Commonwealth Bank's half-year profit has fallen 1.9 per cent to A$4.735 billion. Picture / AAP
Commonwealth Bank's half-year profit has fallen 1.9 per cent to A$4.735 billion. Picture / AAP
Commonwealth Bank's half-year profit has fallen 1.9 per cent to A$4.735 billion ($5.1b) after Australia's largest bank set aside cash for potential penalties in its Federal Court tussle with AUSTRAC.
CBA, reporting its final set of results under outgoing chief executive Ian Narev, has made a A$375 million provision for penalties that could result from AUSTRAC's allegations of money-laundering and terrorism-funding law breaches.
It also made a A$200m provision for what it said were "currently known" regulatory, compliance and remediation costs, which include the banking Royal Commission.
We have focused a great deal of effort on fixing our mistakes, and becoming a better bank.
New Zealander Narev has led CBA since taking charge in 2011.
"We have focused a great deal of effort on fixing our mistakes, and becoming a better bank," Narev said.
"We recognise, and regret, that these costs arise from our failure to meet some standards that we should have."
Narev said the A$375m provision was a reliable estimate of the potential civil penalty related to the Australian Transaction Reports and Analysis Centre allegations that CBA breached reporting rules on more than 53,000 potentially suspicious transactions.
Analysts have estimated the cost could be in the region of A$1b.
Pro forma underlying cash profit excluding the provision rose 5.8 per cent to A$5.11b — narrowly missing analyst expectations of A$5.2b — and the bank lifted its interim dividend A1c to A$2.00.
Statutory profit for the six months to December 31 was flat at A$4.906b, while cash profit, including the life insurance business that CBA has agreed to sell to AIA for A$3.8b, dropped 0.7 per cent to A$4.871b.
Outgoing Kiwi chief executive Ian Narev. Photo / AAP
Net interest margin rose 0.06 percentage points over the half year to 2.16 per cent, helped by mortgage repricing to help sway borrowers away from interest-only loans.
Owner-occupier lending grew 7.5 per cent in the 12 months to December 31, while investor lending inched up just 0.5 per cent in the same period as APRA limits on riskier loans continued to take effect.
CBA also trimmed its exposure to apartment development amid widespread concern of oversupply to A$4.06b, down from A$4.51b in the prior half and from A$5.24b a year earlier.
Narev, who retires in April, said CBA remained positive about Australia's economic prospects but warned about continued market volatility that could affect the country — and the bank under his successor, Matt Comyn.
"Market volatility remains a risk given ongoing global uncertainty as to the pace and extent of rate rises," Narev said.
"Market movements over recent days highlight this risk."
