Should you continue to hold your Commonwealth Bank (CBA) shares?

Will O’Loughlin:

Question one. David from New South Wales. Hi, can you comment on the possible implications to CBA with regard to the money laundering problem please. I hold the stock and wonder if it would be better to sell out now and wait for any action from the regulators and/or litigators to run their course.

 

Sannon Rivkin:

 

We both may have a view. Look the stocks certainly be hit already hard enough to suggest that the market sees it as a problem. For me I guess it’s more, CBA has always had the culture, perception of the best bank in Australia, and certainly as far as customer service is concerned. And I guess, it’s not really that related but, that sort of impact on perception of the culture could have a long-term effect on the business as far as them losing market share. I don’t really see it, but it’s possible. Probably for me, the biggest factor is that maybe we’re going to see a very well respected, at least as far as performance goes now, CEO Ian Narev going.

 

So that, I think, would be a negative, but you know we’ve seen, obviously, a number of CEO’s at CBA. The previous one, Ralph Norris did a wonderful job, so they’re a lot of wonderful banking executives out there who would be very happy to take this job. So I think it’s the sort of thing, it’s in the papers, it affect the share price because it’s in the papers. But the actual real value destruction by what’s going on is probably going to be very small.

 

Will O’Loughlin:

Yeah I agree. The monetary impact of this case, I think, will be insignificant compared to the possible reputational damage, and it’s unfortunately giving the government cover to implement an investigation into the bank, but I do think that if the bank can rebuild their reputation, which they certainly can do, then the finances of the company will be relatively unaffected by this.