Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (February 2024)
68 slides from Commonwealth Bank Of Australia's debt investor presentation, Feb 14, 2024
Slide 1: Fixed Income Investor Discussion Pack
Fixed Income Investor Discussion Pack For the half year ended 31 December 2023 Commonwealth Bank of Australia
Slide 2: 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, 14 February 2024. It is information given in summary form and does not purport to be complete. Information in this presentation is
Slide 3: 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 4.7 4.5 4.5 3.5 3.8 5.6 11.5 12.5 4.1 3.9 3.5 3.0 2.5 5.5 5.4 2.6 2.0 3.4 1.2 2021 2022 2023 2024 2025 2021 202
Slide 4: The Australian economy: cost of living, inflation moderating
The Australian economy Cost of living challenges, inflation moderating Inflation moderating1 Goods prices lower, services prices sticky2 Real household disposable income falling2 Inflation (annual change) Inflation (annual change) Household incomes (annual change) % % % 9 10 Goods 13 Quarterly CPI 8
Slide 5: The Australian economy: economic growth moderating
The Australian economy Economic growth moderating Momentum in the economy slowing late 20231 A GDP per capita in recession1 Population growth has been a tailwind1 GDP growth GDP index Population growth (annual change) % Index % 15 Aggregate 3 112.5 Annual change 110.0 Population 10 growth 107.5 2 5
Slide 6: The Australian economy: higher cost of living impacting consumers
The Australian economy Higher cost of living impacting consumers The cash rate hiking cycle has been large1 Consumer sentiment weak, consumption slowing2 Consumer spend patterns shifting3 RBA cash rate Consumer sentiment Household spending per capita (index = 100, Q1 19) % Index % May 110 Discretion
Slide 7: The Australian economy: slowing growth, remains resilient
The Australian economy Slowing growth, remains resilient Labour demand weakening1 Unemployment to rise from here2 Government investment and spending supporting Labour demand Unemployment rate (with CBA forecast) the economy2 % Index = 100 in 2015 Index Public investment 8 170 250 Applicants per ad 1
Slide 8: 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 5.2 GDP Nominal GDP 7.3 4.7 6.0 4.0 3.6 3.3 6.1 8.0 8.6 6.1 3.3 3.6 3.0 4.4 2.3 3.0 0.7 0.5 (0.2) 2021 2022 2023 2024 2025 2021 2022 2023 2024 2025 202
Slide 9: Summary
Summary
Slide 10: Building a brighter future for all
Building a brighter future for all Supporting our customers and communities • Focused on proactively supporting customers with higher cost of living Helping • Engaged 3 million1 customers each month with money management tools customers today • Prevented and recovered over $100 million in scams2 in
Slide 11: Financials
Financials1 Revenue flat, higher expenses, lower loan impairment expense Operating income Operating expenses Pre-provision profit Cash NPAT Disciplined approach to Inflation and Flat revenue and higher Lower loan volume/margin higher amortisation operating expenses impairment expense Flat +4% (3%) (
Slide 12: Why CBA?
Why CBA? Leading franchise – strong balance sheet settings – supporting sustainable returns Consumer MFI share1 (%) Home lending share2 (%) Household deposits share3 (%) Business MFI share1 (%) Deposit funding Business deposits Peers as at September 20234 market share 75% 71% 68% 66% 23% 21% 18% 16%
Slide 13: Global best digital experiences
Global best digital experiences Extending our market leading digital offering with CommBank app 5.0 and CommBank Yello Australia’s Net Promoter Score6 Digital transactions Digitally active customers8 most popular Consumer mobile app via app7 Dec 23 banking app1 #1 82.7 9.0 68.1 8.3 Active app users2
Slide 14: Business Banking
Business Banking Australia’s leading business banking franchise Business MFI Share1 Business deposits2 Business loans2 Change in share since Mar 20 Change in share since Mar 20 Change in share since Mar 20 282 272 172 165 bpts 13 bpts bpts 42 (22) (85) (73) (108) (115) (199) CBA Peer 2 Peer 1 Peer 3
Slide 15: 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 • New Enterprise Agreement with • Over $750m7 spent to prevent • Over $2m i
Slide 16: Group margin
Group margin Increased deposit price competition Deposit price competition (3) Deposit switching (3) Replicating portfolio 2 Wholesale funding costs (1) Lower consumer finance Capital hedge 2 and home lending margins New Zealand (1) (7) (6bpts) (2) 3 205 199 bpts 2H23 Funding costs Asset pricing Oth
Slide 17: Strength – balance sheet
Strength – balance sheet Long-term conservative balance sheet settings Deposit funding Long-term funding Liquid assets1 Capital % of total funding Weighted average maturity, yrs Average, $bn CET1 ratio, Level 2 75% 5.3yrs $187bn 12.3% 4 (ex. TFF) 5.4 71% 11.7%3 55% 140 3.5 5.0%2 50 Pre- Pre- Pre- Pr
Slide 18: Higher rates unevenly felt
Higher rates unevenly felt Many households cutting back to adjust to higher cost of living Salary and wages1,2 Spending1,3,4 Savings1,5 Year on year change, per customer Year on year change, per customer Year on year change trimmed, per customer Dec quarter, 2023 13 weeks to 7 Jan 2024 31 Dec 2023 E
