Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (November 2003)
42 slides from Commonwealth Bank Of Australia's debt investor presentation, Nov 27, 2003
Slide 1: PERLS II Offer
en! Which/bank PERLS Il OFFER Perpetual Exchangeable Resettable Listed Securities Commonwealth Managed Investments Limited November 2003
Slide 2: Disclaimer
Disclaimer ‘his confidential presentation nas been prepares in November 200% py Commanwealth Managed Investments Limited (CMIL or Responsible Entity! as Responsible Ent forthe PERLS Trust in connection with a proposed offering of Perpetual Exchangeable Resettable Listed Securities (PERLS Il). This p
Slide 3: Offer summary
en! Which/bank Offer summary
Slide 4: Offer summary
Offer summary » Units in PERLS Il Trust issued by CMIL : The proposed Offer is conditiona? on obtaining regulatory approvals and finalising pricing through the bookbuild : Offer of up to $750m with ability to accept over-subscriptions of up to $250m » Floating rate securities set at a margin over 80
Slide 5: CBA - review of operations
nen Which’ bank CBA - review of operations
Slide 6: Australia's economy has been resilient
Australia’s economy has been resilient AUSTRALIA: HOW WE io COMPARE i united states Australia BI ie Average Average Reduction Increase in Reduction Average growth rate inflation in current in budget productivity rate unemploy- account deficit growth ment rate deficit Source: RBA, OECD. Data is for c
Slide 7: Margins have been squeezed
Me PCE SPV EES Pick MOTE SEP BOE BrCen esr margins have been squeezed Gg 30 Credit {3 month ended annual rates) Average Operating Margins* 4 Major Banks {1997 - 2002} Other personal SO ee 20 -- fi | ~ ge - - - fA ef ------ BoP Be ‘ 3.54 10 --- 3.3" 0 A Vy 3.1] Business ~10 29 ——— — Jul Jub Jule Jule
Slide 8: Demographic changes place emphasis on self funded retirement
Demographic changes place emphasis on self funded retirement Projected Size of Various Product Segments Funds Management Life Insurance 54 i} Value af June 2002 @ Projected Value to June 2012 Ri Value af June 2002 @ Projected Value to June 2012 $ Biftion $ Billion Annuities — Ailoc. Wsale Corp. Unit
Slide 9: Underlying Growth of 9%
Underlying Growth of 9% A $m 2900 5 f \ 2800 | mmm a First Time Expenses 2700 4 . (181) Investment Returns 73 2,57 2600 + - ° 8 2500 4 2.468 : ~ Banking . 2400 4 334 Life Insurance 17 2300 5 2200 4 a Underlying Underlying Cash Profit Profit Jun-02 Profit Jun-03 Jun-03 Which bank coments iy 9
Slide 10: FY03 result: 3% improvement in cash profit and 9% improvement in underlying profit
FY03 result: 3% improvement in cash profit and 9% improvement in underlying profit dune 2002 Change Net Profit After Tax {cash basis)* $2.501m 3% Net Profit After Tax {undertying)** $2,468m 9% “ie excluding appraisal value uplif/reduction (2003: -$245m; 2002: $477m) and goodwill amortisation {2603:
Slide 11: Key shareholder ratios improved
Key shareholder ratios improved dune 2002 Change Oy Earnings per Share 197 cents 3% oy Dividend per Share 180 cents 3% Oy Dividend Payout Ratio 76% Y oy Return on Equity 13.12% 2% OG, oy Tier 1 Capital Ratio 8.78% 3% For more information, visit: www.commbank.com.au/shareholder * This ratio does not
Slide 12: Another record dividend
Another record dividend *Final dividend of 85 cps, up 4% on pcp *Payout ratio of 75.9% remains highest among major banks Which bank _ + The Bank’s final dividend: 85 cents fully franked. + Total full year dividend to 154 cents. + Dividend payout ratio of 76% remains high relative to peers.
