A theme throughout this inquiry into Australia’s bank closures is that bank representatives continue to say they are committed to providing cash for the foreseeable future despite Australians using cash less frequently.
The Commonwealth Bank has no plans to remove the distribution of cash even though it is a cost to the bank to keep cash available, according to CEO Matt Comyn.
I know that Australians are afraid of losing cash. There’s no doubt that the best way to keep cash alive is to keep on using it.
Despite regional bank closures, more than 90% of customers remain which is seen as a sign less customers see a physical branch as important because more of them are using online services.
I asked Matt Comyn about the bank’s digital expansion which includes the CommBank App. He said this app is used by eight million customers and the vast majority of customers appreciate the bank’s investment in it. The bank’s contract with Australia Post, worth tens of millions of dollars, is a partnership allowing customers to make transactions at Australia Post outlets where the bank has been shutting down branches. For many rural customers the Bank@Post scheme doesn’t offer everything they need.
We also discussed the many ways the Commonwealth Bank along with the rest of the Big Four Banks are supported by the government including bail-in, props such as government guarantees for overseas borrowing, regulatory support and their advantages over smaller banks.
When I asked about the shareholdings by asset managers such as BlackRock, Vanguard and State Street, Matt Comyn responded that most of the bank’s shareholders are Australian retail shareholders, domestic superannuation shareholders, and shares held by 12 million Australian families. Share dividends will be high this year with a record $10.2 billion profit and a pay packet for its CEO of $10.4 million.
The Commonwealth bank serves about 10 million customers. Among those customers are many Australians who are worried about digital controls, branches closing, and the gradual loss of cash as a readily available and convenient means of transaction. The Commonwealth Bank prides itself on supporting its customers so let’s hope they’re also a listening bank.
Transcript
Senator ROBERTS: Are you aware of what has happened to Qantas’s reputation in the last few months?
Mr Comyn: Yes, I am.
Senator ROBERTS: You represent a bank which provides financial services, and cash is fundamental to those for many people. People are afraid of cash. Whether you agree with that or not, they are afraid of cash and
they’re increasing their use of cash. As to your costs and services, from your statement I concluded that they’re reviewed annually, but are you considering the whole service and what people really expect from your bank?
Mr Comyn: Yes, absolutely we consider the whole service.
Senator ROBERTS: More than 90 per cent of your customers stay after a bank closure?
Mr Comyn: Yes.
Senator ROBERTS: So, your customers are sticky?
Mr Comyn: Yes. It could be perceived in a slightly different way as well, which is the role of a physical branch in some customers’ minds perhaps isn’t as important as it was. I sort of agree with that and I think it very
much depends on different customers. I think a range of different conclusions can be drawn from that.
Senator ROBERTS: I agree with you. The fact is your customers are sticky and so are other customers. You mentioned cross-subsidisation of electronic customers on cash is $40 per customer?
Mr Comyn: What I said was we calculated we think the cost of providing cash, and I believe providing cash will continue to be important and is an important issue. I suspect we pay a significant proportion of the costs of providing cash in Australia. I don’t say that as a complaint, I say it more as a statement of fact. We serve about 10 million customers. It works out to be about $40. The reality is, like anything, there’s a small proportion of customers who use cash very often. There’s a much larger proportion who don’t use it at all, and there would be somewhere in between who are using it infrequently across that. I’m not exactly sure I understand the point you made about ‘afraid of cash’? I think you said earlier on in your question that Australians are afraid of cash? Did I mishear you?
Senator ROBERTS: Sorry. They’re afraid of losing cash. Thank you for picking up on that. That’s a very important point. They’re afraid of losing cash. We’ve seen a digital identity mooted by the Morrison government, now raised by the Labor government, and a bill that was introduced not into parliament as such for processing but into the public debate in parliament last year. We’ve seen attempts to limit the cash ban bill. People are scared, especially after losing a lot of their fundamental freedoms in the last three years under COVID mismanagement. They’re worried about being controlled in all aspects of their lives. How much has your bank spent on digital expansion that cash customers did not ask for?
