ANZ’s share price is down 1.70%, trading at $29.64 in today’s market.
This follows concerns that ANZ Banking Group Ltd [ASX:ANZ] could lose its financial licence due to bank staff illegally giving personal financial advice, and selling the superannuation product ‘Smart Choice Super and Pension by ANZ.
ANZ’s share price had been increasing slightly over the last six months, until this news. It was up 6% overall since 23 February this year, which is very positive compared to Westpac and the Commonwealth bank, whose shares have been steadily declining in this same period.
Trouble still brewing for ANZ’s share price in wake of bank Royal Commission
ANZ is worried it could lose its licence after the Australian Securities and Investments commission (ASIC) was concerned that bank staff were breaching the law by giving personal financial advice, by helping customers swap their superannuation into ANZ super funds.
Before ASIC intervened and changed the way the bank sold the product, ANZ profited $3.6 billion from selling their Smart Choice Super product through an in-branch assessment known as ‘A to Z review’.
The danger would be that bank tellers mis-selling Smart Choice Super, with customers potentially ending up with a worse performing super fund.
Losing their financial licence would be an extreme outcome, and would certainly affect ANZ’s share price. But there are also some smaller risks with these doubts cast over ANZ.
Firstly it harms public trust which is something a bank giving financial advice certainly doesn’t want. And secondly it means that they will have a lot of work to present a worthy defence.
In July ANZ agreed to pay $1.25 million as part of an enforceable undertaking with ASIC, and staff are no longer able to discuss these superannuation products.
The bank has also budgeted $50 million in legal costs arising from the commission, but said it was ‘unable to predict the outcome of the inquiry or its impact on either the bank or the broader industry.’
ANZ set at cutting costs in new strategy
ANZ Chief Executive Shayne Elliott admits they have work to do in order to build a better balanced, better capitalised and simpler bank.
But it seems they might just achieve this. They have already undertaken non-banking operations, in the sale of ANZ’s six retail and wealth businesses in Asia. These businesses were intended to establish ANZ’s footprint in China, through the Shanghai Rural Commercial Bank.
Richard Wiles from Morgan Stanley said the move was reasonable in these difficult circumstances. While Mr. Elliot left investors with this note:
‘We expect revenue growth for the second half of 2018 to continue to be constrained by intense competition as well as the impact of increased regulation…’
Any further public scandals could indeed have an impact on ANZ’s share price.
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