday, CBA said its strategy was to be number one in business banking, a title long held by NAB.

CBA has set up a unit called Major Client Group (MCG) that will sit within the newly-named Business Banking division, to provide “specialised, dedicated support and service to the largest clients”.

The bank is also transferring its private banking arm to its retail division, as part of the changes which CBA said would not impact its first-half net profit, which will be handed down on February 10, or its annual results.

“Continued simplifications have been made to CBA’s operating model during the current half which results in changes to comparative financial information,” CBA’s statement said. “These changes have not impacted CBA’s cash net profit after tax, but result in changes to the presentation of the divisional income statements and balance sheets of the affected divisions.

“Following the transfer of Commonwealth Private and creation of MCG, we have continued to enhance our classification of retail and business banking portfolios resulting in some customers being transferred between Retail Banking Services, Business Banking, and Institutional Banking and Markets.”

As CBA looks to bolster its position in business banking, NAB is stepping up its efforts in personal banking, where CBA is the dominant player. Last week, NAB agreed to acquire digital bank 86 400 as part of its strategy.

In the same announcement, CBA also outlined the capital impact of various divestments.

CBA said the proceeds of its $668m sale of a 37.5 per cent stake in BoComm Life to MS&AD Insurance Group were received last month, adding 17 basis points to its common equity tier one ratio that will be recognised in half-year results.

The bank also reiterated the merger of its subsidiary Aussie Home Loans with online mortgage broking platform Lendi would form a new company in which CBA retained a 45 per cent shareholding. That transaction, which is subject to regulatory approvals, is expected to be completed halfway through the calendar year.

“As Aussie Home Loans does not constitute a major line of the group’s business, the financial results of Aussie Home Loans will continue to be included in the retail banking services division and treated as continuing operations,” the statement said.

Investors will focus at CBA’s half-year profit announcement on whether the bank will lift its dividend following a COVID-19 impacted 2020.

The banking regulator in December scrapped guidance restricting bank dividends at 50 per cent of earnings during the pandemic, but cautioned lenders to ensure payout ratios were sustainable.