Commonwealth Bank of Australia (CBA) has paid a $100,000 fine from the corporate watchdog for an alleged failure to disclose a hike in its 2009 bad debt forecast ahead of a controversial $2 billion capital raising.
CBA on Wednesday said that while it agreed to pay the penalty imposed by the Australian Securities and Investments Commission (ASIC), that payment was not an admission of liability.
Nor could the bank's agreement to pay be taken as a finding that CBA had contravened the Corporations Act and its continuous disclosure rules.
ASIC had alleged CBA failed to notify the Australian Securities Exchange (ASX) after it became aware that its full year loan impairment expense (LIE) to gross loans and acceptances ratio to June 30, 2009 would rise by a material amount.
Last November, CBA notified the ASX its exposure to collapsed Lehman Brothers, Allco Finance Group Ltd and ABC Learning Centres Ltd would result in a full year 2009 LIE of between 40 and 50 basis points.
On December 16, 2008, the bank told the ASX the LIE ratio for 2009 would be around 60 basis points - several hours after announcing a $1.65 billion capital raising.
The capital raising had to be revised and replaced after some investors complained they had not been aware the bank had changed its LIE forecast before buying into the placement.
CBA changed investment banks, handing the deal to UBS which underwrote a new $1.65 billion placement at $26 a share, down from the initial price of $27 per share.
ASIC said on Wednesday that it believed CBA became aware of the changed forecast at 1500 AEDT on December 16 and was therefore obliged to immediately notify the ASX of what ASIC says was a significant deterioration in the expected LIE ratio, and therefore, price sensitive information.
ASIC says CBA did not notify the ASX of the change until about 7.14pm on December 16.
ASIC also said CBA has elected to comply with the infringement notice but, as stated in the Act, that compliance was not an admission of guilt or liability.
CBA chief executive Ralph Norris said on Wednesday: "Loan impairment expense is a single line item in the group's profit and loss statement and cannot be considered in isolation."
"As noted in our ASX announcement at the time, we were experiencing strong volume and revenue growth which, in our view, significantly offset the forecast increase in loan impairment expense, such that the net impact on our overall profitability was not material."
© 2009 AAP