Mr Comyn: It would be very difficult for me to answer that, because we haven’t asked every one of those 10 million customers.
Senator ROBERTS: I understand that.
Mr Comyn: I think we could reasonably assume that with our retail bank, the CommBank app, which is our mobile banking app, we have more than eight million users. On average, they log in 39 times per month. It’s
clearly one of the most important, if not the most important, feature that customers use. I’d say that clearly the vast majority of customers highly value the investments that we make, both in terms of hopefully helping make it easier for them to manage their financial lives but also as Senator White was asking, to make sure it’s the safest, secure and most resilient experience possible.
Senator ROBERTS: We’ll come back to cash in a minute. You just said you’ve got a commitment to cash?
Mr Comyn: I believe cash will continue to be available for many years within Australia. I don’t think people should fear that cash is going to be removed from circulation.
Senator ROBERTS: Is that your commitment or is it just your belief?
Mr Comyn: I can only make the commitment on behalf of the Commonwealth Bank.
Senator ROBERTS: That’s what I mean.
Mr Comyn: We certainly have no plans to remove cash distribution or the provision of cash in Australia. I don’t think that’s feasible, and I don’t think that would be desirable, certainly in the foreseeable future.
Senator ROBERTS: Let’s turn to Australia Post and we’ll come back to cash. How much do you pay Australia Post for the community representation fee—not the transaction but the community representation fee?
Mr Comyn: I mentioned in the introduction it’s tens of millions of dollars. I know I’m protected by parliamentary privilege. Would you mind if I checked whether there’s any commercial—
CHAIR: You can take it on notice.
Mr Comyn: I know what the number is. I don’t have any difficulty sharing it with you, but I probably should check that.
CHAIR: I think usually the best idea is to take it on notice. Mr Comyn can provide the information to us.
Senator ROBERTS: Is your concern one of the figure or of releasing it?
Mr Comyn: I’m not personally concerned with either of those dimensions, but since it’s in a contract entered between the Commonwealth Bank and Australia Post I just want to doublecheck if there are any contractual
restrictions and probably out of courtesy let Australia Post know.
Senator ROBERTS: It was released in 2018 as being $22 million for each bank.
Mr Comyn: It’s more than that.
Senator ROBERTS: So, you’re currently flooding Australia Post. When I say ‘you’, it’s not just the Commonwealth Bank but all banks. You’re closing branches in the regional areas and Australia Post is getting flooded with customers. Is it more than $22 million?
Mr Comyn: The totality of what we pay Australia Post? Yes, it is. Again, not to get caught up in the semantics, I wouldn’t characterise it as ‘flooding’. We pay on a per transaction basis to Australia Post with an extension beyond 2030. We entered into a long-term contract to give Australia Post and some of those individual franchisees certainty. We meet—I know Mr Jones does—regularly with Australia Post to talk about are there opportunities for us to continue to improve the service to be able to support Australia Post’s customers better and to make sure as many transaction types are available in Australia Post to ensure the convenience is as high as possible.
Senator ROBERTS: So, you’re treating them as a partner?
Mr Comyn: Yes.
Senator ROBERTS: Coming back to the structure of the banking system in this country, especially the big four banks, there is protection for the banks if the banks go overboard in risk or the economy collapses. You’ve got protection in bank bailing, which was legislated I think in 2018. That was confirmed to me by a senior Treasury official two years ago. You’ve had props from the government in the past, and government guarantees for things like overseas borrowing. You have enormous support. Four pillars for a start is a regulatory support. You have more generous treatment from APRA in risk weighting. You have barriers to entry that the regulations provide for protecting the big four. You have a barrier that’s legal in the sense that you’ve got deep pockets and you can fund enormous defences in lawsuits brought against you. I’ve seen this first-hand when chaired the Senate select inquiry into lending to primary production customers. You dominate the cash distribution network. You’re essentially now, as a result of the support from the community and governments, a low-risk business. And your customers are sticky. That’s a hell of a ride.
