Narev humble as CBA makes $9.9b profit
Commonwealth Bank chief executive Ian Narev has tried to switch the focus from his bank's legal woes to the benefits Australians will enjoy as a result of the lender's record $9.9 billion annual profit.
CBA's cash profit rose 4.6 per cent on the 2015/16 year and was an eighth straight annual record, but Mr Narev appeared less bullish than in recent years as he faced up to allegations of breaches of money laundering laws by regulator AUSTRAC.
Mr Narev, who has had his 2017 bonus slashed following the allegations, admitted CBA had made mistakes.
But he also reeled off a list of the bank's achievements that include once more being Australia's biggest taxpayer.
Resisting the urge to attack the federal government bank levy - a policy popular with the public - Mr Narev said CBA's post-tax liability under the new measure was an annualised $258 million, on top of a $3.9 billion tax bill that he said was the equivalent of funding 260 schools or six hospitals.
"Commonwealth Bank has been under a very high degree of scrutiny these last few days - scrutiny that has not reflected well on the bank and has not reflected well on me personally," Mr Narev said.
Mr Narev said he was unable to go into specifics on the AUSTRAC matter but said CBA had fixed the IT issue that led to the alleged breaches and was investigating further.
"We know that we've made mistakes," he said.
Mr Narev said CBA was trying to rebuild trust and raise standards - something it has recently had to do with the CommInsure unit it may now sell.
CBA confirmed it is in talks with third parties interested in buying CommInsure and NZ insurance business Sovereign.
The corporate watchdog this year cleared CommInsure of allegations its managers pressured doctors to alter medical opinions so it could deny claims, but said some practices were "out of step with community expectations".
But while CBA's reputation has suffered recently, its business remains strong.
It beat analyst expectations of a $9.8 billion cash profit for the 12 months to June 30 and declared a fully franked final dividend of $2.30 per share, for a full-year payout of $4.29.
UBS analyst Jon Mott said the result was "slightly ahead of expectations with very few surprises, likely just as CBA would like it".
CBA also introduced a discounted dividend reinvestment program, which should help it build capital reserves to help meet Australian Prudential Regulatory Authority "unquestionably strong" requirements.
Loan rate increases in response to regulatory intervention in the home loan market should benefit CBA in the first half of 2018 but higher funding costs and competition for customers more than offset any gains in 2017, pushing net interest margin down 0.03 percentage points to 2.11 per cent.
However, Mr Narev said the bank would comfortably meet the APRA requirement for interest-only lending to comprise no more than 30 per cent of new mortgages.
CBA shares closed 46 cents, or 0.6 per cent, higher at $81.11 on Wednesday.
CBA CONTINUES RECORD PROFIT RUN
* Cash profit up 4.6pct to $9.88b
* Net profit up 7.6pct to $9.93b
* Revenue up 5pct to $26b
* Final dividend up 8 cents to $2.30 per share, fully franked
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