A week after failing to pass on the Reserve Bank’s full rate cut to mortgage holders, Commonwealth Bank is set to post a huge profit.
The nation’s biggest lender will announce its full-year earnings on Wednesday, with analysts expecting a $9.5 billion profit, a record for Australia’s largest bank.
It is forecast to hand shareholders a $2.22 final payment, flat on last year as earning per share growth has been curtailed by the $5 billion capital raising last year.
But the size of its profit result suggests another political debate is around the corner.
While shareholders will applaud the result, borrowers may not.
CBA was accused by federal politicians of putting shareholders before customers as a result. The bank last week said it would reduce mortgage rates by 0.13 percentage points, half of the RBA’s 0.25 recommendation.
Commonwealth Bank and the other three big banks were strongly criticised by the Prime Minister last week for not passing on the full rate rate cut delivered by the RBA at its August meeting.
“They operate with a very substantial social licence and they owe it to the Australian people and their customers to explain fully and comprehensively why they have not passed on the full rate cut and they must do so,” he said.
“It’s not my job to manage the banks or tell them how to manage different products because they’ve all got different risk profiles and so forth, but it is absolutely clear that they have made a conscious decision not to pass on the full extent of the rate cut, and they should have done that.”
After Mr Turnbull announced on Thursday that the big banks would front the House of Representatives standing committee on economics to explain their interest rate levels.
The Prime Minister described his decision as driving “some cultural change” and said the major banks would have to appear before the committee at least once a year, thereby creating a “regular and permanent method of accountability and transparency” for them.
It reignited the debate about a royal commission into the banks proposed by the ALP, which said the moves by Mr Turnbull were window dressing.
“There is nothing Mr Turnbull won’t do to protect the big banks from a royal commission,” said ALP leader Bill Shorten.
“After giving them a $7 billion tax cut, he’s now inviting them to lunch in Canberra once a year so he can wag his finger at them.
“This is a friendly catch-up, not an investigation.”