Commonwealth Bank may scrap plans to demerge from Aussie Home Loans, CEO Matt Comyn has revealed.
Speaking to The Adviser following the release of the Commonwealth Bank of Australia’s (CBA) full-year results (FY20), chief executive Matt Comyn said the bank is yet to determine the fate of its subsidiary Aussie Home Loans.
The major bank announced plans to demerge from the mortgage brokerage in June 2018. At the time, it was intending to spin off its third-party businesses into an independent wealth and mortgage broking group, separately listed on the ASX. However, the bank suspended its planned spin-off and sold the wealth businesses involved in the demerger.
Mr Comyn said CBA is still “exploring options”, but added that the bank has been “pleased” with Aussie’s performance over the past few years.
“I think we don’t feel a near-term pressure to exit,” he told The Adviser.
“We’re exploring options over the medium and longer term and will remain active managers of Aussie and very supportive of the team and business in the near term,” he said.
When asked if CBA would consider abandoning its demerger plans, Mr Comyn told The Adviser that the option would form part of the decision-making process.
“It’s certainly one of the options that we’re exploring,” he revealed.
“As you can imagine, we’re canvassing a broad range of options and it would be premature to speculate too much at this point in time.”
Mr Comyn said CBA had delayed its decision on Aussie’s future in response to changes in the regulatory environment and the onset of the COVID-19 crisis.
“[I] guess in the last couple of years, at various points in time, there’s been considerable regulatory uncertainty and changes,” he said.
“As you’d appreciate, over the last six months, it hasn’t been at the forefront of our thinking, given a number of other things that we’ve been prioritising.”
He added: “But as I said, I think the broker business and Aussie continues to perform well, and we’re very supportive shareholders in the meantime.”
Last year, the founder and chairman of Aussie Home Loans, John Symond, revealed that he had held talks with the Commonwealth Bank regarding a potential buyback of a stake in the 27-year-old brokerage.
“I’ve spoken to the [Commonwealth Bank] about it. They’ve made it very clear that they’re not yet in a position to work out what they want to do,” Mr Symond said at the time.
“They said, ultimately, they will exit Aussie. They don’t know whether that will be in six months, one year or two years, [but] they would undertake to talk to me when the time comes.”
Mr Symond said he hoped to “help steer” the future trajectory of the business in whatever capacity future owners deem appropriate.
“I really want to make sure that Aussie goes into the right hands,” Mr Symond added at last year’s conference.
“Do I have an ongoing role as chairman, non-executive or executive chairman? Or maybe, if all the ducks are lined up – right ownership etc – [do] I take a chunk of it?” he said.
CBA has posted a cash net profit after tax of $7.3 billion, down 11 per cent from $8.2 billion in FY19.
The bank’s result was underpinned by a sharp increase in loan impairment expenses in response to credit quality concerns off the back of the COVID-19 crisis, up from $1.2 billion to $2.5 billion – equating to approximately 33 bps of CBA’s loan book.
However, the hit to CBA’s bottom line was offset by strong growth across its core businesses, particularly home lending.
CBA’s mortgage portfolio grew 1.3x system, increasing by over $18 billion, from $467 billion to $485 billion.
Home loan settlements were up 23 per cent, from $43 billion in FY19 to $53 billion in FY20.
Owner-occupiers drove CBA settlement growth, making up 75 per cent of the bank’s mortgage flows, up from 71 per cent in the previous corresponding period.
As a result, CBA’s share of the mortgage market increased from 25.2 per cent to 25.7 per cent.
CBA’s proprietary network originated 53 per cent of new home loans, with the share of broker-originated loans slipping from 48 per cent to 47 per cent.
Despite the recent fall in residential property prices, the average size of home loans settled by the bank increased from $320,000 to $354,0000.
CBA also reported a 5.1 per cent increase in its business lending portfolio, up $7 billion to approximately $93 billion.
The group also benefited from strong household deposit growth, increasing by a record high of $25 billion (9.3 per cent) to $279 billion.