Yesterday, the bank booked a A$300M after tax loss on the sale of its life insurance business CommInsure. It also cut goodwill by A$1.4B, recognising damage to the brand since a litany of claim handling problems were exposed.
According to Ferguson: “The announcement smacks of company wanting to get out of the business at just about any cost, no doubt fuelled by the spectre of a royal commission and an inquiry by the prudential regulator APRA following a string of scandals it has found itself at the centre of in the past few years.”
The bank’s fall from grace was triggered by a media investigation alleging it was putting profit before sick and dying people, and selling life insurance policies with outdated medical definitions, making it difficult for customers to successfully make a claim.
Other alleged frauds, including money-laundering, forgery and management cover-ups, piled scandal upon scandal.
In addition to the financial write-downs, management heads are now rolling at the Bank. Annabel Spring, leader of the Wealth division, has announced she will depart later this year. Chief Executive Ian Narev will leave before mid next year.
Ferguson said that “(It) should be a lesson to other companies, including retirement villages such as Aveo, 7-Eleven, Domino’s and Caltex, that all stakeholders need to be treated right. In the short term they might reap the rewards of screwing customers, workers, franchisees or in the case of retirement villages, the elderly, but eventually it catches up.
“(T)his is a lesson in what can happen when a company over stretches for growth. The moral is stick with your strengths, ignore the growth junkies and above all treat your customers with respect for they are the ultimate judges of success.”