Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (August 2023)
74 slides from Commonwealth Bank Of Australia's debt investor presentation, Aug 9, 2023
Slide 1: Fixed Income Investor Discussion Pack
Fixed Income Investor Discussion Pack For the full year ended 30 June 2023 Commonwealth Bank of Australia
Slide 2: The Australian economy: cost of living challenges
The Australian economy Cost of living challenges Inflation off the peak, but still too high1 Goods prices lower, services prices sticky2 Not helped by weak productivity growth2 Inflation (annual % change) Inflation (annual % change) Labour productivity (GDP per hour worked) 9 % Index Quarterly CPI 1
Slide 3: The Australian economy: economy has been resilient
The Australian economy Economy has been resilient Labour market remains tight1 Participation rate high, more people want to work1 Wages rising as well2 Labour market Participation rate Wages (annual % change) 600 8 % % 4 400 7 68 200 6 67 3 Wage Price Index 5 66 0 65 4 2 -200 64 3 Participation rate
Slide 4: Material lift in interest rates, economy to slow from here
The Australian economy Material lift in interest rates, economy to slow from here The cash rate hiking cycle has been large1 Consumer sentiment is weak2 Consumer spend patterns shifting3 RBA cash rate (with CBA Economist forecasts) Consumer sentiment Household spending per capita (index = 100, Q1 19
Slide 5: Interest rate impact to continue due to lags
The Australian economy Interest rate impact to continue due to lags Labour demand weakening1 Unemployment to rise from here%2 GDP growth to slow – recession risks lift3 Labour demand Unemployment rate (with CBA forecast) % GDP (quarterly and annual change with forecast) % Index 8 15 250 Applicants p
Slide 6: Key Australian economic indicators (December CY)
Key Australian economic indicators1 (December CY) GDP % Headline CPI % Unemployment rate % Calendar year average Year on year, December quarter December quarter average GDP Nominal GDP 7.8 6.8 11.0 11.9 4.7 4.2 4.5 3.5 3.8 3.5 5.2 6.0 3.0 3.7 1.8 0.9 1.4 1.4 -1.1 2020 2021 2022 2023 2024 2020 2021 2
Slide 7: Key New Zealand economic indicators (June FY)
Key New Zealand economic indicators (June FY) GDP % CPI % Unemployment rate % Financial year average Year on year, June quarter June quarter average GDP Nominal GDP 7.3 8.2 6.0 8.1 4.8 6.0 5.9 5.6 4.0 4.1 4.0 4.9 4.0 3.6 3.2 3.3 3.0 3.3 1.2 2.3 0.1 1.7 1.5 -0.7 2019 2020 2021 2022 2023 2024 2019 202
Slide 8: Summary
Summary
Slide 9: Building a brighter future for all
Building a brighter future for all Supporting customers and communities • Focused on proactively supporting customers in need Helping • Engaged over 3 million customers with money management tools customers today • Prevented and recovered over $200 million in scams in FY23 • Helped more than 150,000
Slide 10: Financials
Financials1 Cash NPAT up 6% over the year, but down 3% in 2H23 as margins peaked Operating income2 Operating expenses2 Pre-provision profit2 Cash NPAT Margin recovery and Inflation and Strong underlying Includes normalisation in organic volume growth additional staff performance loan impairment expe
Slide 11: Volumes
Volumes Disciplined and deliberate volume growth vs PCP ‘000 Balance growth vs system1,2 Retail Jun 23 10,677 Jun 23 vs Jun 22 transaction +8% accounts3 Jun 22 0.8x 9,920 ex. Unloan & BW ‘000 Business Jun 23 1,138 transaction Jun 22 +9% 1,042 1.0x 0.8x 0.7x 1.4x accounts $bn IB&M FY23 73 funding +$1
Slide 12: Group margin – 12 months
Group margin – 12 months Benefits from rising rates partly offset by ongoing competitive pressures FY24 considerations • Intensity of home loan and deposit price competition • Rate of customer deposit switching • Higher wholesale funding costs • Outlook for cash rate, replicating portfolio & equity
