It’s been a good week for the Commonwealth Bank. Shares closed on Friday at $72.76, up a tidy 2% for the week, and its core home loans business is set fair. Its small army of shareholders, the cherished mum-and-dad investors, can rest easy.
Hang on a minute though. The Commonwealth? Isn’t that the bank that was described this week by the regulator as having a top-to-bottom management culture that is complacent, insular and incapable of learning from its mistakes? It is. And isn’t it also the bank that lost the details of up to 20m accounts but didn’t tell anyone? Correct. And, just to get this straight, isn’t it also the bank exposed by the royal commission as having charged fees for financial advice to dead people, in one case for a decade? Right again!
So why haven’t the shares crashed? The fact is investors don’t care about what happened at the bank a couple of years ago – the shocking data loss happened in 2016, for example, so in the view of financiers it’s old news. Shares in the Commonwealth – in common with all banks – have had a bit of a kicking in recent weeks, falling from the mid-$80 range to the low-$70s. In the market jargon, therefore, the downside has been priced in.
The mortgage business is a key consideration here. The outlook is still rosy for a division that supplies the bulk of Commonwealth’s very healthy annual profits of almost $10bn. ANZ said recently the percentage of bad loans had fallen, boosting the outlook for other banks. Also, the Reserve Bank kept rates on hold again this week, meaning that any possible rise in borrowing costs, and therefore a squeeze on mortgage holders, still looks a long way off.
Looking at the bank’s shares from the big end of town on Friday, you could argue that the only way is up. Despite all the bad news, the behemoth of Australian business continues to steam ahead. It remains, by some margin, the country’s biggest company by market value – worth around $130bn at the close on Friday. For perspective, that is a few billion more than Wesfarmers, Woolies and Telstra put together. The other three big banks – Westpac, ANZ and NAB – are also among the country’s top five companies. The only non-bank in there is BHP, so it’s hard to avoid the conclusion that the economy has been completely captured and is dominated by the interests of financial services.

"Since they escaped the global financial crisis unscathed, a myth of invincibility has grown up around Australia’s banks"
Another factor in this serene progress is that no one wants to believe Australia’s prudential regulator when it says the country’s biggest company is run by a bunch of smug, incompetent people who only care about their next bonus. The evidence from the royal commission and the Apra report – that the industry is out of control and staffed by sales people who are prepared to trample all over customers to bump up their commission – is damning. You might think the obvious conclusion – and one probably being drawn by voters, judging by Scott Morrison’s increasingly panicked-looking public utterances on the banks – is that things have gone fundamentally wrong with our financial services industry.
Instead, any old explanation will do.
Most risibly, some said there were too many inexperienced women at board level. Catherine Livingstone, Commonwealth’s chair, might be many things, but she’s not wet behind the ears in business, having been the boss of the fantastically successful ear implant firm Cochlear. Others said the real problem is that the Commonwealth was owned by the state some time back in the last century. Most hilariously, Tony Abbott reckons the banks have spent too much time focused on social issues like gay marriage instead of red-blooded pursuits like making stacks of cash.
You can laugh about it, but the unwillingness to accept the scale of the problem is no joke. Ever since they escaped the global financial crisis unscathed, a myth of invincibility has grown up around Australia’s banks. Even Peter Costello thinks that now. Profits have soared and, as manufacturing and retail struggle, the banks make up almost one-third of the value of the stock market. They were said to be well managed and well regulated, but the work of Kenneth Hayne and his commission has shown that’s not true.
The scary bit is that the royal commission highlighted mainly the bits that Morrison and Asic allowed us to see – terrible tales of people being lent far too much money and bad advice in the banks’ wealth divisions. A succession of middle managers have been put through the wringer by the commission counsel, Rowena Orr, while the people who are ultimately responsible for the lax standards and shoddy treatment of customers – the chief executives and board members of the banks – have not been held to account. Only a royal commission with its terms redrawn to look at the industry from the top down will finally allow us to see the whole picture.
Martin Farrer is a Guardian editor