The Commonwealth Bank of Australia (ASX: CBA) share price could be hit today after announcing additional Royal Commission costs.

Commonwealth Bank of Australia or CBA is Australia’s largest bank, with commanding market share of the mortgages (24%), credit cards (27%) and personal lending markets. It has 16.1 million customers, 14.1 million are in Australia. It is entrenched in the Australian payments ecosystem and financial marketplace.

CBA’s new costs

The Royal Commission has caused damage to CBA’s reputation and it’s damaging CBA’s bottom line more and more as time goes on.

Yesterday afternoon CBA announced the following:

Program and customer remediation costs

The bank is adding a $100 million provision to cover the higher-than-expected total cost of the financial crime compliance Program of Action and other ongoing compliance & remediation programs.

Indemnity provision

A sum of $200 million will be held as an indemnity provision for CBA’s wealth management and mortgage broking business for historical remediation and service fee issues.

Transaction and separation costs 

The sale of CFSGAM is going to create a $1.5 billion post-tax gain net of transaction costs. CBA said it will recognise transaction & separation costs of $144 million.

It will also recognise a further $55 million for transaction and separation costs in relation to the sale of Comminsure Life, which is in addition to the $194 million previously recognised.

Insurance recoveries

Fortunately, it wasn’t all bad news for CBA shareholders.

The bank said it has received a total of $135 million thanks to professional indemnity insurance recoveries related to the civil penalty and legal costs experienced in FY18. This will be recognised by CBA as a benefit within operating expenses.

Is the CBA share price a buy?

The CBA share price has fallen around 15% since the start of 2018. The Royal Commission (and underlying issues) have caused a lot of damage to CBA shareholders and CBA employees.

It’s currently offering a fully franked dividend yield of 6.3%. This is an attractive dividend yield, but only if CBA keeps paying the same dividend.

All of these costs and the housing market could cause an inescapable hit to profit and the dividend.

Therefore, it might be worth waiting until the entire Royal Commission process and its subsequent consequences are known. Until then, it could be a better idea to look at proven profit growers like the 3 shares in the free report below.

Finding ASX shares offering exceptional long term growth and dividends over 3% is rare. Fortunately, the Rask Group's top expert investment analyst has released a FREE investing report which reveals proven ASX shares.

These three companies have proven themselves to be reliable dividend + growth shares over a decade. Click here to get instant access to his report.

Past performance is not indicative of future performance but as he says in his report, there are many reasons to keep a close watch on these 3 shares in 2019 and beyond.

Absolutely no credit card details or payment required.


Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).