CBA Settles $249M Super Class Action; 500,000 Members to Benefit

Commonwealth Bank, Colonial First State Investments, and Avanteos Investments reached an in-principle $249 million settlement on August 25 to resolve a class action alleging members’ retirement savings were invested at below-market interest rates between November 2008 and September 2021. More than 500,000 superannuation members could benefit once the Federal Court approves the deal. The respondents deny wrongdoing but agreed to settle without admission of liability.

What the class action alleged

The case centred on cash and deposit investments through Colonial First State and Avanteos superannuation products: CFS FirstChoice, FirstWrap, and Commonwealth Essential Super. Members alleged their savings were invested with parent company CBA at rates lower than available elsewhere, costing them millions collectively. Slater and Gordon Lawyers also alleged CFSIL and AIL received undisclosed payments from CBA that incentivised them to place members’ money with the bank at reduced rates.

Why the settlement matters for super members

Small interest rate differences compound over decades in superannuation. Members can lose tens of thousands of dollars by retirement if trustees fail to pursue the best available rates, according to Slater and Gordon. The settlement will boost affected members’ retirement savings so it can grow into the future, the law firm stated.

What happens next

The settlement remains subject to Federal Court approval. CBA confirmed the in-principle agreement to the ASX last week. All three respondents continue to deny the allegations and make no admission of liability or wrongdoing. The case was launched in 2018 following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

CBA stock reaction and valuation

CBA.AX rose 1.2% to A$159.15 on the settlement news. Meyka rates the stock a B with a 12-month forecast of A$181.19, suggesting upside from current levels. However, the bank faces headwinds: Meyka’s DCF and PE metrics both signal a strong sell, while ROE shows a buy rating. The settlement does not require CBA to admit wrongdoing, limiting reputational damage.

Final Thoughts

The $249 million settlement resolves a major post-Royal Commission class action without CBA admitting fault, but underscores trustee duties to prioritise member returns. For CBA shareholders, the deal removes litigation risk while the bank’s valuation remains mixed on fundamental metrics.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.