CBA CEO denies plans for ‘large-scale’ branch culling

Speaking to investors following the release of the Commonwealth Bank of Australia (CBA’s) third-quarter results for the 2019 financial year (3Q19), CEO Matt Comyn rejected reports that the bank was planning to cull 300 of its branches and cut 10,000 jobs in a bid to reduce costs by approximately $2 billion.

“We maintain the largest branch network [and] we believe that it’s an important strategic asset,” he said.

Mr Comyn acknowledged that CBA’s branch network may be subject to closures but claimed that such a reduction would be reflective of the shift in market preferences and denied suggestions that the bank has plans to significantly reduce its physical footprint as part of a cost-saving strategy.

“Clearly, over time, both the number of branches and the size of those branches has reduced and is likely to continue to reduce, but certainty we’re not contemplating any large-scale branch reduction in the near term,” he said.

“If you look at the way we’ve managed our physical footprint over the last few years, it’s been fairly modest in terms of those branch reductions and really in line with what we’re seeing in terms of customer preferences changing.”

The chief executive also said that the branch network continues to play an essential role in driving new business to CBA.

“We believe the branch network enables us to gather deposits very well across the entire retail and business bank, and we also think it’s a critical element of being able to serve our customers directly for their home loan needs,” Mr Comyn added.

In contrast, ANZ CEO Shayne Elliott told the financial services royal commission in November that he believed the branch network was “not terribly efficient” at originating home loans, and noted the utility of the broker channel.

“[I] would say for ANZ – and we may be different from our peer group – [less] than a third of home loans are originated through a branch,” he said.

“[Fifty-five] per cent come through brokers and another roughly 15 per cent come through our mobile banking network.”

According to the latest available data, CBA’s proprietary channel originated 60 per cent of its home loan flows, compared to 43 per cent of ANZ’s mortgage flows originated by its branch network.  

CBA reports $714m remediation sting   

In its 3Q19 financial results, CBA has reported a 28 per cent fall in its cash net profit after tax (NPAT), from a quarterly average of $2.4 billion to $1.7 billion.

The drop was attributable to 9 per cent increase in operating expenses, which included $714 million in customer remediation costs, and a 4 per cent decline in operating income.

“We are committed to improving outcomes for our customers, addressing past failings and compensating customers quickly,” Mr Comyn said.

“The additional $714 million in pre-tax customer remediation provisions taken in the quarter demonstrates this commitment and builds on a range of other initiatives to achieve better customer outcomes, including removing and reducing fees for our customers.”

Despite the earnings decline, the CBA CEO said the bank remains “well-placed in a challenging environment”, and pointed to volume growth in CBA’s core businesses, “a strong capital position” and “balance sheet strength”.

However, the major lender reported weaker quarter-on-quarter growth via its home lending, business lending and household deposit channels.  

Home lending volumes dropped from a 3.2 per cent increase in 3Q18 to 2.5 per cent over 3Q19, while business lending volumes were down from 2.8 per cent in 3Q18 to 2.3 per cent.

Household deposit volumes fell from an increase of 3.4 per cent in the previous corresponding period to 2.9 per cent in 3Q19.

CBA director to retire

The Commonwealth Bank has also announced that non-executive director Sir David Higgins will retire from the bank’s board, effective 31 December 2019.

Sir Higgins joined CBA in 2014 and has served as chairman of CBA’s remuneration committee and as a member of risk committee.

CBA chairman Catherine Livingstone thanked the outgoing board member for his service to the group.

“I would like to thank Sir David for his service, commitment and contribution to the board,” Ms Livingstone said.

According to CBA, Mr Higgin’s decision to retire was reflective of the time commitment required for the board and travelling to Australia when considered with his portfolio of directorships from 1 January 2020.

[Related: Suncorp posts 3Q mortgage contraction]