Commonwealth Bank reveals $45m hit from Bankwest restructure plan

Australia’s biggest bank has taken a $130 million hit, partly driven by increased restructuring costs at Bankwest.

Commonwealth Bank closed Greater Perth’s final remaining Bankwest branch in Mandurah at the end of last year as it shifted the 130-year-old Western Australian financial institution to a fully-digital model.

Markets were told on Tuesday the price tag of that restructure had lifted by $45m, which will be reflected in CBA’s annual results due next week.

The extra expenses were driven by the cost of “transitioning of Bankwest to a digital bank and the transition of Bankwest business banking to CBA”, investors were told.

The digital-only plan was announced in March last year and was expected to cost 350 jobs. About 60 branches were closed or rebranded as CBA — mostly in regional areas.

Bankwest was founded in 1895 as the Agricultural Bank and then became the state-owned Rural & Industries Bank.

It was publicly-listed in the 1990s, later bought by Scotland’s HBOS, and eventually fell into the hands of Commonwealth amid the Global Financial Crisis.

Also on Tuesday, Commonwealth announced an extra $85m had been spent on customer remediation, including for Kiwi subsidiary bank ASB.

The company did not further clarify those costs but had previously reported ABS was hit by a class action in New Zealand over consumer finance law compliance failures.

The full $130m provision will weigh on the company’s operating results.

Shares in CBA lifted 1.4 per cent to be $177.35 just before midday.

Earlier this week analysts from Morgan Stanley said investor expectations for Commonwealth Bank’s results looked optimistic.

“Given their stretched valuations, we believe bank share prices will be vulnerable in the upcoming reporting season if earnings or dividends disappoint,” the note authored by Richard Wiles said.