Analysts have been sending out their hot takes on Monday’s record $700m+ fine handed out to CBA for breaching anti-money laundering regulations. You will recall that the stock climbed 1.4 per cent on the day, so investors were happy to get at least one worry off their plate – and that’s generally the word from the broker community as well.
Morgan Stanley analysts say they view yesterday’s announcement as “incrementally positive, given it removes one of the uncertainties facing the stock”. They had been expecting something more like a $500 million fine, but the extra penalty only represents around 0.05 percentage points of the bank’s top-tier capital reserves. They stay underweight.
Macquarie analysts say they appreciate the fine “provides clarity but warn the threat remains of “potential action by an offshore regulator”, as well as potential trouble from an associated pending class action.
The Silver Doughnut’s team also note that coupled with “associated compliance-related expenses” the bank’s dividend payout ratio in the second half of this financial year will exceed 90 per cent.
Macquarie is “neutral” on the stock, saying: “Given uncertainty around earnings outlook and current instability in the management team, we believe the valuation premium is difficult to justify“.
UBS analysts continue on a similar theme: “[Yesterday’s] announcement may be a welcome sigh of relief for many investors and removes one of the stock’s overhangs”.
“However, CBA still faces two enforceable undertakings [EUs] with both ASIC and APRA. These EUs will continue to add higher legal, compliance and project costs and are likely to be disruptive to the course of business.”
“We continue to be supporters of CBA given its strong franchise and market position. However the outlook is challenging with risks skewed to the downside. Regulatory risks remain very high. We expect