Slide 13: Strength – balance sheet
Strength – balance sheet Long-term conservative balance sheet settings further strengthened – well placed in an uncertain context Deposit funding Long-term funding Liquid assets Capital % of total funding Weighted average maturity, yrs Average, $bn CET1 ratio, % Level 2 12.2% 2 75% 5.5yrs $189bn ex
Slide 14: Higher rates unevenly felt
Higher rates unevenly felt Challenging environment for many households Home loan balances 1 Deposit balances2 Change in savings3 Change in spending4 Distribution by customer age % vs. last year YoY, per active customer Last 3 months Last 4 weeks Age, years 3.2% 18-24 -6% -0.2% 1.5% 25-34 23% 11% -3%
Slide 15: Credit risk
Credit risk Impairment expense normalising – increase in arrears and TIA off low base Loan impairment expense Arrears2 Troublesome and impaired assets Loan loss rate, bpts1 90+ days $bn Personal loans Credit cards Home loans3 TIA % of TCE (bpts) FY21 FY22 FY23 Historic avg: 0.91% Consumer 4 (7) 11 0
Slide 16: Provisioning
Provisioning1 Increased provisions for impact of higher rates – now 1.64% of Credit RWA Total credit provisions Provisions and scenarios $bn Jun 23 TP/CRWA: 1.29% 1.38% 1.64%2 7.9 Jun 23 $5.95bn $5.95bn 5.54 4.80 2.92 2.75 Corporate 3.8 6.9 Dec 22 5.5 Pre 2.79 3.03 Consumer 3.5 COVID-19 $bn $bn Jun
Slide 17: Why CBA? Leading franchise – leading returns
Why CBA? Leading franchise – leading returns Consumer MFI share1 (%) Home lending share2 (%) Household deposits share3 (%) Business MFI share1 (%) Deposit funding Peers as at March 20234 75% 70% 65% 65% 34.6% 25% CBA Peer 3Peer 1Peer 2 25.4% 27% 19.9% 20% 16.4% 21% 17.0% 16.8% 12.1% 11.8% 14% 13% 14
Slide 18: Home loans – CBA
Home loans – CBA1 A balanced approach to portfolio quality, growth and returns Portfolio1 Jun 22 Dec 22 Jun 23 New business1 Jun 22 Dec 22 Jun 23 10 Total balances – spot ($bn) 556 570 584 Total funding ($bn) 76 77 72 2,9 Total balances – average ($bn)2 546 562 577 Average funding size ($’000) 394 4
Slide 19: Home loans – resilience
Home loans – resilience1 Portfolio continues to demonstrate resilience Customers in advance2 Average payments in advance2,3 Dynamic LVR4 % of customers # of payments Portfolio averages 80% 37 36 36 53% 78% 78% 78% 49% 44% 45% 29 Jun 20 Jun 21 Jun 22 Jun 23 Jun 20 Jun 21 Jun 22 Jun 23 Jun 20 Jun 21 J
Slide 20: Business Banking
Business Banking Extending leadership through strong customer relationships, continuous innovation • #1 NPS1 MFI share1 Differentiated customer • #1 Digital NPS1 proposition • #1 in Business Branch NPS1 25.4% • #1 MFI share1 Leading customer • #1 deposits market share2 franchise • >1m transaction ac
Slide 21: Global best digital experiences
Global best digital experiences Market leading digital assets Net Promoter Score1 Monthly transactions Digitally active customers6 Digital transactions Consumer mobile app via app5 % of total - by value7 Jun 23 26.2 $78.6bn $78.6bn 8.7m 75% 8.7m Peers 70 72 61.3 8.0 7.6 18.8 48.1 15.7 14.4 CBA Jun 2
Slide 22: Global best digital experiences: history of innovation
Global best digital experiences Building on a history of innovation Strong foundations Establishing leadership Reimagining banking Launch of Market first Partnering CommBank x15ventures offerings with industry app 5.0 ↑ leaders Building a First major bank Making pipeline of new to offer: Providing m
Slide 23: Our reporting suite
Our reporting suite We are committed to transparent reporting and align with global best practice and stakeholder feedback Global principles and policies We are signatories or members of programs We provide transparent reporting on our that align with our values and sustainability progress in line w
Slide 24: Our commitment to sustainability
