The Commonwealth Bank of Australia (ASX: CBA) share price is up 2.3% to $69.97 today as a traditional investor favourite mounts a comeback after months of down days on the back of rising regulatory and compliance risks that came about in part because of the Hayne Royal Commission.
In fact late yesterday afternoon the CBA warned shareholders that it's now expecting extra costs as a result of its recent regulatory and compliance problems.
Specifically, the lender warned that it's to take a $100 million provision to "cover the higher than expected total cost of the multi-year financial crime compliance Program of Action and other ongoing compliance and remediation programs."
It will also take an additional $200 million "indemnity provision" for remediation issues and associated program costs, "including ongoing service fees charged by aligned advisors of the Group".
These costs are associated with businesses in its wealth management and mortgage broking businesses that it has named "NewCo" as it intends to demerge them as part of a substantial group restructuring.
The main part of the restructure being the agreement to sell its Colonial First State Global Asset Management (CFSGAM) business to Japanese asset management giant Mitsubishi Trust and Bank for $4.13 billion
In total for the financial year to 30 June 2018 CBA recorded $389 million in provision costs related to problems around "financial crimes compliance, the ASIC investigation, the shareholder class actions, the AUSTRAC proceedings, the Royal Commission and the APRA Prudential Regulatory inquiry".
That's the bad news, the good news is that the combined $300 million in additional provisions is a drop in the ocean compared to CBA's most recent full year cash profit of $9.7 billion.
The bank also managed to pay out $4.31 per share in trailing dividends over the past year, which places it on a trailing yield of 6.2% plus full franking credits.
This yield may look attractive but investors should consider that the CBA may be forced to trim its dividends in 2019 giving the mounting headwinds facing the Australian economy.
