Commonwealth Bank of Australia has seen its profit rise for the half on the back of the Royal Commission's final report being released, with the bank generating a cash net profit after tax (NPAT) of $4.67 billion in 1H19, up 1.7 per cent from 1H18.
However, across CBA’s various business units, there were mixed results in the profit margins on a continuing operations basis.
The results come as Commonwealth Bank experienced a surge in its share price, with it being at its highest point since August.
The bank also has reported increased spending into rectifying the issues brought up by the royal commission, with risk and compliance and remediation costs adding to operating expenses by $121 million.
Remediation and program costs rose to $1.46 billion as risk and compliance costs became a larger slice of CBA’s investment spend, coming to 64 per cent for 1H19 from 41 per cent in 1H18.
The costs included $580 million for advice review program costs, which involved future advice model and regulatory reform spending of $122 million.
CBA spent $245 million on remediation for its banking customers and $1.21 billion for its wealth division.
“There is much work ahead as we understand the implications and implement the recommendations of the royal commission,” Matt Comyn, CEO, CBA said.
“We have a clear mandate, a strong franchise and dedicated people. We are already making the necessary changes and will be a better bank as a result.”
The retail banking services segment, which includes Bankwest and Commonwealth Financial Planning, saw its cash NPAT drop by 8 per cent from the pcp, to $2.21 billion for the half, down from $2.41 billion.
Retail revenue fell by 4 per cent from the prior corresponding period.
In institutional banking & markets, NPAT was down by 5 per cent from the prior corresponding period, at $580 million, while revenue fell by 7 per cent.
Business and private banking experienced an increase of 3 per cent in its cash NPAT from 1H18, to $1.4 billion, while revenue had a slight rise of 1 per cent.
Under its continuing operations in wealth management, including Colonial First State and its aligned advice business of Financial Wisdom, Court Financial and CFP Pathways, the bank experienced average FUA growth, at $147 billion, up 5.7 per cent from 1H18.
NPAT for the continuing wealth businesses came to $136 million, an increase of 17.2 per cent from 1H18 while revenue increased by 5.8 per cent to $441 million.
Its discontinued business Colonial First State Global Asset Management saw a drop of 3.9 per cent to $211 billion for its average AUM, while revenue decreased by 8.3 per cent to $433 million for the half. CBA cited lower investment markets and performance fees.
CBA’s life insurance businesses, which were sold last year, saw its revenue fall by 47.6 per cent to $119 million.
Statutory net profit after tax for the group, including discontinued operations, came in at $4.59 billion for the half, a 6.3 per cent decrease from the prior corresponding period.
CBA’s operating income dropped by 1.9 per cent, to $12.4 billion from $12.6 billion a year ago.
EPS was 265.2 cents, up by 0.9 cents from the prior corresponding period and dividend per share remained flat, at $2.
CBA expects the demerger of NewCo, which includes the group’s continuing wealth management and mortgage broking businesses, to be complete later this year.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].