CBA profits up amid outflows and unrest

By Craig Phillips

THE Commonwealth Bank of Australia (CBA) has attributed its 28 per cent rise in net profit for the financial year just ended to resurgent equity markets, improved general and life insurance, and a continued buoyant home lending market.

However, ongoing staffing issues relating to the group’s ‘Which new bank’ strategy and outflows from a number of its ‘legacy’ stand-alone investment offerings remain an issue for the group.

For CBA’s funds management business, underlying net profit after tax grew by 18 per cent to $274 million. However, this was dampened by outflows from its single manager retail products, as investors continue to ditch more traditional offerings in favour of master trusts and platforms.

The group’s funds under administration (FUA) grew to $110 billion, up 11 per cent on June 30, 2003, levels. Colonial FirstChoice more than doubled its assets under administration and recently surpassed $7 billion, while wholesale wrap provider Avanteos has FUA approaching $2 billion. International inflows also led to a 32 per cent surge over the period.

These success stories would have boosted the bank further had they not predominantly offset outflows from other areas as the market continues to lose its appetite for stand-alone retail products.

“[These products] have continued to struggle to attract and retain customers as investors move away from traditional single entity managers to flexible master trust and wrap platforms,” the group says.

The net profit of the group’s three main business areas — banking, funds management and insurance — rose 13, 18 and 98 per cent respectively over the 12 months to June 30.

CBA’s banking net profit was up to $2.68 billion, while funds management and insurance increased to $274 and $128 million respectively.

Meanwhile, there have been ongoing differences between the bank and a number of its employees, leading staff to claim they have been excluded from participating in developing the ‘Which new bank’ strategy.