Finance Finance News Banks pay price for scandals – but CEOs still get millions
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Banks pay price for scandals – but CEOs still get millions

AMP CBA profit results
The financial giants have faced massive costs to mitigate scandals.
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AMP and Commonwealth Bank’s profits have taken a hit as the financial giants count the cost of scandals highlighted by the royal commission, but their respective bosses remain big earners.

AMP announced its first-half profit plunged 74 per cent to $115 million Wednesday after the company set aside $290 million to refund and compensate customers it overcharged for financial advice.

The financial advice group’s revenue for the six months to June 30 was down 6 per cent to $7.17 billion.

AMP declared an interim dividend of 10 cents per security, franked at 50 per cent.

The shock result comes the same day Commonwealth Bank announced its full-year net profit fell by 4 per cent to $9.38 billion.

CBA’s result was affected by a $700 million civil penalty it paid to regulator AUSTRAC, to settle a money-laundering case brought by the agency last year.

Its profit was also hit by $389 million in “risk and compliance provisions” and “one-off-regulatory costs” – resulting from an ASIC investigation, shareholder class actions, the AUSTRAC proceedings, the royal commission and the APRA inquiry.

Even excluding the one-off costs, mainly to mitigate scandals highlighted by the ongoing banking royal commission, AMP’s underlying profit fell to $495 million — down more than 7 per cent on last year.

The royal commission last month heard that AMP had misled the corporate regulator on multiple occasions about its practice of charging many customers fees for services they were not, and could not be, receiving.

Since that banking royal commission hearing – which claimed the scalps of former CEO Craig Meller and chairman Catherine Brenner – AMP’s total market value has dropped by $4 billion.

But the new bosses will still take home handsome pay cheques.

AMP acting CEO Mike Wilkins will pocket $1.46 million for the eight months work he will have done by the end of the year.

Mr Wilkins, an AMP director, took charge of the embattled financial services company in April, after Mr Meller quit.

amp profit
Mike Wilkins said AMP had taken action to stabilise its business. Photo: AAP

The results “demonstrated AMP’s resilience through a difficult period”, Mr Wilkins said.

“While there will be further challenges ahead, we have a strong foundation on which to reset the business and restore the confidence of our customers and the wider community,” he said.

“The events around the royal commission into financial services have challenged our reputation, and while we continue to monitor the impacts, we have taken action to stabilise the business and move forward.”

Former Future Fund and Commonwealth Bank boss David Murray, who replaced Mrs Brenner as chair of AMP in June, will be paid $850,000 a year, AMP said. Mrs Brenner was paid $660,000 a year as chair of AMP, while Mr Meller was paid a total of $8.32 million as CEO in 2017.

As for CBA, its new chief, Matt Comyn, has base pay of $2.2 million, with the potential to earn up to $8.4 million through bonuses, according to the ABC.

matt comyn
Matt Comyn, who took over as CBA chief executive in April, is a 20-year veteran of the bank. Photo: AAP

In Wednesday’s results, CBA revealed it spent a total of $1.1 billion defending itself in several lawsuits and hearings.

CBA’s underlying cash profit – that strips out one-off items – was down almost 5 per cent to $9.2 billion, still roughly in line with market expectations.

Costs rose by 9.2 per cent to $11.6 billion, largely due to the AUSTRAC penalty, while income edged up 2.6 per cent to $26 billion.

The bank managed to expand its margins thanks to the higher rates being charged to property investors.

The profit was also boosted by improvements in the quality of its loan book, with loan impairment expenses down 1.5 per cent to $1.08 billion.

-with wires

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