The fallout from the Royal Commission continues to bruise Australia’s banking sector, taking chunks from the bottom lines of both Suncorp and Commonwealth Bank.
CBA reported an 8.1 per cent drop in its full-year net profits after tax to $8.57 billion on Wednesday.
Suncorp took a much bigger hit, recording an 83.5 per cent drop in its net after-tax profit to $175 million, driven primarily by its divestment from its life insurance business in a move to ‘derisk’ the company.
Both companies’ annual reports show they have suffered losses while trying to clean up their reputations following the 2018 Hayne banking inquiry.
CBA has already taken a hefty $1.2 billion hit related to findings by the Hayne inquiry.
The nation’s largest lender booked $918 million in customer remediation expenses, and an additional $358 million for risk and compliance programs.
The addition of 600 risk and compliance staff, plus extra staff for remediation programs, pushed CBA’s operating expenses up by 2.5 per cent to $11.37 billion.
Overall, the bank’s risk and compliance-related spending was a whopping 64 per cent of its total investment in the 2019 financial year, up from 50 per cent last year.
“The key takeaways … are we’re making very good progress on becoming a simpler and better bank,” CBA chief executive Matt Comyn said.
The bank held its final dividend at $2.31 per share, fully franked.
Mr Comyn said the Australian economy remained subdued but noted an improvement in the housing market, including improved clearance rates, stabilisation of prices in Sydney and Melbourne, and slightly higher housing credit growth.
“Ultimately, household growth will be key, as will the links to consumer and business sentiment in the coming years,” he said.
CBA has already dramatically reduced its exposure to financial advice, announcing its exit from the last of its aligned financial advice businesses.
It will stop providing licensee services through Financial Wisdom by June and will help it close.
The bank has also announced its entry into the ‘buy now, pay later’ sector by pouring $US100 million into a partnership with Swedish fintech Klarna Holding AB.
Klarna is valued at $US5.5 billion and has 60 million customers and is expected to help CBA rival Afterpay and ZipCo in Australia and New Zealand.
CBA’s full-year profit fell 4.7 per cent to $8.49 billion.
Suncorp, meanwhile, managed to lift its full-year cash profit despite suffering a decrease in its net profit after tax.
The bank and insurer will hand another $506 million back to shareholders from the sale of its life insurance business.
It has already paid out an 8 per cent special divided after selling its life unit to Japan’s TAL Dai-ichi Life. It also announced an extra 39 cents per share capital return for October 24 and a related share consolidation.