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Too early for CBA share swoop: CLSA

CBA likely faces higher operating costs, higher operational risk capital and reduced pricing power from AUSTRAC AML allegations, according to CLSA’s Brian Johnson.

And while quantitative signals favour a switch to CBA from WBC, it’s too early to buy given further retail selling of DRP scrip issuance and the very real likelihood of a rebasing of earnings under new management.
“The regulatory challenges for CBA appear to be getting more challenging with APRA now announcing they will establish an independent inquiry into CBA,” Mr Johnson says.

“It is also becoming clear that the AUSTRAC AML allegations go well beyond a simple “coding” oversight on its fleet of Intelligent Deposit Machines, and seem to point to a culture where CBA’s management were willing to tolerate risk slippage/customer dissatisfaction in order to deliver cost efficiency and excess shareholder returns in a challenging growth environment.”

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