The Commonwealth Bank of Australia (ASX: CBA) share price is slipping lower today, currently down 0.76% at $157.38 apiece.
Despite no price-sensitive news from CBA, shares are down amid reports that the bank and its subsidiary, Colonial First State, may face damages due to a long-standing superannuation-related class action.
The matter was before the Court on Thursday, with the judge noting the estimated damages against both parties could reach $900 million. Let's take a look.
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Class action rears its head again
The Federal Court has been hearing a class-action lawsuit initially filed by law firm Slater & Gordon in 2018 on behalf of Colonial First State's superannuation members.
The case alleges that Colonial failed to secure competitive interest rates for retirement savings invested with its parent bank, CBA.
Originally estimated at $100 million, potential damages have now ballooned to an estimated $900 million after hearings on Thursday.
Slater & Gordon argues that Colonial First State prioritised the Commonwealth Bank's interests over its members. According to the class action:
When you give your hard-earned money to a superannuation fund, you have the right to assume they will do the best possible job of managing those savings for your retirement.
In 2018, the royal commission into banking revealed unacceptable behaviour from big bank-owned super funds, including boosting their revenues by ripping customers off with uncompetitive interest rates on their cash investments.
Our class action against Commonwealth Bank and Colonial First State alleges that Colonial breached the trust of its superannuation fund members by investing members' retirement savings with its parent bank even though the bank didn't offer the best interest rates.
The lawsuit came after the Financial Services Royal Commission in 2018 uncovered a litany of unsatisfactory practices in the banking industry, resulting in a major shakeup to financial services in Australia.
The Commonwealth Bank and Colonial have categorically denied the class action claims and are preparing a strong defence.
According to The Australian, the bank's barrister, Sera Mirzabegian SC, contested the scale of the newly estimated damages. She also criticised the proceedings' delays, noting that most individuals involved had left the bank.
What could this mean for the CBA share price?
While the CBA share price is slightly down today, it's not likely a direct result of these headlines, in my view. Nothing has changed fundamentally for the business, its sales or earnings outlook, for instance.
The bank has also been busy integrating the latest in artificial intelligence (AI) into its operations.
Zooming out, the broader market is also down today, with the S&P/ASX 200 index (ASX: XJO) 0.6% in the red at the time of writing.
Commonwealth Bank shares have climbed 50% in the past 12 months and are up 41% this year to date.
