There are few businesses on the ASX that have seen their reputations bruised more than Commonwealth Bank of Australia (ASX: CBA) over the past year.
It had the punishing $700 million AUSTRAC penalty and then the whole Royal Commission has been hard watching for the bank.
Several segments of the bank have come under scrutiny, including CommInsure most recently.
As Warren Buffett said, it takes many years to build up a positive reputation but only seconds to destroy that reputation.
New Commonwealth Bank CEO Matt Comyn has sent out a letter to try to outline what changes the bank is making to fix the past mistakes.
According to the letter, the bank has changed its employee incentives to reward tellers for helping people, not selling products. Commonwealth Bank initiated, among its big four peers, the idea of removing ATM withdrawal fees.
Mr Comyn also said that the bank is compensating customers where it sold products that were not right for customers and will provide greater transparency on fees and charges.
Customers would much prefer that none of these issues were ever present to begin with, but it's good to see that bank is taking action. It's a shame that it took the Royal Commission for some of these issues to come to light.
Is Commonwealth Bank a buy?
Wanting to be a 'good' bank is a good thing. But, sadly, it may mean that bank is a little less profitable than it was before.
There are a few problems that stop me from investing in Commonwealth Bank. Two of the main ones are its size and the falling housing market.
I'm not a fund manager with $1 billion of funds under management (FUM), I don't need to allocate money to large businesses – I can choose microcaps if I want to beat the market. Commonwealth Bank has as much market share as it's likely going to get, this means it can't grow much faster than population growth and efficiency benefits.
If a rising housing market boosts earnings, then a falling housing market should hamper earnings, particularly if bad debts rise.
The grossed-up dividend yield of 8.6% seems attractive, but I can think of other dividend shares I'd much rather own before Commonwealth Bank.
