Buried in the Commonwealth Bank’s 2022-23 record $10.16 billion profit announcement yesterday was a gratingly gratuitous bit of sloganeering from the country’s biggest bank.
“We will continue to invest in our business and execute on our strategy to deliver our purpose of building a brighter future for all.”
In case you’re wondering, those are the CBA’s italics (as well as the weird management-speak “execute on”).
Brighter for whom, you may ask? Not the CBA’s customers, ground underfoot by the Reserve Bank’s interest rate rises — faithfully transmitted into higher mortgage costs by the CBA, though, funnily enough, not so faithfully transmitted to its deposit rates, so that the bank’s net interest margin rose to 2.07%. That means its net interest margin rose 17 points, or 9%, which handily beat inflation (not, of course, that profits are driving inflation anywhere, as outgoing RBA governor Philip Lowe would hasten to assure us).
It’s plenty bright for CBA shareholders — around 800,000 of them, each of whom will get a record $4.50-a-share full-year dividend. That’s all fully tax imputed, so if you are aged 60 or older it’s completely tax-free — yet another fine moment in the great Australian game of transferring wealth directly from younger Australians to baby boomers. Hell, there have to be some advantages to getting older.
But it’s brightest of all for CBA CEO Matt Comyn. He enjoyed a surge in pay from $7 million to $10.4 million, or more than 40%, courtesy of long-term share incentives handed to him in 2018-19 when he replaced Ian Narev at the top of the bank. Comyn’s fixed salary was unchanged at $2.5 million and his short-term bonuses were steady, but he received $5.5 million in shares that vested under a long-term bonus scheme put in place in 2018-19, soon after he started in the job. CBA shares closed at $100.27 on June 30, up from $90.38 on June 30 2022 (and were up nearly 4% on Wednesday at just under $105).
Comyn’s merry team also benefited from bonus shares that vested in the year, including chief financial officer Alan Docherty, institutional banking boss Andrew Hinchliff, retail banking boss Angus Sullivan, chief risk officer Nigel Williams, and human resources group executive Sian Lewis. Well done all.
Comyn’s pay tops the $6 million received by ANZ chief executive Shayne Elliott last financial year, and $3.9 million for both NAB chief executive Ross McEwan and Westpac chief executive Peter King in 2022. How quickly will the ANZ, NAB and Westpac move to match their CEO pay with that of Comyn’s?
Comyn didn’t have to work too hard for that extra $3.4 million, courtesy of Australia’s banking oligopoly, although Elliott may not be too grateful given it’s that oligopoly that led to the ACCC, completely correctly, knocking back the ANZ’s $4.9 billion offer for Suncorp’s banking arm. The ACCC knows the oligopoly means the big banks coordinate with each other, rather than compete — and when they do compete, it’s in “non-price competition”, which is like competing over the nicest footy jumper instead of the score in a World Cup. It’s much easier being a major corporate CEO when your main rivals all have a polite agreement not to tread on each other’s toes too much.
But Comyn’s massive pay boost wasn’t just the result of weak competition between the big four banks. In the time Comyn has been CEO, the CBA has enjoyed support from the Reserve Bank and the federal government. Reserve Bank data showed the CBA drew down a total of $51.14 billion of the $188 billion made available in the term funding facility, which enabled the bank and all other financial groups to continue doing business in making home and business loans during the pandemic. At the same time, Comyn’s bank, like all other ADIs (authorised deposit-taking institutions), benefitted from the federal government’s $250,000 deposit guarantee, which gave depositors confidence during the pandemic and afterwards.
Then there was Josh “remember him” Frydenberg abandoning or even reversing his implementation of the Hayne royal commission recommendations around banking regulation on the basis that the pandemic meant the banks had to be cut some slack.
Frydenberg and Lowe should ask Comyn for a cut of his increased remuneration — they certainly helped him earn it. But not nearly as much as the CBA’s long-suffering customers.
