Record fine hits CBA’s profit

COMMONWEALTH Bank has posted a drop in annual cash profit to $9.23 billion, hit by a $700 million fine after the nation’s biggest bank broke anti-money-laundering laws.

The profit drop was primarily due to the $700 million penalty paid to AUSTRAC, the largest in Australian corporate history, after CBA admitted to 53,700 breaches of antimoney-laundering and counter-terrorism funding laws.

The bank was also hit by $155 million in costs relating to the banking royal commission.

CBA chief executive Matt Comyn said it has been a “difficult” 12 months, but the bank’s business fundamentals remained strong.

“We got some things wrong. We have made mistakes,” Mr Comyn said in a statement.

“We absolutely need to make sure we do not make them again.”

Mr Comyn, who took the helm from Ian Narev four months ago, said the bank was simplifying its portfolio, operating model and processes to improve its performance.

CBA is splitting with its wealth management and mortgage broking businesses following a series of industry scandals.

The anti-money-laundering scandal led to Mr Narev’s departure as CEO.

CBA’s financial performance was affected by a 14 per cent drop in cash profit at its institutional banking and markets division to $1.12 billion for the year ended June 30, due to a slump in trading revenue.

Citi analysts said CBA’s cash profit result was slightly below consensus estimates, but was unlikely to put too much pressure on the recent share price rally.

“A lack of lending growth, continued NIM (net interest margin) headwinds and no discernible slowing in underlying cost growth is likely to keep any share price rises in check,” Citi said in a note.

CBA’s other divisions all delivered cash profit growth, with its retail banking services unit – which accounts for more than half of its profit – posting a 5 per cent rise to $5.19 billion.

Its business and private banking unit reported a 4 per cent rise to $1.88 billion, while its Bankwest subsidiary – which is in the process of closing 29 branches along Australia’s east coast – reported an 18 per cent rise to $681 million.