Morningstar | Commonwealth Bank Pauses on Simplification Strategy
Commonwealth Bank of Australia's reputation has been tarnished following a string of compliance shortcomings and mis-steps. Our positive view is based on the bank's robust balance sheet, dominant market positions, strong profitability, organic capital generation, sound loan book and high returns on equity. We believe a bank funding crisis, a severe downturn in Australia or a housing collapse could force sharp falls in earnings and dividends. CBA has traded at a premium to major bank peers due to lower financial risk and a long history of sustainable earnings and dividend growth despite slow system credit growth and pressure on funding costs. Some market investors consider CBA's strong emphasis on home loans a weakness, but we argue it is a key strength. In our view, concerns centred on a U.S.-style housing crash in Australia are overdone.The author's retirement fund owns shares in all four Australian major banks.Commonwealth Bank of Australia provides integrated financial services including retail, business and institutional banking, funds management, superannuation, life insurance, general insurance, broking services and finance company activities. Co. operates in seven segments, Retail banking Services, Business and Private Banking, Institutional Banking and Markets, Wealth Management, New Zealand, Bankwest, as well as International Financial Services and Other Divisions. As of June 30 2016, Co. had total assets of A$933.1 million and total deposits of A$588.0 million.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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