We have the perfect example of the resilience of our big banks, especially the biggest, the Commonwealth.
After months of bad publicity, pressure from shareholders, regulators and the public, not to mention customers, the bank has ridden out the crisis to emerge financially undamaged.
And shareholders will benefit.
In fact Commonwealth Bank shareholders will get a small lift in interim dividend of one cent a share (to a new high of $2 a share), despite the bank revealing the estimated cost of the Austrac money laundering case and remediation expenses totalling $575 million.
The $575 million change against profits is made up of a $375 million estimated cost to settle the Austrac, which the bank says will be non tax deductible, and a further $200 million to fix the problems that have already emerged, and those to be found in the continuing panel of inquiry commissioned by the lead regulator, APRA. That panel is due to report in April.
For that reason, and various other changes (suc as the sale of Comminsure) and sale of a stake in Visa and the Aussie Home Loans transation, the bank’s reported profit is hardto nail down.
The bank said there was a 1.9% fall in cash profits to $4.73 billion, while the statutory profit was up 1.2% at $4.895 billon. Operating profit was steady on $7.348 billion for the half (These figures are after all the various changes).
Revenue rose 2% to $21.263 billion.
But the figure that will have analysts and shareholders wetting their pants is a 6 points rise in the bank’s net interest margin (NIM) to 2.16%. That is the first rise in the NIM for quite a while and tells us the recent rise in fixed interest loan rates has been very profitable for the CBA (a point made by the Productivity Commission in its report into banking competition this morning as well (http://www.pc.gov.au/inquiries/current/financial-system/draft/financial-system-draft-overview.pdf).