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Australia’s Commonwealth Bank slapped with class-action suit

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SYDNEY: Commonwealth Bank of Australia was hit on Tuesday with potentially Australia’s biggest class-action lawsuit over a money-laundering scandal that has already smashed its share price and exposed it to billions of dollars in fines.


Litigation financier IMF Bentham Ltd said it would fund the lawsuit against Australia’s biggest bank, accusing it of making false and misleading statements and failing to disclose breaches of anti-money laundering rules for years.


A second lawsuit against the A$128 billion ($102 billion) lender, on top of one filed on August 3 by financial intelligence agency AUSTRAC alleging breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act, is fuelling investor concerns that the scandal may still have more shocks in store.


“Things can get worse before they get better, which means the underperformance of CBA... will continue into the next quarter,” said George Boubouras, Managing Director and Chief Investment Officer at Contango Asset Management, which owns CBA shares.


In addition to the two civil suits, CBA is being investigated by Australia’s banking and corporate regulators over the suspicious transfers cited in the AUSTRAC claim.


Investors are also worried that foreign regulators will pick up the case, as some of the money was sent offshore.


Velocity Trade banking analyst Brett Le Mesurier said investors were concerned the scandal could hurt earnings growth, because the bank was “looking inwards rather than outwards as they deal with this”.


CBA shares had some respite on Tuesday, rising 0.24 per cent against a 0.07 per cent fall in the wider market.


They have dropped 12 per cent since the money-laundering scandal erupted last month, wiping roughly A$17 billion ($13.55 billion) off the bank’s market value even though it reported its eight consecutive record cash profit on August 9. — Reuters


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