Mr Comyn: I’d challenge just about every one of the assumptions that you made then, but I’m not exactly sure where that would get us. I definitely wouldn’t characterise it in terms of the context that you did. Are we heavily regulated? Absolutely. Is there a lot of investment required to manage and appropriately respond to that regulation? Yes, there is. Do I think significant financial institutions in Australia and others should be heavily regulated? Absolutely. Do I think it’s important that Australian banks and the Commonwealth Bank have unquestionably strong levels of capital? Absolutely. Because we’re big importers of capital and the success of economies and financial institutions are necessarily very intertwined. I could give you multiple examples but I don’t know how helpful it would be. Even if you think about capital levels, Australian banks hold considerably more capital than many other financial institutions and jurisdictions. As a policy setting I think that’s absolutely appropriate, but to help make the numbers real that costs across the major banks per annum between $7 billion and $11 billion. I’d characterise a lot of things differently. I think sometimes our funding facilities are described in a way that’s not necessarily matched by our experience.
Senator ROBERTS: I acknowledge your view. I point to the fact that every monopoly in the world—I’m not accusing you of being a monopoly—is there as a result of government. You say you have a low-risk business. Your ownership of the Commonwealth Bank, a significant controlling portion, includes the Vanguard Group and BlackRock. I’m reading from your registry: Vanguard Investments, Norges Bank, Goody Capital Management, BlackRock Advisors, Vanguard Global Advisors and a couple more. When I look at the other three big banks, they’re almost identical in terms of the significant controlling interests. It seems to me that we have one bank with four logos. That’s a very tight industry. You hide behind the regulations, I’d put it to you. When I chaired that Senate select inquiry into lending for primary production customers, I saw the services almost identical from each of the banks. The strategy is almost identical. The disregard for customers is almost identical as is the hiding behind regulations. Regulations are there to protect your bank; that’s the way I see it in practice. It’s almost identical across all four banks. Directors appoint you, I take it, and your directors are appointed by the likes of BlackRock, Vanguard, First State and State Street. The banking sector with the four big banks seems to be a very cosy club and you can do whatever you want with very sticky customers; is that correct?
Mr Comyn: No, it’s not. Again, the shareholder base is quite different to the way you outlined. There are quite significant differences even across the major banks. We’re an extremely widely held retail stock. Approximately 50 per cent of our shareholding is held directly by retail onshore shareholders. Obviously that’s a result—
Senator ROBERTS: How many of those shareholders vote?
Mr Comyn: Every one of them is entitled to vote.
Senator ROBERTS: How many of them vote?
Mr Comyn: I couldn’t give you the exact number. One thing I would say is clearly I meet with institutional shareholders. I just came back from meeting with some institutional shareholders internationally. I can assure you I get stopped and asked about the performance, profitability, questions on people’s minds, and the dividend by a lot more retail shareholders than I ever do from international. To finish quickly on the shareholder base, more than 50 per cent would be direct to retail. The next approximately 30 per cent would be institutional but domestic, primarily through superannuation, some of the biggest industry and superannuation funds. We actually have quite a small representation internationally. You mentioned some of them. There’s a mixture of both. You touched on some of our index funds. Some have a variety of different mandates from either US, North America or within Asia. Fundamentally if the Commonwealth Bank is profitable, 75 per cent approximately of our profits go to our shareholders, predominantly Australian families—more than 12 million. I can assure you based on my experience they absolutely do value it. I’m not sure the point you’re making on regulation, either. Obviously we work very closely with regulators.
Senator ROBERTS: The point I’m making was that regulations help you because they give you protection. It’s very difficult for a small borrower to take you on legally.
CHAIR: We’re going to have to rotate the call. Mr Comyn, you can briefly respond to that if you want to. It’s up to you.
Mr Comyn: In the interests of time
