CBA share price falls despite APRA update

CBA was given some good news from APRA this morning…

| More on:
A woman wearing yellow smiles and drinks coffee while on laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • CBA is now out of APRA's bad books
  • APRA has removed a $500 million capital add-on
  • CBA expects this to boost its CET1 ratio by 15 basis points

The Commonwealth Bank of Australia (ASX: CBA) share price is falling with the market on Friday.

In morning trade, the banking giant's shares are down 1% to $92.27.

What's going on with the CBA share price?

Investors have been selling the bank's shares today despite a positive announcement out of Australian Prudential Regulation Authority (APRA).

According to the release, APRA has removed the remaining $500 million capital add-on applied to CBA to address previous weaknesses in its governance, accountability, and risk culture frameworks and practices.

The regulator initially imposed the $1 billion capital add-on on the bank in May 2018 in response to the final report of the Prudential Inquiry into the Commonwealth Bank of Australia.

APRA notes that the inquiry concluded that "CBA's continued financial success dulled the senses of the institution." This was particularly in relation to the management of non-financial risks. As a result, an extensive remediation plan was established to address the identified shortcomings.

The good news is that APRA has been satisfied with the remediation program and notes that CBA has addressed all recommendations. This follows validation work undertaken by APRA to ensure all remediations were sustainable and well-embedded.

CBA response

CBA has responded to the news. It highlights that the removal of the remaining operational risk capital overlay of $500 million will represent an increase in its Common Equity Tier 1 capital of 15 basis points.

CBA's CEO, Matt Comyn, commented:

We are committed to ensuring the improvements we've made to our governance, culture and risk management practices are continuously improved and sustained.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »