Client compensation biggest drag on CBA profit

The Commonwealth Bank of Australia has released a record full-year cash profit of $9.14 billion, despite growing expenses associated with the remediation of financial planning clients, FOFA compliance and a profit drop in its wealth management arm.

In its 2015 results announcement, the bank revealed it had seen a 5 per cent surge in cash profit in line with analysts' expectations. At the same time, CBA launched a $5 billion capital raising in an effort to meet future requirements, including the change to average mortgage risk weights for Australian residential mortgages announced by APRA in July 2015.

Commenting on the result, CBA chief executive Ian Narev said: "This financial year saw all-time highs in retail customer satisfaction, with the group returning to the number one position at year-end, and ongoing high levels of customer satisfaction in our other businesses.

"As a result, our balance sheet continued to grow, and combined with ongoing margin discipline, this resulted in good levels of revenue growth given market conditions. We also maintained our focus on productivity, which is particularly important given increasing levels of regulatory and compliance costs," Mr Narev said.

Making provisions for the advice review program, FOFA requirements and "growing regulatory, compliance and remediation costs" was the major driver of expense growth, the bank said.

Wealth Management's cash net profit after tax for the full year ended 30 June 2015 was $650 million, a decrease of 6% on the prior year after excluding the contribution from the Property businesses exited in the prior year.

At the same time, funds management income was flat on a "headline" basis, at $1,938 million.

"Excluding the impact of property transactions and businesses from the comparative results, income increased 8 per cent, driven by a 14 per cent increase in average Funds Under Administration," the bank said.

Insurance income decreased by 3 per cent due to an "unusually large number of weather event claims during the year in New South Wales and Queensland".

Earnings per share (cash basis) were up 5 per cent to 560.8 cents and the bank will issue a fully-franked final dividend of $2.22 per share, taking total for the year to $4.20, up 5 per cent on the prior year.

Customer deposits were up $39 billion to $478 billion, representing 63 per cent of the group's total funding.

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