CBA Share Price Up as it Disputes Rumours of Redundancy Plan

For every move forward, it seems as though the Commonwealth Bank of Australia [ASX:CBA] manages to take two moves back.

As one of Australia’s Big Four, CBA currently has the biggest mortgage market share of 24%. But there has been concerns over the company’s plan for future growth since their last half-yearly report, which revealed declining profit margins.

At time of writing, the share price stands at $73.25, up 0.77%.

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Does CBA have a legitimate profit-lifting plan?

The appointment of a new chief executive has raised many questions about the long-term plan for the bank’s future.

Earlier this week, it was reported that part of this new ‘plan’ to lift profits included the possible removal of up to 10,000 (or one in four) CBA employees in an effort to cut costs by almost $2 billion.

Many news outlets argued that, if it were true, such a plan would conceivably go a long way in pleasing the people it is duty-bound to look after – investors.

The rumour of the ‘secret plan’ has been rubbished by CBA, with their chief executive calling the plan ‘incorrect and misleading’, with the added detail that they were ‘disappointed’ with the speculation so far.

But news media can hardly be blamed for thinking the worst when it comes to the big four and job cuts. NAB and ANZ both announced cuts to their worker base since the end of the royal commission.

And given the latest news to come out, it’s also not hard to see features of the past. It was also revealed this week that the bank has been underpaying up to 8000 staff members as a result of what they call ‘discrepancies’ in pay calculations. A similar occurrence happened back in 2017.

An internal review found that staff affected are now entitled to $4.8 million ‘including interest.

What’s the answer to a larger growth problem?

Making large swathes of employees redundant may only be a quick fix amidst tightening credit conditions.

What is not in question is CBA’s need to find new ways of turning a profit. Redundancies would be a simple strategy to reduce operating expenditure, but as the bank with the biggest customer share, this doesn’t address the issue of revenue growth — which declined to $12.4 billion in the last half-year results.

Kind regards,

Ryan Clarkson-Ledward
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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