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The first of the big four banks has released its half-yearly results following the royal commission final report released on Monday.
The Commonwealth Bank of Australia has reported a 6 per cent fall in its net profit, after being hit by hefty fines for misconduct and a slowdown in the housing market.
The bank’s cash profits for that period were up 1.7 per cent to $4.68 billion compared to the prior corresponding period.
CBA was slugged with a $700 million penalty following Federal Court proceedings last year relating to serious breaches of anti-money laundering and counter-terrorism financing.
The fine is the largest ever civil penalty in Australian corporate history. It’s clear from the latest results the bank has taken a hit from the compliance and compensation costs.
Aussie banks scaled a 10-year peak on the ASX yesterday, rallying $19 billion in one day, as shareholders sighed in relief following the soft blow from Hayne’s royal commission report.
Are the banks a buy?
Business Breakfast host James Daggar-Nixon discussed the results with guests Mathan Somasundaram from Blue Ocean Equities and Gaurav Sodhi from Intelligent Investor, and whether CBA and other bank shares are a buy or sell for investors.
Sodhi said the royal commission has forced him to take a deep dive into the banks, where normally banks were not top of his list for investment.
“After going through the banks in a lot of detail, it is clear the CBA is miles ahead of any other bank in Australia,” Sodhi said.
For investors wanting to have banking exposure in their stock portfolio, Sodhi said CBA is the best option.
“And for goodness sakes, NAB is just the worst.
“A 20-year record on NAB is just atrocious.
“We tend to assume that large profitable businesses are just going to be institutionally well run, and management may not matter as much and these are good businesses,” Sodhi said, referring to the fact NAB CEO Andrew Thorburn and chair Ken Henry were both singled out and received a scathing attack in Hayne’s report.
The banking royal commission is a good excuse to compare banks and look at a long track record of these companies, Sodhi said.
“There is a world of difference between a CBA and a NAB. They have actually swapped places. NAB used to be the market leader and be super profitable. It’s actually reversed now. I think if you must have banking exposure, CBA is clearly the best.
‘I’m not a buy myself, I’m more concerned about the domestic economy. But as a concensus trade, CBA is better than the others,” Sodhi said.
Watch the video for the analysts’ full analysis.