CBA (ASX: CBA) has acknowledged that it’s being sued, is it time to sell shares?
What is CBA?
CBA is Australia’s largest bank, with commanding market share of 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 is being sued
This afternoon the major ASX bank acknowledged and announced to the market that class action proceedings have been filed against it by Slater and Gordon (ASX: SGH
) in the Federal Court of Australia.
The proceedings have also been brought against The Colonial Mutual Life Assurance Society.
The Class action relates to consumer credit insurance for credit cards and personal loans that were sold between 1 January 2010 and 7 March 2018.
CBA said it is reviewing the claim and will provide any update as required.
Time to sell shares?
The major ASX banks have been under a lot of scrutiny ever since the Hayne Royal Commission. This is the type of thing that could continue to nibble at bank earnings for years to come, like in the UK with the PPI scandal.
I don’t think this class action individually will be enough of a reason to sell CBA shares. COVID-19 is more pressing right now. But CBA has had to pay hundreds of millions of dollars in customer remediation.
COVID-19 has caused a lot of economic pain so far. I’m cautious about buying bank shares right now when there is such a range of outcomes for this year. I’d prefer to buy something like Bubs (ASX: BUB).
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
