The Commonwealth Bank of Australia (ASX: CBA) share price could be a mover today on reports that it has a secret plan to save $2 billion of 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.
What Is CBA Thinking About?
According to The Australian reporting, the country’s biggest bank has a secret plan to cut its workforce significantly to save on costs.
The CBA CEO Matt Comyn is supposedly looking at cutting “more than” 10,000 employees, which would save the bank around $2 billion of annual costs. Although if CBA were to do this it would likely come with significant redundancy costs at the start.
CBA isn’t the only bank that is targeting job cuts to reduce its expenses, National Australia Bank Ltd (ASX: NAB) is currently going through the process of cutting 6,000 jobs to save a lot of costs. Indeed, non-bank Telstra Corporation Ltd (ASX: TLS) is also cutting a large amount of stuff.
Being more efficient with your workforce is an understandable goal, but it does speak of the fact that the biggest businesses in Australia are looking at expenses rather than income to grow profit.
In Commonwealth Bank’s half year report the operating income declined 1.9% to $12.4 billion, the net interest margin (NIM) dropped to 2.1% from 2.16%.
Is The CBA Share Price A Buy?
The CBA share price is currently much lower than it has been in previous years due to two key factors. The first is that the big banks are re-mediating customers to the tune of hundreds of million of dollars because of the issues raised in the Royal Commission.
The other issue is that house prices are falling each month, which raises the risk of bad debts and lowers credit growth. Until Australian dwelling values stop falling I don’t think now is the time to buy bank shares like CBA.
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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).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.