Commonwealth Bank of Australia (CBA) has taken the opportunity as part of announcing its 2021 full year results to highlight the company’s continued focus on investing in digital and technology capability.
For the period to 30 June 2021, CBA achieved nearly a 20% uplift in statutory after-tax net profit of AU$8.84 billion, while operating income remained steady hovering around AU$24 billion.
“The continuing strength of our businesses, combined with a focus on customer needs, digital engagement, and consistent operational excellence has contributed to a strong financial result this year,” CBA boss Matt Comyn told shareholders on Wednesday.
“We are focused on continuing to make progress on our more ambitious strategy — building tomorrow’s bank today for our customers. Reimagining banking through new products and partnerships that will support our customers and help build Australia’s future economy, while focused on disciplined execution and investing in digital and technology capability.”
The company detailed it invested some AU$1.8 billion towards achieving that “ambitious strategy” during the year, an increase of AU$372 million or 26% on the prior year. This was mainly driven by an AU$267 million increase in productivity and growth initiatives, which accounted for 32% of total investment spend. These initiatives included ongoing development of Commbank applications and digital channels; modernisation of its technology stack with further cloud migration; simplifying and automating manual back-end processes; and developing a self-service merchant portal and deploying additional smart payment device offering.
There are now 7.6 million digitally active customers, including more than 6.4 million Commbank app users, and 70% of Commbank transactions are made digitally, according to CBA.
Despite an increase in productivity and growth initiatives, investment in risk and compliance projects still accounted for the largest portion — of 46% — of total investment spend during the year. This included upgrading the bank’s anti-money laundering and counter-terrorism financing (AML/CTF) technology; enhancing its processes for monitoring, managing, reporting, and controlling financial crime; and improving protection against privacy breaches and compliance with new regulations such as open banking.
CBA’s continued investment in risk and compliance projects was part of completing works under the Australian Prudential Regulation Authority’s remedial action plan (RAP), saying previously it was looking at how it could use data “the right way” to restore customer trust.
“Three years ago, we set about improving governance, culture, and accountability across the bank through the Remedial Action Plan by implementing all of the recommendations in the Prudential Inquiry final report,” Comyn said.
“We know we won’t be judged by the completion of a plan, but by the extent to which we improve customer and risk outcomes. We’ve made substantial progress through the RAP and will now focus on ensuring the improvements made are sustained.
“The focus of the next phase of our Prudential Inquiry work includes monitoring the effectiveness of the changes made to ensure the outcomes of the RAP are sustained and continuously improved upon.”
On the total operating expenses front, there was a 3.3% increase to AU$11.4 billion. The bank attributed part of that increase to higher IT expenses related to infrastructure costs and cloud computing, which was offset by business simplification initiatives, and staff expenses increasing as more full-time staff, including more than 600 new engineers, were recruited to help the bank deliver its strategic priorities.
The black and yellow bank also announced on Wednesday an off-market buy-back of up to AU$6 billion of CBA shares, which Comyn described as the “most efficient and appropriate way to commence the return of surplus capital, as shareholders will benefit from a lower share count that will support return on equity and dividends per share”. Under the buy-back scheme, the board has agreed on a final dividend of AU$2 per share.
Comyn said as the bank continues to deliver sustainable returns to shareholders, it will continue to focus on delivering its digital strategy.
“We are prepared for a range of different economic scenarios and are well placed to support our customers … looking ahead, we anticipate ongoing economic impacts and earnings pressure from lower interest rates,” he said.
“We will continue to invest in the business to reinforce our product offering to our retail and business customers and extend our digital leadership. Through disciplined execution and our people’s care and commitment, we will continue to deliver for our customers, community and our shareholders as we build tomorrow’s bank today.”