Our commitment to sustainability Building a brighter future for all Climate Engaging Supporting Strengthening Conducting strategy our people our customers our communities business responsibly • Set financed emissions targets • 79% employee engagement, • Launched CommBank Safe Hub • Launched our FY23
Slide 25: Strengthened settings, supporting sustainable returns
Strengthened settings, supporting sustainable returns Resilient under a broad range of scenarios Strengthened settings Supporting sustainable returns Net interest earnings Strong organic capital Healthy franking Loan loss Improving ROE supported by generation funding account surplus – provisions wel
Slide 26: Funding, Liquidity & Capital
Funding, Liquidity & Capital
Slide 27: Funding overview
Funding overview Resilient balance sheet with significant excess liquidity Funding composition Wholesale funding Funding profile Deposit growth supporting 75% of funding Weighted to long term TFF refinance to be managed across FY24 – FY25 period % of total funding Maturity3 FY23 Short-term 8% 8% 7%
Slide 28: Deposit funding
Deposit funding Highest share of stable customer deposits in Australia Customer deposits vs peers1 Customer deposits by segment4 ($bn) ($bn) % of 778 800 819 total 68% 75% 65% 70% 65% 78 funding ASB & Other 73 77 9% CAGR 819 IB&M 151 153 162 20% 3% 185 649 628 570 30% 575 BB 222 227 228 28% Other de
Slide 29: Liquidity
Liquidity Disciplined approach to liquidity risk management Liquidity Coverage Ratio (LCR)1 Liquid assets1 Retail and SME deposits Jun 2023 (Qtr avg) Jun 2023 (Qtr avg) ($bn) Cash Deposits in NSFR2 ($bn) Govt, semi As at June 2023 CBA 135% 271 & other 350 Peers as at March 20231 Peer 3 202 112 186 1
Slide 30: Wholesale funding
Wholesale funding Wholesale funding is diversified across differing products, currencies and tenor Portfolio mix Short-term funding by product $bn Certificates of deposits 62% Long-term funding1 147 55% Commercial paper 12% Short-term funding2 71 26% Central Bank deposits 18% MTN 5% Term Funding Fac
Slide 31: Capital – total capital
Capital – total capital Well placed to meet future APRA requirements for loss-absorbing capacity (LAC) • Total capital at Jun 2023 of 20.0%, $8.4bn above 1 Jan 2026 minimum of 18.25%. • Tier 2 at Jun 2023 of 5.5% exceeds Jan 2024 requirement of 5.0%. @ 5% by @ 6.5% by $bn 20.0% 1 Jan 2024 1 Jan 2026
Slide 32: CET1 – International
CET1 – International APRA’s revised capital framework remains more conservative than Basel framework CET1 International Adjustments1 Level 2 1.8% Definition Risk weighting equity investments, deferred tax assets, capitalised expenses which are fully deducted from CET1 of Capital under APRA rules 19.
Slide 33: Capital – regulatory changes
Capital – regulatory changes Basel III reforms in Australia finalised and a number of regulatory changes in progress Change Implementation Details • Higher regulatory capital buffers, with the CCyB default level set at 100 basis points for all ADIs and the CCB increasing by an additional 125 basis p
Slide 34: Financial Overview
Financial Overview
Slide 35: Overview – FY23 result
Overview – FY23 result1 Key outcomes summary Financial Balance sheet, capital & funding Statutory NPAT ($m) 10,188 +5.3% Capital – CET12,6 (Int’l) 19.1% +50bpts Cash NPAT ($m) 10,164 +5.9% Capital – CET12 (APRA) 12.2% +70bpts ROE % (cash) 14.0% +130bpts 1,253 +3.1% Total assets ($bn) EPS cents (cash
Slide 36: Operating income
Operating income1 Margin recovery and volume growth, partly offset by lower other operating income • Impact of divestments (incl. Bank of Hangzhou and General Insurance) • Lower equity accounted profits, and • Reduced CommSec equities trading income, partly offset by • Volume growth2 +7.9% • Higher
Slide 37: Operating expenses
