Commonwealth Bank of Australia (ASX: CBA) has provided a remediation and demerger update for its wealth management and mortgage broking business.
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.
Here’s What CBA Announced
Last week Commonwealth Bank released its full response to implementing the recommendations from the Royal Commission. The bank said it is prioritising the implementation, refunding customers and re-mediating past issues.
Due to this, Commonwealth Bank has suspended preparations for the demerger in order to support the focus on the above priorities. However, the bank is committed to exiting its wealth management and mortgage broking business.
CBA’s $1.46 Billion Bill
Commonwealth Bank has spent or provisioned a total of $1.46 billion to address issues over the past few years, including $1.215 billion relating to the wealth management businesses.
Approximately $610 million has already been paid to customers or provisioned for refunds for a number of different issues including fees for no service.
There has been a further $650 million in program costs and internal process improvements.
The final $200 million is for an indemnity provision for wealth management-related remediation issues and program costs, including ongoing service fees charged by aligned advisors.
Are CBA shares a buy?
There doesn’t seem to be an end to the current problems facing the bank. The customer refunds continue and there may be further problems if a serious class action goes ahead.
Commonwealth Bank might be the highest quality bank compared to National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ), but Westpac and NAB might be better choices for their larger dividend yields.
In any case, I think there are better shares on the ASX than CBA, particularly with Australia’s house prices still falling.
3 Proven ASX Shares That Could Be Better Picks Than CBA
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