CBA quizzed on investment spending surge
- Reading on The Australian Financial Review
On August 12th, the Commonwealth Bank of Australia (CBA) dished out its operating expenses by 3.3%, especially in the investment spending on digital projects in the face of its revenue only up by 1.7%. Their digital strategy drew general bafflement.
CBA has argued that the market has been changed with more services delivered online in COVID-19. They invest and partner with a flurry of startups and build up in-house new brands, such as Unloan, a digital home loan application, which will be launched later this year. CBA also established an office in India to attract skilled IT workers with the global talent pool due to the hard border closures in Australia. Out of its $1.8M investment projects, there are two main areas. One is in risk and compliance spending at 46%, and the other is for productivity and growth initiatives at 32%, such as migrating more computing to the cloud and simplifying core platforms.
Although the higher spending is critical, the net interest margin is squeezing by continuing pressure for the bank as mortgage customers expect lower-margin fixed-rate home loans. At the same time, depositors prefer term products with higher rates. While the margin pressures remain in Australia, the Reserve Bank of New Zealand indicated to life the interest rate.
