Australia's biggest bank, the Commonwealth, posted a slide in annual profits Wednesday, capping a tumultuous year for a troubled lender which has been rocked by scandals and board upheaval. The country's largest firm by market capitalisation reported Aus$9.37 billion (US$6.95 billion) in statutory net profit from continuing operations for the year to June 30, a four percent drop and its first annual fall since 2009.
Cash profits, its preferred earnings measure, also fell, down 4.8 percent to Aus$9.23 billion from the previous year and slightly below market expectations. The decline was mostly driven by a Aus$700 million penalty paid to financial intelligence agency AUSTRAC after it breached anti-money laundering laws, along with compliance and regulatory costs. Chief executive Matt Comyn, handing down his first annual results, admitted it had been a "difficult" 12 months.
"We got some things wrong. We have made mistakes. We absolutely need to make sure we do not make them again," he said, while insisting the bank remained in good shape. "Despite the challenges we have faced this year, the fundamentals of our business remained strong," he said. "We also continued to strengthen our balance sheet. This performance has supported a higher dividend for shareholders."
The bank, viewed as a bellwether for the industry due to its size, announced a final dividend of Aus$2.31, pushing its full-year shareholder payout to Aus$4.31 per share, up twwo cents on the previous year. Morgan Stanley said in a note the result was "satisfactory relative to expectations", and its share price was 2.54 percent higher in afternoon trade at Aus$74.74.
It has been a turbulent 12 months for the country's biggest mortgage provider, which saw former chief executive Ian Narev quit amid pressure from regulators over breaches of laws on money laundering. He was replaced by Comyn, who has since been on a drive to turn around the bank's battered reputation. In June, it agreed to pay a Aus$700 million fine - the largest civil penalty in Australian corporate history - to settle the laundering claims. It followed mediation between the Commonwealth and AUSTRAC, which had accused it of "serious and systemic non-compliance" of anti-money laundering laws more than 53,000 times.
In the aftermath, the Commonwealth replaced its senior leadership overseeing financial crimes and pumped millions of dollars into improving its systems.
The bank also admitted in May its traders engaged in "unconscionable" behaviour in the setting of a benchmark interest rate, and agreed to pay a Aus$25 million fine in a case brought against it by the corporate watchdog. All of Australia's banks - among the developed world's wealthiest - have been under increasing scrutiny amid allegations of suspect financial advice, life insurance and mortgage fraud and the rigging of benchmark interest rates.
The scandals led the government this year to launch a royal commission into misconduct in the finance industry, which is ongoing. Comyn said the bank was working to simplify its portfolio, operating model and processes to make the company "simpler, better" moving forward. "The result will be a more focused business managed with greater discipline to deliver sustainable returns at lower risk," he said.
The Commonwealth has been offloading non-core assets, announcing this year the sale of its Australian and New Zealand life insurance business to AIA for Aus$3.8 billion. It has also flagged the potential sale of its CommInsure general insurance business and foreshadowed the spinning off of its wealth management and mortgage-broking arms. On Wednesday it announced plans to sell its loss-making South African banking business.