CBA under fire over $2b share blunder
Sydney Morning Herald
Thursday October 15, 2009
FUND managers have hit out at Commonwealth Bank of Australia's refusal to accept responsibility for last year's botched multibillion-dollar capital raising, even after the securities regulator accused the bank of sloppy disclosure over a $600 million blowout in bad debts.The Australian Securities and Investments Commission fined CBA $100,000, alleging the bank failed to reveal to investors about the worsening bad debt position at the same time it was attempting to raise $2 billion from fund managers.CBA agreed to pay the fine but accepted no wrongdoing. In doing so, it escaped a potential $1 million penalty had ASIC opted to pursue the matter as a civil legal action.Despite ASIC's finding, the CBA chief executive, Ralph Norris, yesterday said he was disappointed with the regulator's decision to issue an infringement note.He insisted the disclosure of bad debts was "not material" to the bank's overall profit given the lender was enjoying a surge in revenue at the same time.This position drew immediate criticism from fund managers who said Mr Norris had "missed the point"."If there's some material change in some parts of the business the market needs to be informed," Peter Vann, Constellation Capital Management's head of investment research, said.CBA was forced to refund about $2 billion to institutional investors in December when they found out about the bank's worsening financial position only after they had signed-up for a share placement being handled through the bank's broker, Merrill Lynch.Intense anger about the poor disclosure forced the CBA to cancel the issue and attempt to revive the fund-raising a day later through another broker and at a cheaper price.The latest run-in with ASIC caps off a year where CBA's reputation has suffered a beating given its close links to the collapsed financial planner Storm Financial."It smacks of, 'I'll pay up just to make it go away,' " a second fund manager said of the fine.ASIC's finding is expected to draw some vindication for Merrill Lynch, which CBA had attempted to blame.While the ASIC investigation into the affair found CBA had passed on the warnings on bad debts to Merrill Lynch in the form of a draft press release, the broker had already begun undertaking soundings about the capital raising.Information on the updated bad debt position was not released through the Australian Securities Exchange's market announcement platform until just after 7pm on December 16. This was more than four hours after the bank first became aware of the expected blowout as the global financial crisis was starting to spread through the Australian economy.ASIC said it was CBA's responsibility to tell all investors that its bad debt was likely to come in at a bigger-than-expected $2.49 billion.
© 2009 Sydney Morning Herald