Advice scandal drags on Commbank result
The advice scandals which have beset the Commonwealth Bank have taken their toll on the Wealth division's balance sheet, with the advice remediation processes contributing to a six per cent decline in the division's cash net profit to $650 million.
In fact that fall-out from the Commonwealth Bank's planning problems clouded an otherwise strong full-year result for the company which reported a five per cent increase in statutory net profit after tax of $9.06 million and a fully franked final dividend of $2.22 per share.
Commenting on the result, Commonwealth Bank chief executive, Ian Narev referenced the execution of a simple, consistent strategy and noted all-time highs in retail customer satisfaction.
However in the commentary dealing with the key components of the result, the bank's announcement to the Australian Securities Exchange (ASX) noted that expense growth was higher, increasing five per cent on the prior year and that the major driver had been "growing regulatory compliance and remediation costs", including those associated with a number of legislative reforms such as Future of Financial Advice and "provisioning for the costs of the Advice Review program and ongoing regulatory engagement".
The results announcement of the Wealth Division noted that "strong growth in funds management income was offset by the impact of further provisioning for customer remediation in advice and lower insurance income due to a number of weather events".
It said the Open Advice Review program had closed for expressions of interest on 3 July and that total expressions and completed registration forms received were over 23,000 and 7,000 respectively.
The Wealth Division analysis also noted that funds management margins declined three basis points due to lower advice revenue, continued run-off in the legacy investment business, and the impact of provisioning for customer remediation.
Looking at the insurance business, it said insurance income was 13 per cent down on the prior year to $503 million, albeit that Wholesale Life Insurance income increased strongly on the prior year as a result of repricing and reduced reserve strengthening.
However it said retail life insurance income decreased three per cent on the prior year, impacted by poorer claims experience and lower sales, partly offset by an improvement in lapse rates.
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