ASIC may be about to sue Commonwealth Bank of Australia (ASX: CBA), is it a buy at the current share price?
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.
ASIC Could Soon Sue CBA
The corporate regulator, ASIC (Australian Securities and Investments Commission), is getting closer to starting a case against Commonwealth Bank and its board on allegations that the bank and directors breached duties and continuous disclosure requirements, according to Australian Financial Review reports.
Some of the officials being questioned (or has plans to be questioned) by ASIC include Chairman Catherine Livingstone and the former CEO Ian Narev.
The AFR quoted a CBA spokesman saying: “CBA continues to engage with ASIC regarding a number of matters and responds to requests made by the regulator. We won’t be commenting on any individual matter.”
With the regulators still feeling the heat of the words in the Royal Commission report that they were too lenient and didn’t launch legal cases enough, ASIC is looking to get on the front foot against Commonwealth Bank here for its response to the money laundering issues regarding failures to disclose nor responding adequately.
Commonwealth Bank may have already paid a $700 million civil penalty to AUSTRAC, but the response to the issues seem to imply that ASIC thinks it has a case against the bank as well.
Is CBA a buy?
Who knows when the bad news is going to stop for CBA? There are threats of class actions against the bank, regulators want the banks to hold more capital, the Australian housing market is falling and there is growing online-only competition.
Despite the large fully franked dividend yield of 5.8%, I don’t think CBA shares are a buy today because of all of the potential short term negatives that are on the horizon. If you want shares with proven returns then I’d consider the ASX shares in the free report below.
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