Slide 13: Further improvement in the portfolio
Further improvement in the portfolio Top 20 Exposures to Corporates (Committed) Well Diversified Portfolio by Industry {Top 20 exposures are 3.3% of total committed Energy Telcos technology exposures of $229 diflion) Leasing Aviation EE z Construction Other Commercial Finance Agriculture Government
Slide 14: Strategic initiative targets were achieved and the Banking cost to income ratio improved
Strategic initiative targets were achieved and the Banking cost to income ratio improved Costs Benefits NetCost Annual Benefit $m $m $m $m Target 227 84 143 159 Revenue: $40m Outcome 214 69 145 (165 > Costs: $125 6% 10% improvement over two years . 4% 541 52.0 dun-01 dun-02 dun-03 S | Ronmoreealth i
Slide 15: We have a successful track record on execution
We have a successful track record on execution. Transformation of service is the next phase Privatisation |. Conmonyealth 221k dy 45 Which bank
Slide 16: Net interest income and other income
8.000 4 7,566 4 7,060 6,506 Net Interest Income 316 Commission & Other Fees 184 Trading — Income Lending 13 Fees 34 Jun-02 Which bank Jun-03 *Sale of strategic asset in 2002 Gonmonvenaltis ini oy 16
Slide 17: Underlying profit to cash profit, Jun-02 to Jun-03
ESE F WEEENE RD STSCAE EGER NO EEENC EER FOE Wess. 400 350 300 200 150 100 Which bank 37% decrease from underlying business 360 (109) (46) a... = Underlying Net Operating OE} Tax Underying FirstTime S‘hotder Cash Prefit Profit Operating Expense Profit Expenses Invest Jun-03 Jun-b2 Income Jun-03 Retu
Slide 18: Profit by region
$m 64 120 4 41% increase from underlying business 100 4 6 (30) 44 _ ao | —_ Underlying Asia NZ Australia Undertying S'holder Cash Profit Profit Jun-02 Profit Jun-03 Invest dun-03 Retuins Which bank
Slide 19: Capital ratios continue to strengthen
Capital ratios continue to strengthen 8.5% 7 6.96% 0.56% 0.51% 8.03% 8.0% 7.5% 7.0% 6.5% 6.0% Tier 4 US Trust PERLS Il Proforma 30 dune Preferred (net Tier 1 2003 Securites AST42m) 30 June 2003 Bank Credit Rating Fitch Moody's S&P Short Term Fit P41 Ait Long Term AA (Stable) Aa3 {Stable} | AA- {Stab
Slide 20: September 2003 Quarter: Performance
September 2003 Quarter: Performance » Continued high levels of credit growth » Deposit growth above expectations # Strong investment returns :» Increased FUM » Growth in insurance premium income Gonmonyeeaith Sark dy 20 Which bank In relation to performance for the 1st quarter of 2004, we have exper
Slide 21: Transformation
transiOrmation Customers are saying: “Know me, give me what I want and do it reliably” Which bank Program called ‘Which new bank’ Three themes: customers, people and processes: « We want customers to experience service that is responsive, convenient and reliable. Customers are saying, “know me, give
Slide 22: Financial impact and outcomes
Financial impact and outcomes Subject to current market conditions continuing Over the next three years we will: Over the next three years this wifl result in: Cash EPS growth exceeding 10% CAGR » Redirect the normal project spend of $6006m 4-6% CAGR productivity improvements » Spend an additional $
Slide 23: Investments & Benefits
Investments & Benefits Initiatives 570 425 225 1,226 Branch refresh 90 85 85 286) Total investment Spend {pre tax} 650 546 310 4,480 [Estimated Senefits {pre tax) | 200] 620] 900} (1) Estimated benefits are recurring and continue to grow beyond 2006. They are comprised of 50% cost savings and 50% re
Slide 24: Summary
Summary « Operating Environment: . Economy resilient - Home loan growth continues Favourabie outlook for Funds Management and Life insurance » Performance: 9% underlying profit growth Strong credit quality and capital position . Good September 2003 quarter » Which new Bank: Launched September 2003 S
Slide 25: PERLS II - Offer Structure
wen! Which’ bank PERLS Il — Offer Structure
Slide 26: PERLS II Structure
PERLS I! Structure Investor Heturns. 2 a DOCMCREAEOCAREE — geeys Conmonwealth 24k iy 26 Which bank * Where the PERLS were preference shares directly issued by the Bank, the PERLS II use a structure very similar to the Westpac Firsts in order to get desired regulatory outcomes - Tier 1. This is refle
Slide 27: Key terms PERLS II
