Despite the Commonwealth Bank’s advice compensation program and Suncorp’s life insurance losses, both companies have reported a strong yearly profit result.
The CBA posted a record profit of $8.631 billion, representing a 13% increase on 2013.
The banking group attributed the result to a range of factors, including:
- The continuing success of its customer focus strategy, retaining its number one position for customer satisfaction among Australian retail banking businesses
- An increase in wealth management earnings of 19%
- Investment in long-term growth through technology and productivity initiatives
However, the media was critical of the way the CBA made the announcement, avoiding any mention of the bank’s Open Advice Review compensation program in its press release and shareholder presentation. When the press conference was opened to questions, journalists challenged CBA CEO, Ian Narev, about whether he believed the bank had done enough to compensate those impacted by poor advice.
Mr Narev reiterated that the Group’s Open Advice Review would be overseen by an independent financial group (see: CBA Progresses Advice Compensation Measures) and that the costs of the program would not be material to the group’s results.
“We want to get through the review program as quickly as possible, but we also want to ensure this process is done properly and accurately,” Mr Narev said.
Victims of poor advice delivered by the CBA’s financial planning businesses also expressed their disappointment about the result.
Jan Braund, a former client of disgraced adviser, Don Nguyen, told the Sydney Morning Herald she thought the record profit was “obscene”.
‘‘These are the people who are supposed to look after the little people who collectively made that bank wealthy, they are the ones reaping the rewards and it has taken this amount of time for them to even think of the little people,” Ms Braund said.
Meanwhile, the Suncorp Group has reported a net profit after tax of $730 million for the year ending 30 June 2014.
The Group’s life insurance arm, Suncorp Life, recorded an underlying profit after tax of $84 million, which was down 30% on the previous year. Suncorp said the result was due primarily to its lower planned profit margins, which followed revised assumptions and increased reinsurance arrangements.
Direct new business sales were flat for the year but total life in-force premiums were up 8.5%. The result also included $50 million of claims and lapse experience losses. During the year, additional reinsurance reduced Life’s capital requirements by $207 million, contributing to the return of $535 million of capital from Suncorp Life to the Group.
Suncorp Chief Executive, Patrick Snowball, said the clear and consistent strategy and focus on simplification were reflected in the Group’s strong financial results in 2014.
“We’ve achieved significant milestones in simplifying our business and delivering ongoing cost savings. We’ve made appropriate investments in technology, data and business intelligence and we’ve taken the necessary measures to account for fundamental changes in the life insurance industry,” he said.
