In its latest financial update, the Commonwealth Bank of Australia (CBA) has revealed that it expects to absorb a $169 million hit to its cash earnings, off the back of its loss of revenue streams and incursion of costs linked to its disposal of several of its subsidiaries.
The reported costs include:
- Losses on disposals of businesses of $74 million (post-tax), which include transaction and separation costs related to the sale of CFSGAM ($100 million post-tax) and CommInsure Life ($38 million post-tax)
- The gain on disposal of Sovereign (+$113 million post-tax) and other expenses, including the loss on disposal of TymeDigital and project costs associated with the demerger of NewCo (mortgage broking and wealth businesses).
- Hedging and financial reporting volatility losses of $91 million (post-tax) mainly due to the depreciation of the Australian dollar against the New Zealand dollar.
Simplification of operating model
CBA has also announced changes to its financial reporting methods as part of its plan to simplify its operating model.
The changes are designed to “realign businesses across operating segments” and will result in changes to the presentation of the income statements and balance sheets of the affected divisions.
- The consolidation of CBA’s Australian retail businesses, with Bankwest now included within the Retail Banking Services (RBS) division and will no longer be separately disclosed.
- The small business banking segment has been transferred out of RBS to Business and Private Banking (BPB) in order to consolidate CBA’s business banking.
- Following the announcement of the demerger of NewCo and to consolidate CBA’s retail businesses, Commonwealth Financial Planning has been transferred out of Wealth Management (WM) to RBS.
- General Insurance has been placed under strategic review and transferred out of WM to RBS, while the review is underway.
CBA is scheduled to announce its interim financial results on 6 February 2019, hosted by CEO Matt Comyn and chief financial officer Alan Doherty.
The major bank previously revealed that it will fork out an additional $220 million in remediation costs associated with its mis-selling of insurance products, the demerger of its mortgage broking and wealth business, and the sale of its life insurance business.
[Related: CBA’s bottom line takes additional $220m hit]