Key terms PERLS I! { Rate x(t Corp Tax Rata) ant to institutional bookbulld - ~~ - ers have the right to Date — Gonmonwealth aan <p 27 Which bank Basic Structure is a reset preferred security, 5 year * You will see we kept many similar terms to PERLS including the $200 face value * Perpetual, subjec
Slide 28: Key terms PERLS II (cont'd)
Key terms PERLS II (conta) ange on: each Rollover Date -~ - changed, subject to k has the option to: ~~ nt} equal fo issue Price ©. eliver cash equal to the Conmonwealth aan “py 28 Which bank * Atreset date, the bank can the margin, payment dates subject to APRA limitations * Ifthe Investor chooses
Slide 29: Payment of Distributions
Payment of Distributions » Payment of Distributions is subject to: . Declaration of interest on the Convertible Notes by Directors of CBA Payment not exceeding Distributable Profits of CBA APRA not stating that payment would result in PERLS f! no longer being treated as Tier 1 Capital APRA not objec
Slide 30: Reset of Terms
Reset of Terms : Prior to each Rollover Date, the Bank can notify PERLS II Holders that it intends to reset the terms of the PERLS II : Resettable terms inciude: Next Rollover Date - Margin, can be decreased on any Rollover Date - On each Rollover Date on and after year 15, the Bank may increase or
Slide 31: Holder Exchange
Holder Exchange » PERLS Il holders can request exchange in the following circumstances: Rollover Date Change of Control Event If Distributions are less than 100% franked : Where PERLS II holders request exchange, the Bank can choose to: Acquire all of Holder's PERLS II in consideration for ordinary
Slide 32: Bank Exchange
Bank Exchange » The Bank can notify PERLS II Holders that on a: Roilover Date, or Tax or Regulatory Event, or Bank Exchange Event, it intends to acquire: All or some (pro-rata) of each Holders PERLS II in consideration for ordinary shares (in very limited circumstances a conversion discount may not
Slide 33: Automatic Exchange into ordinary shares
Automatic Exchange into ordinary shares » APRA Event (requirement for more regulatory capital) » Default Event: Payments are made in breach of Dividend Stopper agreement The Bank ceases all of ifs business The Bank is wound-up, goes inte liquidation, or administration Gonmonyeeaith Sark dy 33 Which
Slide 34: PERLS vs PERLS II
PERLS vs PERLS I! xpected fo be in the range. .. f B.80% 10 1.05% 00% (ie no dividend factor) = Below $2.00.on exchange |”. Exchange into ordinary Shares Yes Conmonwealth ak Gy 34 Which bank * In this table we have shown that the PERLS Il are very similar to PERLS, in an business as usual situation,
Slide 35: Pricing benchmarks
Pricing benchmarks 12% - a Pricing Benchmarks WBC (USD750m)} (Ae) NAB (GBP400m) 21.0% | '~PERLSAI * id 4 WEKPA(A) § 4.) bookbuild ANZ (USD750m) . a ANZPA(A} range ey fos J CBA{USD550m)}. 3 . (>) < ANZ {USD360m)} (80.8% | ceaparay a aa eo c es Se Bo £ 3S % fom 4 A 0.0% 1 1 1 1 r 1 5 Aug-04 Apr-07 Jan
Slide 36: Bookbuild Process
en! Which’ bank Bookbuild Process
Slide 37: Overview of the proposed Issue
Overview of the proposed Issue : Offer of up to A$750m PERLS Il, with capacity to accept over-subscriptions of up to A$250m » To be issued by Commonwealth Managed Invesiments Limited (as Responsible Entity for the PERLS 1} Trust} » Offer to public through PDS to be lodged with ASIC » Joint Lead Mana
Slide 38: Bookbuild details
Bookbuild details » The margin used to calculate the distribution rate will be determined by a bookbuild process. » The indicative range for the bookbuild will be in terms of a Margin within the range of 80bps and 105bps » Co-Managers and participating brokers required to lodge their bids by diam Fr
Slide 39: Syndicate structure
Syndicate structure Joint Lead Managers and Bookrunners CommSec ay Deutsche Bank LZ Co-Managers Citigroup Global Markets Goidman Sachs JBWere UBS Private Clients Australia ‘Gommonvecalth Sank iy 39 Which bank
Slide 40: Indicative timetable
Indicative timetable Which bank
Slide 41: Contacts
en! Which’ bank Contacts
Slide 42: Contacts
Contacts CommSec Equity Capital Markets Tony Kench {02) 8292 4307 David Grimes {02) 8292 4304 Institutional Sales Nik Persic {02) 9312 3998 Chris Bagley {03) 9675 7343 Debt Capital Markets Shane Clinton (02) 9312 0018 Which bank Deutsche Bank Investment Banking Guy Fergusson Naomi Flutter (02) 9258
Commonwealth Bank of Australia — Debt Investor Presentation (November 2003) on 6ix