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CBA full-year cash profit drops 4.7% YOY on higher remediation expenses

Commonwealth Bank of Australia's cash net profit after tax for the full year ended June 30 fell 4.7% year over year due to customer remediation fees, fee removals and risk and compliance costs.

The Australian bank reported cash profit after tax from continuing operations of A$8.49 billion, down from A$8.92 billion in the previous fiscal year. Basic EPS on a cash basis declined to A$4.808 from A$5.103.

On a statutory basis, which includes profit from discontinued operations, net profit after tax fell 8% year over year to A$8.57 billion from A$9.33 billion.

The S&P Global Market Intelligence consensus normalized EPS estimate for the year was A$4.78, while the GAAP EPS estimate was A$5.38.

CBA said total remediation costs for customers in fiscal 2019 reached A$2.2 billion, more than the A$1.2 billion recorded in the previous fiscal year. In addition, a reduction in customer fees erased some A$415 million from its annual profit, and an increase in risk and compliance staff and staff working on remediation contributed to higher expenses.

Net interest income on a cash basis declined to A$18.12 billion from A$18.34 billion. Total income slipped to A$24.41 billion from A$24.92 billion, while operating expenses inched up to A$11.27 billion from A$11.0 billion.

The bank's full-year net interest margin was down five basis points to 2.10% from 2.15%.

Under the Australian Prudential Regulation Authority’s criteria, the bank's common equity Tier 1 ratio increased to 10.7% from 10.1% in the previous fiscal year. On an international basis, its CET1 ratio rose to 16.2% from 15.5%.

CEO Matt Comyn said he expects further progress in the bank's divestment of noncore assets to strengthen its capital position. Earlier this month, the bank announced the completion of the sale of its asset management business, Colonial First State Asset Management (Australia) Ltd., to Mitsubishi UFJ Trust & Banking Corp.