Finance Finance News Commonwealth Bank half-year profit drops as cost of misconduct bites

Commonwealth Bank half-year profit drops as cost of misconduct bites

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CBA boss Matt Comyn said it was a strong result in challenging times. Photo: ABC
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The Commonwealth Bank has reported a 6 per cent fall in its net profit, hit by the costs associated with fixing historic misconduct issues and tighter margins due to competition and rising costs.

First-half profit came in at $4.6 billion, down from $4.9 billion in the corresponding period last year.

Cash profit — the bank’s preferred measure that strips out one-off gains and losses — edged up 1.7 per cent to $4.68 billion, with higher sales volumes of loans offset by lower margins.

The result was slightly below market expectations.

CBA chief executive Matt Comyn said it was a strong outcome for the bank’s core business in at a challenging time.

Commonwealth Bank CEO Matt Comyn.
CBA CEO Matt Comyn described the bank’s profits as strong despite a decline on the previous corresponding period.

“Our transformation to be a simpler, better bank is well underway,” Mr Comyn said.

“We will continue to take action to address issues, earn trust and be a better bank for our customers, as we strengthen risk management, invest in core business growth, and deliver long-term sustainable returns for shareholders.”

Top line income fell by almost 2 per cent, with reasonable growth in the volume of loans more than offset by lower net interest margins and falling income from market trading and fees.

Costs edged down, but to an extent this was due to significantly higher one-off regulatory and remediation costs in the prior period, including $375 million set aside for settling its money laundering fine with AUSTRAC.

The mounting costs of compliance and remediation from misconduct can be seen in the extra $121 million set aside in the half, as well as a $200 million provision to deal with issues that may arise in it wealth management business, NewCo, after it is demerged.

The company’s investment spending was also dominated by the need to fix legacy issues identified at the banking royal commission.

Risk and compliance related investment spending was $432 million, almost two-thirds of total investment budget of $676 million.

The interim dividend was held flat at $2 per share.