More red ink for the banks from the royal commission disclosures and associated scandals.
In the latest case yesterday it was the Commonwealth Bank which revealed a new $350 million impact to its December 31 half-year earnings from a series of new costs.
The bottom line is an estimated $220 million-plus hit to earnings or around 2% of profits which the CBA reveals its interim results next February.
CBA said its December half result would include a new $100 million provision for higher-than-expected costs from its financial crimes compliance program – which was launched after the Austrac anti-money laundering scandal.
The provision would also cover other ongoing compliance and remediation schemes, CBA said in a statement to the ASX after trading had ended for the day.
CBA shares rose 0.2% to $68.43, as the wider ASX200 rose 0.4%.
The post-trading statement yesterday will see the shares come under pressure today – when the Westpac AGM could see that bank’s remuneration report take a strike from upset shareholders.
On top of the high compliance costs, the CBA said will set aside $200 million as a provision for historical problems in its wealth management and mortgage broking businesses, which it plans to de-merge in a sharemarket float in late 2019.
CBA said the $200 million provision would cover past “issues,” including compensation to customers who were charged financial advice fees without any service being provided, which has been a key focus of the banking royal commission.
“This is in addition to the $270 million in compensation (including interest) already paid by CBA to customers who were provided with poor quality advice or charged fees where service was not provided “ as the CBA reported in October.
It also warned of an additional $55 million in separation costs from the sale of the Comminsure business, on top of $194 million in separation costs it took for year to June 2018.
CBA also said its results would recognise a $144 million provision for the transaction costs linked with the demerger of its wealth and broking business, and these costs would be classified as non-cash items from discontinued operations.
Partly offsetting the new provisions, CBA said its results would recognise a $135 million benefit from professional indemnity insurance recoveries related to civil penalty and legal costs in 2018.
The fresh round of provisions comes after all of the big four banks’ profits were hit by hundreds of millions of dollars in compensation in 2018. On top of this companies such as IOOF, AMP, Freedom Insurance Group and Bank of Queensland have felt the financial impact of disclosures from the commission. These costs have been direct, and indirect.
