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Thoughts on CBA’s technology spend

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Thoughts on CBA’s technology spend

Hi James, CBA tech spend is approaching $2 billion pa - is the positive impact this might have on the bottom line reflected in the price? It seems to me that analysts (excluding MM) mostly treat Banks as lumbering out dated entities that will eventually disappear - Regards Michael.

Answer

Hi Michael,

CBA’s tech spend which is above the other banks is one of the main reasons why traditionally they have enjoyed better financial metrics and subsequently trade at a premium to the others and this in MM’s view will only become more important as technology and innovation underpins the future of banking. While we do not share the view you have outlined above that banks are outdated entities that will eventually disappear, they are likely to evolve in a few different directions but again as CBA’s investing for the future now it’s likely to pay major dividends in the years ahead.

I would also add that it wasn’t that long ago when many of these analysts you are referring to were writing off the banks during the damning Royal Commission but CBA has more than doubled from its COVID low posting fresh all-time highs in the process. We continue to like the banks generally and CBA specifically as excessive provisioning during Covid and now an economic tailwind provides clear support.

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Commonwealth Bank (CBA)
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