CBA value takes a dive

$25m fine, value slides for biggest lender

Investors stripped trouble-plagued Commonwealth Bank of $4 billion in value after the lender revealed a fine to the corporate cop and a rise in home loan arrears.

INVESTORS have rounded on the Commonwealth Bank, stripping more than $3.5 billion from its market value after it warned more home loan customers were falling behind on their repayments.

And the bank, Australia’s biggest, has agreed to fork out $25 million in fines and other penalties after conceding traders attempted to manipulate a key inter-bank lending rate.

Shares in the CBA fell 2.8 per cent – their biggest singlesession slide in almost three months – following the revelations yesterday, wiping $3.68 billion from its market value.

In a third-quarter trading update, the CBA revealed the proportion of customers falling behind on home loan repayments had climbed.

“There has been an uptick in home loan arrears, influenced by a small number of customers experiencing difficulties with rising essential costs and limited income growth,” the bank said in a statement.

The proportion of mortgage customers who were behind by 90 days or more rose to 0.65 per cent, up from 0.59 per cent just three months earlier, the CBA said.

At the end of 2015, fewer than 0.5 per cent of home loan customers were behind on their repayments by 90 days or more.

For the three months to March, the group’s net profit was about $2.3 billion, down from $2.6 billion in the same period a year earlier.

The bank said there had been a “slight decline” in its net interest margin – a key measure of profitability – as many customers switched from interest-only loans to loans with principal-and-interest repayments.

Operating expenses also rose “due to increased provisions for regulatory-compliance project spend”, the bank said.

It, like all the big banks, has been the subject of intense scrutiny amid the banking royal commission in recent months, and has also been targeted by regulators for its role in a series of scandals in recent years.

The bank announced yesterday that it was paying $25 million to settle legal action – brought by the Australian Securities and Investments Commission – for attempts to rig the Bank Bill Swap Rate, also known as the BBSW.