The Commonwealth Bank of Australia (ASX: CBA) share price has suffered a steep decline in August, despite the bank reporting a record $9.93 billion profit for the financial year ending June 30, 2017. The profit was 8% above the prior year and helped the bank pay investors dividends totalling $4.29 per share over the year on earnings of $5.74 per share.
The higher profits came despite the bank's net interest margin as a key measure of profitability falling 3 basis points to 2.11%. Helping the profitability was the growth in more profitable funding sources such as customer deposits that increased to $561 billion as at June 30, 2017, up $43 billion on the prior year. Customer deposits now represent 67% of the bank's funding that it lends on to borrowers in order to turn a profit.
However, CBA shares have been slammed after the AML regulator AUSTRAC accused it of allegedly failing to enforce checks designed to stop criminals or tax dodgers depositing cash in the bank (commonly via anonymous "Intelligent Deposit Machines") in order to hide their ill-gotten gains.
Google Finance: CBA share price performance since Aug 1
AUSTRAC is seeking "orders for civil pecuniary penalties" against the CBA under s.175 of the AML / CTF Act 2006 and given the serious allegations CBA could face a whopping fine that might even move the dial on its $9.93 billion full year profit if the regulators toughen up. As such, I'm not surprised to see investors sell down the shares and I would watch from the sidelines before considering an investment in Australia's largest bank.
