Australia's biggest bank, the Commonwealth, posted record annual profits today, as its chief executive faces calls to resign in the wake of allegations the lender breached money laundering and terrorism financing laws.
Australia’s biggest bank, the Commonwealth, posted record annual profits today, as its chief executive faces calls to resign in the wake of allegations the lender breached money laundering and terrorism financing laws. The Commonwealth Bank of Australia’s profits are closely watched as it is the nation’s top lender and the results provide a guidance on the health of the economy as it transitions away from a dependence on mining.
The bank, the country’s largest firm by market capitalisation, posted a 7.6 percent jump in annual net profit to a record 9.93 billion Australian dollar ($7.86 billion) for the year to June 30. Cash profits, which are its preferred earnings measure, also hit a new high, rising 4.6 per cent to 9.88 billion dollar from the previous year, beating market expectations.
The results will be a boost for Commonwealth after the country’s financial intelligence agency AUSTRAC said it was taking civil action against CBA for alleged “serious and systemic non-compliance” of laundering and terrorism financing laws. The bank yesterday said it would slash pay and bonuses of top executives, but backed chief executive Ian Narev despite calls for him to step down. “Commonwealth Bank’s performance this year has again contributed to the financial wellbeing of our customers, shareholders, our people and the Australian economy,” Narev said in a statement today. “This is the result of our consistent focus on customer satisfaction, innovation and financial strength.”
Banking income rose by 4.3 per cent due to growth in home lending, business lending and deposit volumes, while bad debt costs fell by 12.8 per cent to 1.1 billion dollar. Shareholders were rewarded with a final dividend of 4.29 dollar per share, up two percent from the prior period. “Overall, it was quite a good result with very few issues,” Regal Funds Management’s senior analyst Omkar Joshi said. “The modest beat to expectations was driven by continued low bad debts.”
Shares in CBA rose 1.04 percent to 81.48 dollar in mid- day Sydney trade today. The bank is accused of failing to provide AUSTRAC quickly enough with 53,506 reports for cash transactions of 10,000 dollar or more at its cash deposit machines between November 2012 and September 2015, with a total value of 624.7 million dollar. It also did not report suspicious transactions on time, or at all, that totalled 77 million dollar, and did not monitor customers or manage the risk even after becoming aware of suspected money laundering, AUSTRAC claimed.
Each breach could attract 18 million dollar in fines, potentially running into the billions of dollars. Chair Catherine Livingstone said today the board had “no reason to believe that the (AUSTRAC) allegations arose from deliberate or unethical behaviour, or any commercial motive”. She added that the bank had spent 125 million dollar on strengthening its policies and processes against money laundering, including upgrading financial crime technology and vetting customers.
Narev has admitted “mistakes were made” but told The Australian newspaper Monday he was “focused on doing my job and am not spending any time on thinking about my own position”. The bank said in the profit report today it was reviewing the allegations and was limited in what it could comment on the case given the ongoing court proceedings. “At this time it is not possible to reliably estimate the possible financial effect on the group,” CBA added.