CBA writes down software, sells Visa stake
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Commonwealth Bank has written down its capitalised software by $275m as the fast-changing technology environment has reduced the longevity of some of its digital and direct banking software. It amounts to about 12% of the bank's capitalised software balance, and a bit less than the $379m that it amortised in 2016 in the normal run of things.
As we wrote when ANZ did something similar (although somewhat larger) back in May, it means that ‘the investments were more expensive than expected and/or the money was spent badly'. We'll opt for the former in this case because CBA has a track record of leading innovation among the banks and we're happy to see it trying new things despite the fast-changing environment.
The software writedown will be offset in the accounts by a $278m profit on the sale of CBA's remaining shareholding in Visa Inc for $439m.
The stock is up 5% since CBA: Result 2016 back in August. HOLD.
Note: The Intelligent Investor Equity Income Portfolio owns shares in Commonwealth Bank. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.
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