Operating expenses1 Inflation, volume & technology investment driving cost growth – other uplifts more than offset by productivity Cost to Income1 45.7% 42.8% Contribution to mvt: +4.1% +1.0% +0.9% +1.4% (1.9%) (204) 154 +5.5% 105 101 451 11,646 • Increased technology spend on cyber security, frauds
Slide 38: Capital
Capital Strong capital position maintained Movements in bpts Level 1 Level 1 12.5% ~12.3% 42 (26) +12.2% (6) ~(20) ~12.0% 12.1% ~$9bn ~$8bn surplus surplus 11.4% Cash NPAT 104 10.25% RWA 14 APRA minimum2 1H23 Dividend (DRP neutralised) (76) Dec 22 1 Jan 23 Organic On-market Other Jun 23 $1bn Jun 23
Slide 39: Provisioning through the cycle
Provisioning through the cycle Forward-looking approach – builds higher provisions in advance of credit deterioration • AASB 9 requires a forward-looking approach to loan loss Economic cycle provisioning. GDP • This is achieved through the use of forward looking adjustments (FLAs) and multiple econo
Slide 40: Loan losses
Loan losses Normalising loan impairment expense for FY23 Loan loss rate1 Loan loss rate by business unit1,2 bpts bpts 13 11 Consumer Corporate 13 17 FY22 FY23 11 12 41 1H23 2H23 22 33 25 76 12 21 20 19 50 12 43 16 16 15 15 16 12 24 7 6 6 23 13 11 20 8 10 14 4 26 26 4 15 17 19 17 18 18 18 18 18 17 16
Slide 41: Provisions
Provisions1 Provision coverage of 1.64% Provision coverage2/CRWA Provisions by stage % Credit Credit Stage 2 exposures Total exposures provisions by credit grade3 provision 1.64 1.52 $m Jun 22 Jun 23 Jun 22 Jun 23 $188bn coverage 1.45 8 Weak 1.29 Stage 1 914,883 921,565 1,313 1,709 $142bn Collective
Slide 42: Balance sheet
Balance sheet Continued growth in key markets Jun 23 vs Jun 23 vs $bn Jun 22 Dec 22 Jun 23 Dec 22 Jun 22 Group lending +5.4% Home loans 622.0 639.3 652.2 2.0% 4.9% Consumer finance 16.5 17.0 17.0 - 3.0% +2.2% Business loans1 148.9 156.5 165.4 5.7% 11.1% 910.5 930.8 Institutional loans 95.5 97.7 96.2
Slide 43: Volume growth
Volume growth Targeted growth across products Home lending1,2,3 Business lending1,2,4 Household deposits1,5 Business deposits1,6 CBA CBA (excl. IB&M) CBA CBA CBA excl. Unloan and BW CBA (incl. IB&M) System System System System (incl. Institutional lending) 2.5% 5.0% 4.9% 11.4% 7.5% 0.7% 3.7% 8.5% 8.
Slide 44: Market share
Market share1 Strong market shares Home lending2,5 Household deposits4,5 % Jun 22 Dec 22 Jun 23 40% CBA Peers 40% CBA Peers Break in series Home loans – RBA2 25.1 25.1 25.1 Break in series from Jun 21 Break in series from Jun 21 30% Break in series from Jul 19 30% from Mar 19 Home loans – APRA 4 25.
Slide 45: Deposit switching
Deposit switching Reduction in rate of switching in 4Q23 Domestic retail deposits1,2 Domestic business deposits1,2,3 ($bn) ($bn) Non-interest bearing mvt %4 Non-interest bearing mvt %4 1Q23 2Q23 3Q23 4Q23 1Q23 2Q23 3Q23 4Q23 (1.3%) (5.3%) (7.5%) (4.1%) (4.1%) (3.5%) (8.5%) 1.0% 189 251 256 257 185 2
Slide 46: Deposit composition
Deposit composition Increasing term deposit mix Domestic retail deposits1,2 Domestic business deposits1,2,3 ($bn) ($bn) $416bn $326bn $391bn $312bn $356bn 14% 16% $330bn $331bn 17% $267bn 20% 15% $233bn 10% 12% 18% $197bn 12% 62% 11% 57% 54% 57% 61% 62% 60% 67% 66% 62% 36% 31% 24% 27% 24% 21% 27% 21
Slide 47: Cost approach
Cost approach Ongoing productivity savings creating capacity for long-term investment Cost reduction Investment spend Cumulative savings Cost approach Shift to productivity & growth Capitalised software ($bn) 2.1 2.2 1.9 1.9 1.8 1.7 1.3 1.4 1.4 • Simpler, more efficient FY15 FY16 FY17 FY18 FY19 FY20
Slide 48: Asset Quality
Asset Quality
Slide 49: Total committed exposure
Total committed exposure Close monitoring of key sectors Provisions to total Group TCE ($bn) TIA ($bn) TIA % of TCE committed exposure % Dec 22 Jun 23 Dec 22 Jun 23 Dec 22 Jun 23 Dec 22 Jun 23 Consumer 765.6 776.8 1.9 2.0 0.2% 0.3% 0.4% 0.4% Government administration & defence 233.6 231.3 0.0 0.0 0.
