Commonwealth Bank of Australia (CBA) has reported statutory net profit after tax was up 34% to AU$6 billion for the half year to 31 December 2019, despite seeing overall cash profit down 4% to AU$4.5 billion, on revenue of AU$12.5 billion.
The Australian bank saw the cost of IT services expenses increase by 9% year on year from AU$912 million to AU$997 million. Although when compared to the half-year prior to 30 June 2019, IT expenses reduced slightly, which the bank said was due to a decrease in spending on external vendors.
As a result of higher IT costs, alongside higher risk and compliance costs, CBA's operating expenses went up by 2.6% to AU$5 billion for the period.
The higher risk and compliance costs were associated with strengthening its regulatory and compliance frameworks and implementing systems to meet regulatory obligations.
Previously, the bank was slapped with a court-enforceable undertaking for losing the data of 20 million customers.
The bank also entered into an agreement with Austrac to end civil proceedings that saw the bank admit to 53,750 breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF), which included failing to hand over 53,506 threshold transaction reports (TTRs) for cash transactions over AU$10,000 to the regulator through intelligent deposit machines (IDMs) for almost three years between November 2012 and September 2015; and not complying with its own AML/CTF program across 778,370 transactions for a period of three years.
According to the bank, some of the specific risk and compliance costs were associated with upgrading and enhancing its AML/CTF technology, enhancing data controls and processes to improve data quality, enhancing systems to address new regulations such as open banking, and investing the New Payments Platform and data centres.
Cost savings came in at AU$222 million, up from the AU$80 million that was achieved during the same period last fiscal year. The bank said it was underpinned by its business simplification efforts.
For the half-year period, the bank saw a boost in digital transactions to 64% versus 60% during the prior comparative year.
Meanwhile, Commbank app users increased slightly to 5.9 million from 5.3 million a year prior.
The yellow bank's financial results come a week after it launched X15 Ventures, which aims to build and grow standalone businesses that deliver products or services to be used by the bank in addition to its existing core offerings.
See: How AI may help solve banks' customer relationship issues (TechRepublic)
"We want to find a way to work with and accelerate the growth of digital ventures and propositions who want to do this in a way that is outside of the Commonwealth Bank, but of course really leverage the scale, financial capacity of what we can bring to market," CBA chief executive Matt Comyn said at the time.
"We didn't want to be a passive equity investor; we actually want to work with a range of different businesses across what we believe are going to be critical experiences for our customers or ecosystems as the whole market evolves."
To be funded by a portion of the company's AU$1 billion a year commitment to spend on technology, X15, dubbed as the company's "venture building entity", has plans to bring five new ventures to market during 2020 and grow that number to 25 over the next five years.
The first three ventures that were named as part of X15 were digital home buying app Home-In, business insights aggregation tool Vonto, and Klarna.
CBA has invested a total of $300 million in Klarna so far, granting it 50:50 ownership rights to the Swedish company's Australian and New Zealand businesses.
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