On the day the CBA announced a $5 billion half-year cash net profit and its CEO Matt Comyn pledged to support customers during the ongoing cost of living crisis, one 2GB listener (who owns a small business) was so mad at our biggest and most successful bank, that he wrote this note to Ben Fordham who hosts the breakfast show on the radio station.
Here is his note:
“Hi Ben, I run a small family business with my brother, and we employ two others and have done so now for 21 years.
Our company has a modest amount of savings set aside in a Commonwealth Bank savings account for staff liabilities and for harder times. I recently noticed that the interest payments received on that account had dropped in the months of January and February without any notification from the bank. I went into my local branch for an explanation as there have been no recent drops in the official interest rate.
The manager provided the attached documents outlining the change in the business account rates. The bank has effectively dropped the rate from 1.35% for balances over $10,000.00 to tiered system, where I am now only earning a measly 0.5%.
The maximum you can earn is now 1.25% for balances over $1,000,000.00.
Is there no limit to the greed that our banks will operate at? The Commonwealth Bank just announced a 5 billion dollar profit whilst ripping out interest payments from small businesses. I would be so grateful if you could invite the CEO or any executive of the Commonwealth Bank onto your program to provide comment.
It would be interesting to see if they have the backbone to front up.
I believe the behaviour of our banks is out of control and there needs to be more regulation.”
At the same time, Ninenews.com.au reported that “… Comyn said he was ‘optimistic’ about the national economy, but that the bank nonetheless expected pressure on households and families to continue in 2024. The bank's $5 billion profit was down three per cent on the same period 12 months ago.”
Mr Comyn told us that the bank would focus on helping customers, but our listener is sure this savings rate drop isn’t helping him.
It’s interesting that the CBA should drop the interest rate on savings as no official rate cut has happened, so the bank is anticipating the eventual drop in the cash rate from the RBA and its ‘banking’ profits ahead of that time, which could happen as early as June (if AMP’s Shane Oliver is right) or as late as December (if other economists are on the money).
Either way, this premature rate cutting is good for the CBA’s bottom line and bad for our listener.
So, how should our listener get even with the bank? Try these:
1. He could switch banks but will generally find they all act in a similar way and the CBA is the price leader for the big four banks.
2. If our listener has a home loan, he could go to a mortgage broker to make sure he has the best loan, and at the same time, make sure the savings rates are good. He’s getting 1.35% from CBA and the ING Savings maximiser is 5.5%. Sure, there are few little things you have to do to get the rate but it’s small beer.
3. Get financial advice because the savings account interest rate and probably the account selected could be way better.
4. Become a CBA shareholder. The best time to do that is when the stock market crashes.
In 2020 when the Covid crash happened, the CBA’s share price fell from $91 in February of that year to $57 on March 27. If you’d had the courage to buy one of the best banks in the world (for investing in), you’d now hold a share worth $114! That’s nearly a 100% gain in three years!
Given the annual dividend for 2023 is $4.55, the annual income return in being a shareholder who bought on that day in Covid is $4.55 on $57, which is an effective interest rate of nearly 8%.
As I always argue, the best way to get even with a bank like the CBA is to become a shareholder. Even if you bought CBA at $114 today, the dividend yield would be close to 4%, and if you add in franking credits, for many it would be a 5% annual payback!
Last year, Commonwealth Bank announced a full 2022-23 financial year profit of a record $10.2 billion., proving that the bank is right for you as an investor, but as a saver or borrower, you really need to do your homework and shop around.
Being loyal to banks can be bad for your bottom line unless you’re very rich and you’re happy to arm twist your banker.