In mid-September, Commonwealth Bank of Australia (ASX: CBA) announcedthat it no longer intended to be in every sector of the financial servicessector after selling its insurance business for A$3.8bn to pan-Asianinsurer AIA Group. The bank is also looking to spin off (via a trade sale ormore likely an IPO) its global asset management business Colonial First StateAsset Management (CFSGAM). Based on a rule of thumb that asset managementbusiness is valued at 3-5 per cent of assets under management, CFSGAM could beworth A$6.5 to A$10bn. While these divestments are essentially a strategicrepositioning back to the group’s traditional core banking roots - and perhapsa tacit admission that it got “too big to manage” - the proceeds will providesignificant capital to shore up the balance sheet. How much CBA gets to keephowever, will depend on the way the bank resolves the AUSTRAC case intoallegations of 54,000 breaches of anti-money laundering and terror financinglaws.

 At first sight, it looks like the broader banking sector isstarting to feel the pressure of negative public opinion. In a surprise move, CBA announcedthat it would drop ATM fees for customers from other banks using its ATMs. Thisforced other banks to follow suit, with Westpac, ANZ, and NAB announcingquickly that they would also drop fees. While the move should be welcomed as asmall, but important win for customers, it will not have a material impact onbank profitability; in CBA’s case the estimated cost of the initiative at A$50mis immaterial relative to last year’s cash profit of A$9.88bn. With Australiansociety becoming increasingly cashless as direct transfer and “tapping”payments rise, ATM fees are becoming less costly to customers over time; since2011, ATM withdrawals have dropped by 22%. As a result, we see the move as ashrewd and well-timed piece of positive PR following a string of roughheadlines for the major banks, rather than evidence of a fundamental change inhow banks view customer relations. The real costs to customers lies in thebillions of dollars in credit card fees, home loan fees, and transactionaccount fees. Looking at the major financial stocks, we calculate that AMPLimited (ASX: AMP) offers the largest upside potential with ~18% total return,with Bank of Queensland (ASX: BOQ) offering the least upside with a forecasttotal return of 0.0%. See table below.