Commonwealth Bank of Australia (ASX: CBA) shares are under the spotlight after the bank announced some impacts for the upcoming FY24 result.
CBA is the largest bank on the ASX and one of the biggest businesses in Australia.
FY24 result impacts
The bank announced to the ASX this morning a few items that are going to hurt its FY24 result.
Divestment of PT Bank Commonwealth
First, as part of its strategy to focus on its banking business in Australia and New Zealand, CBA has completed the sale of its 99% shareholding of its Indonesian banking subsidiary called PT Bank Commonwealth (PTBC) on 1 May 2024.
The ASX bank share reported this sale has resulted in a total non-cash loss of $298 million, after tax. Lower profit can hurt the CBA share price.
This includes a $133 million impairment loss on remeasurement of PTBC’s net assets to their actual “fair value” in the first half of FY24. An additional $100 million loss was recognised on completion of the sale in the second half of FY24, and $65 million of separation costs, of which $53 million was accounted for in the first half of FY24.
CBA noted that as PTBC does not constitute a major line of its business, the financial results of PTBC were treated as ‘continuing operations’ during the period. The sale is “broadly neutral” to the bank’s group common equity tier 1 (CET1) ratio – a measure of how safe the balance sheet is.
Other notable items
In the six months to 30 June 2024, CBA has accounted for $89 million of pre-tax provisions relating to costs associated with changes to the operating model of Bankwest.
Those changes include transitioning Bankwest to a digital bank and the transition of Bankwest business banking to CBA.
CBA explained that the Bankwest items will be excluded from the underlying operating expenses for the overall business so it can provide a transparent view of the business’ performance. Operating expenses will be presented both on an underlying and headline basis.
Final thoughts on the CBA share price
The business is expected to report its full-year result on 14 August 2024.
Realistically, these costs aren’t significant for a business that’s going to making many billions of dollars of profit in FY24 and beyond.
However, I wouldn’t call the ASX bank share a buy with its high price/earnings ratio (p/e ratio), it looks expensive compared to other banks. There are plenty of other ASX dividend shares I’d rather buy first.
