The Commonwealth Bank is now, officially, the unkillable monster of Australian capitalism.
Despite a royal commission, scandal after scandal, record low interest rates and a dramatically tightened regulatory environment, the CBA is going from strength to strength.
Yesterday, driven by a $4.47 billion cash profit earned in the six months to December, its share rose 4% to a near-five year high, at more than $88 — a far cry from the depths of the royal commission in 2018 when they briefly fell below $66.
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The CBA now has a market value of $149 billion, just ahead of pharmaceutical giant CSL with $147 billion.
There were many in the finance business, in the market, and among investors who thought that the bank would be badly damaged by the combination of the Hayne royal commission and the bad publicity flowing from it.
That’s not to mention the AUSTRAC money laundering scandal, the regulatory aftermath of the royal commission (which the Financial Review claims will undermine the stability of the big banks…) and the government’s Banking Executive Accountability Regime regulations including a banking profits tax.
And then there were the three interest rate cuts last year from the Reserve Bank which were supposed to make life more miserable for the banks. The CBA’s net interest margin instead rose 0.1% to 2.11% in the half year.
That wasn’t supposed to happen, but it and other lenders ate some of the 0.25% rate cut from the RBA in October, while the government whined but did nothing.
As for all those “fintechs” that we’re constantly told are about to disrupt financial services, their impact is nowhere to be seen.
CBA’s competitors have not fared so well. Westpac is still coming to grips with its own money laundering crisis, one vastly bigger and uglier than the CBA’s.
ANZ is running hard to stand still and NAB is under new management but yet to make significant changes from its new CEO.
Share prices tell the story: CBA is up more than 19% this year, ANZ is up a more modest 6.9% and the NAB is up 6%. Westpac shares have fallen 4.25%. That’s in a broader stockmarket up around 6%.
Whatever you think of the CBA, if your super fund has heavy exposure to it, that’s good news.
But some big fund managers — such as Australian Foundation Investment Co and its stablemate Mirrabooka Investments — sold off much of the bank shares in the past 18 months to three years because they saw a weak future for them and stronger outlooks for industrial stocks.
So far this year the CBA and its loyal shareholders are laughing.
The royal commission, more regulation and taxes and reputational damage have turned out to be just temporary blips for Australia’s biggest bank.