Slide 50: Commercial property
Commercial property Portfolio weighted to NSW – impaired exposures low (0.03% of the portfolio) • Exposure growth has continued to moderate consistent with broader market conditions which are evidencing low commercial property sales volumes, and low levels of Group exposure Jun 22 development approv
Slide 51: Entertainment, leisure & tourism
Entertainment, leisure & tourism Improving trends evident but uncertainty remains Group exposure Jun 22 16.1 • Diverse industry with many sub-sectors with distinct challenges. 14.8 Dec 22 14.0 Jun 23 • Growth has been predominately in the accommodation and hospitality sectors, supported by well secu
Slide 52: Retail trade
Retail trade Household spending remains high despite cost of living pressures Group exposure Jun 22 Dec 22 • Household spending growth has moderated from high levels as 15.4 Jun 23 interest rate rises temper demand in discretionary segments. 13.6 14.7 32.0 29.2 29.6 • Discretionary retail segments a
Slide 53: Construction
Construction Sector remains challenged Jun 22 Group exposure Dec 22 • Building construction performance was challenged as low margin and Jun 23 in many cases non-profitable fixed-price contracts are digested. 11.2 11.8 11.8 • Labour shortages, raw material delays, weather events, rising costs 7.1 5.
Slide 54: Mining, oil & gas
Mining, oil & gas Managing sub-sector exposures in line with strategy, stable portfolio performance Group exposure Jun 22 67.3 68.0 66.3 Dec 22 7.8 7.5 7.4 Jun 23 • Exposures of $7.4bn (0.5% of Group TCE); overall exposure remained largely unchanged with further reductions in oil & gas facilities. 0
Slide 55: Consumer arrears
Consumer arrears1 Uptick from historical lows ASB 6.0% Credit cards Personal loans CBA 5.0% Group 30+ days Group 30+ days Group 5.0% 4.0% Bankwest 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% Jun 19 Jun 20 Jun 21 Jun 22 Jun 23 Jun 19 Jun 20 Jun 21 Jun 22 Jun 23 Credit cards Personal loans Group 90+
Slide 56: Home Lending
Home Lending
Slide 57: Housing sector
Housing sector Home prices rising due to supply and demand imbalance Monthly home prices rising since March1 Driven by low stock on the market1 Home lending lower, but stabilising2 Dwelling prices (8 capital cities) CoreLogic total listings (rolling 4 weeks, combined capitals) Housing loan approvals
Slide 58: Home loans – growth
Home loans – growth Strong market share position maintained in a challenging context Consistent market share performance1 Net growth driven by new fundings2 New fundings3 149 94 $bn 65 76 76 77 72 CBA CBA Peer 1 Peer 2 Peer 3 1H21 2H21 1H22 2H22 1H23 1H23 Group (ex Bankwest) 149 Internal Refinance 1
Slide 59: Home loans – mix
Home loans – mix1 Rising interest rates have driven a shift from fixed to variable loans – fixed rate expiries set to peak in 1H24 Fixed vs variable rate stock and flow2 Fixed rate expiry schedule Variable Previously expired • ~90% retention rate Fixed • 30+ arrears: segment 0.92% vs portfolio 0.92%
Slide 60: Home loans – resilience
Home loans – resilience Strong repayment and savings buffers in place Repayment buffers – 33% more than 2 years in advance1 Offset account balances ($bn) (Payments in advance 2, % of accounts) Linked to Principal and Interest Linked to Interest Only Jun 22: 34% 6% 6% 6% 11% 15% 22% 70 69 66 64 57 57
Slide 61: Home loans – resilience
Home loans – resilience1 87% of the book originated under tightened standards since FY16 Key serviceability changes by year2 New loan assessment (from FY16)3 • Increased serviceability buffer & buffers on existing debts • All income used in application to assess serviceability is verified • Removed
Slide 62: Home loans – resilience
