The Commonwealth Bank of Australia (CBA) has released its results for the 2017 financial year, reporting record after-tax profit of AU$9.88 billion, an increase of 4.6 percent over the previous year.
For the 12 months to June 30, 2017, CBA recorded AU$44 billion in revenue, while operating expenses increased to AU$11 billion. The bank told shareholders on Wednesday that underlying expenses increased due to higher staff and technology costs.
AU$1.9 billion was spent by the bank on information technology services, which was 31 percent more than in FY16. AU$512 million was spent on application maintenance and development, AU$210 million on data processing, AU$188 million was attributed to the line item labelled desktop, communications cost the bank AU$193 million, AU$779 million was to cover the amortisation of software assets, software write-offs totalled AU$6 million, and IT equipment depreciation came in at AU$53 million.
Retail banking services accounted for AU$4.96 billion of the bank's profit, while subsidiary Bankwest contributed AU$702 million of the AU$9.88 billion total.
A strategic priority for the bank in FY17 was to enhance the home loan experience for customers by better integrating its branch, online, and mobile channels, which was bolstered thanks to the "smarter use" of data and "better conversations" across all channels.
"Commonwealth Bank's performance this year has again contributed to the financial wellbeing of our customers, shareholders, our people, and the Australian economy," CEO Ian Narev said.
Narev also said the record profit result was thanks to the bank's consistent focus on customer satisfaction, innovation, and financial strength.
"We will maintain our focus on our long-term sources of competitive advantage in our customer base and in technology, while accelerating the focus on productivity that we need to remain competitive for the long term, and listening more to our community and strengthen trust," the bank's financial report reads.
CBA found itself in the spotlight earlier this month after it was revealed the Australian Transaction Reports and Analysis Centre (Austrac) had begun civil penalty proceedings against the bank. It was alleged CBA has been involved in "serious and systemic non-compliance" with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Austrac detailed 53,700 alleged breaches of the Act, which included failing to hand 53,506 threshold transaction reports (TTRs) for cash transactions over AU$10,000 to Austrac through intelligent deposit machines (IDMs) for almost three years between November 2012 and September 2015.
In response to Austrac's allegations, CBA said that much of the blame for the lack of filing was due to a "coding error".
The bank faces a maximum penalty of AU$18 million for each of the 53,700 contraventions if found guilty.
Throughout the 2017 financial year, the bank toyed with a handful of emerging technologies, such as blockchain. In October, it claimed the first interbank trade transaction combining blockchain technology, smart contracts, and the Internet of Things in partnership with Wells Fargo and Brighann Cotton. It also announced earlier this year that the Queensland Treasury Corporation would be exploring a prototype of the bank's capital markets blockchain platform, to be executed via a virtual "cryptobond".
Speaking with ZDNet last month, Maaike Steinebach, chief executive of CBA's Hong Kong branch and managing director of the institutional banking and markets business in Hong Kong, said it's important for the bank to innovate to keep abreast of the rapid pace of change occurring around the world.
"We all have to deal with this change and we believe this is an opportunity for us to engage with our clients to understand and learn from them as much as we can share our innovation journey with them, but also with the wider community and understanding what the key changes are so that we can get insights into the kind of risks we are running as a business, as well as the risks our clients are running," she explained.
In a bid to strengthen ties with greater China, the bank also recently entered into a memorandum of understanding with Alipay, Alibaba's online payment platform, to deliver payment solutions to Australian and Chinese consumers and retailers.
CBA also entered into a partnership with Barclays in September that saw the banks connecting with each other's apps to allow mobile payments between Australia and the UK.
At the same time, CBA also opened the doors to an innovation lab in London, joining Barclays' own Rise innovation hub, which has focused on fintech since 2014. CBA's innovation lab network now spans Sydney, Hong Kong, and London.
The bank also launched a new business analytics platform that aims to provide small-to-medium enterprises with access to big data earlier this year, and recently partnered with Airtasker to provide the outsourcing company with an identity verification function for its online platform.
For the first half of the 2017 financial year, CBA reported AU$4.9 billion in statutory net profit after tax, up 6 percent from the corresponding period a year prior. Operating income for the period experienced a 6 percent increase to AU$13.1 billion.
During the six-month period, the bank spent AU$1.2 billion on IT services, up from AU$752 million spent during the first half of FY16.
With total IT spend increasing 54 percent, the amortisation of software assets cost the bank AU$613 million during the six-month period, while AU$222 million was spent on technology application, maintenance, and development.