Home loans – resilience1,2 Targeted support for those customers in the highest risk segment (~0.3% of book) Portfolio Risk profile $494bn $24.3bn4 5% $1.6bn (0.3%)5 DLVR > 90%, no LMI Exposures with the capacity to deleverage 6% $2.7bn (0.5%)5 DLVR 80-90%, no LMI or reduce expenditure3 Higher risk $
Slide 63: Home loans – resilience
Home loans – resilience1 Portfolio DLVR remains strong at 45% Negative equity2 Dynamic LVR bands3 Proportion of balances in negative equity % of total portfolio balances Average dynamic LVR4: • 56% of customers ahead of repayments 70% Jun 22 44% Jun 22 • 24% of home loans in negative equity have Len
Slide 64: Home loans – capacity
Home loans – capacity1 Higher serviceability buffers and interest rates are impacting borrowing capacity Borrowing capacity reducing2 Driven by increase in serviceability buffer and interest rates Change in maximum borrowing capacity2 – Indexed Dec 16 (Loans assessed based on the higher of the custo
Slide 65: Home loans – resilience
Home loans – resilience1 Impaired loans and portfolio losses remain low Impaired home loans2 Impaired home loans – by State3 Increased impaired home loans mainly driven by ASB impairments (+$245m) due to Other increased hardship support mainly driven by the rising rate environment and 10% NSW cyclon
Slide 66: Home loans – resilience
Home loans – resilience Arrears remain low Arrears by portfolio Bankwest Arrears by product Arrears by repayment and interest type Interest Only Group 90+ days 90+ days1 90+ days1 CBA Principal & Interest Group 0.8% 1.0% Fixed 0.8% ASB Variable 0.8% Portfolio 0.6% 0.6% 0.6% 0.4% 0.4% 0.4% Owner Occu
Slide 67: Sources, Glossary & Notes
Sources, Glossary & Notes
Slide 68: Sources and notes
Sources and notes Slide 11 1. Home lending source: RBA Lending and Credit Aggregates. Business lending source: Business including select financial businesses. From April 2023 RBA Lending and Credit Aggregates excludes lending to warehouse trusts. Historical RBA data has been restated to reflect this
Slide 69: Sources and notes
Sources and notes Slide 21 1. Refer to the glossary for source information. 2. CBA won Canstar's Bank of the Year – Digital Banking award for 2023 (for the 14th year in a row). Awarded June 2023. 3. The Forrester Digital Experience ReviewTM: Australian Mobile Banking Apps, Q2 2022. Commonwealth Bank
Slide 70: Sources and notes
Sources and notes Slide 35 1. Presented on a continuing operations basis, all movements on the prior year unless otherwise stated. 2. Includes discontinued operations. 3. On an underlying basis. 4. The Group uses PACC as a key measure of risk adjusted profitability. It takes into account the profit
Slide 71: Sources and notes
Sources and notes Slide 44 1. Comparatives have been updated to reflect market restatements. 2. CBA source: RBA Lending and Credit Aggregates. Home lending peer source: Peer APRA Monthly Authorised Deposit-taking Institution Statistics balance divided by RBA Lending and Credit Aggregates system bala
Slide 72: Sources and notes
Sources and notes Slide 64 1. CBA excluding Bankwest and Unloan, unless noted otherwise. 2. Scenarios based on differing assumptions with respect to family types, number of dependents, loan size, income sources and existing liabilities/commitments. 3. Customer rate includes any customer discounts th
Slide 73: Glossary
Glossary Cash Profit The Profit Announcement (PA) discloses the net profit after tax on both a statutory and cash basis. The statutory basis is MFI Share – RFI-DBM Atlas Business MFI Share. Data on a 6 month roll weighted to the Australian business population. MFI Customer prepared in accordance wit
Slide 74: Important information
Important information The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 9 August 2023. It is information given in summary form and does not purport to be complete. Information in this presentation is not
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