Slide 19: Housing sector
Housing sector Strong house price recovery Home prices rose over the past year1 Driven by low stock on the market, now rising1 Home lending has risen modestly2 Dwelling prices (8 capital cities) CoreLogic total listings (rolling 4 weeks, combined capitals) Housing loan approvals (excluding refinanci
Slide 20: Home loans – CBA
Home loans – CBA1 A disciplined approach to portfolio quality, growth and sustainable returns Portfolio1 Dec 22 Jun 23 Dec 23 New business1 Dec 22 Jun 23 Dec 23 8 Total balances – spot ($bn) 570 584 582 Total funding ($bn) 77 72 67 Total balances – average ($bn) 562 577 580 Average funding size ($’0
Slide 21: Home loans – credit quality
Home loans – credit quality Credit quality remains sound – majority of interest rate rises passed through Buffers1, $bn Home loan arrears3 % Hardship6 Offset and redraw balances, spot Number of cases Impact of cash rate changes on mortgage repayments4 ~20% Not yet felt by customers +9% $127bn $133bn
Slide 22: Credit risk
Credit risk Sound credit quality – modest uptick in arrears – TIA stable Loan impairment expense Arrears2 Troublesome and impaired assets Loan loss rate, bpts1 90+ days $bn 1H23 2H23 1H24 TIA % of TCE (bpts) Personal loans Credit cards Home loans Consumer 11 12 7 Historic avg3: 0.91% Corporate 13 17
Slide 23: Provisioning
Provisioning1 Strong provision coverage maintained at 1.64% of Credit RWA Total credit provisions Provisions and scenarios $bn Dec 23 TP/CRWA: 1.29% 1.64%2 1.64%2 8.0 $6.06bn $6.1bn 5.95 4.80 2.92 2.94 Corporate 3.8 Pre- 3.03 3.12 Consumer $bn COVID $bn Jun 19 Jun 23 Dec 23 Central Recognised Downsi
Slide 24: Total committed exposure
Total committed exposure1 Close monitoring of key sectors Provisions to total Group TCE ($bn) TIA ($bn) TIA % of TCE committed exposure % Jun 23 Dec 23 Jun 23 Dec 23 Jun 23 Dec 23 Jun 23 Dec 23 Consumer 776.8 776.2 2.0 2.0 0.3% 0.3% 0.4% 0.4% Government administration & defence 231.3 206.9 0.0 0.0 0
Slide 25: Funding, liquidity & capital
Funding, liquidity & capital
Slide 26: Funding overview
Funding overview Conservative funding settings maintained, flexibility through tighter financial conditions Funding composition Wholesale funding Funding profile Deposit growth supporting 75% of funding Weighted to long-term TFF refinance to be managed across FY24 – FY25 period % of total funding Ma
Slide 27: Deposit funding
Deposit funding Highest share of stable customer deposits in Australia Customer deposits vs peers1 Customer deposits by segment4 ($bn) ($bn) % of total funding 68% 75% 68% 71% 66% 800 819 825 825 ASB & Other 76 77 80 10% CAGR 182 659 641 IB&M 155 164 153 19% 570 2% 587 Other deposits 22% 82 239 159
Slide 28: Liquidity
Liquidity Disciplined approach to liquidity risk management Liquidity Coverage Ratio (LCR)1 Liquid assets1 Cash Retail and SME deposits Dec 2023 (Qtr avg) Dec 2023 (Qtr avg) ($bn) Govt, semi Deposits in NSFR2 ($bn) & other As at December 2023 268 187 140% Peers as at September 20231 136% 210 91 350
Slide 29: Wholesale funding
Wholesale funding Wholesale funding is diversified across differing products, currencies and tenor Portfolio mix Short-term funding by product $bn Long-term funding1 Certificates of deposits 57% 158 58% Central bank deposits 20% Short-term funding2 81 30% Commercial paper 14% Term Funding Facility (
Slide 30: Capital – total capital
Capital – total capital Well placed to meet APRA requirements for loss-absorbing capacity (LAC) • Total capital at Dec 2023 of 20.5%, $10.6bn above 1 Jan 2026 requirement of 18.25%. • With 5.8% of Tier 2 at Dec 2023 CBA is well positioned to meet the 1 Jan 2026 LAC requirement of 6.5%. Jan 2024 Jan
Slide 31: CET1 – International
CET1 – International APRA’s revised capital framework remains more conservative than Basel framework CET1 International adjustments1 Level 2 Definition Risk weighting equity investments, deferred tax assets, capitalised expenses which are fully deducted from CET1 1.7% of Capital under APRA rules 19.
Slide 32: Capital – regulatory changes
Capital – regulatory changes Basel III reforms in Australia finalised and a number of regulatory changes in progress Change Implementation Details • Implemented on 1 Jan 2023 with the aim to increase the risk sensitivity within the capital framework, enhance the ability of ADIs to APS 110, 111, 112,
Slide 33: Financial overview
Financial overview
Slide 34: Overview – 1H24 result
Overview – 1H24 result1 Key outcomes summary Financial Balance sheet, capital & funding Statutory NPAT ($m) 4,837 (7.7%) Capital – CET12,5 (Int’l) 19.0% +50bpts Cash NPAT ($m) 5,019 (3.1%) Capital – CET12,6 (APRA) 12.3% +20bpts ROE % (cash) 13.8% (40bpts) Total assets ($bn) +3.6% 1,276 EPS cents (ca
Slide 35: Operating income
Operating income1 Volume growth and higher other operating income offset by margin compression • Volume driven growth in retail, business and institutional fee income 2H23: +1.0% • Volume growth2 +4.2% • Higher Markets trading and sales income • Margin compression (11bpts) +0.2% (233) 259 13,623 13,
Slide 36: Operating expenses
Operating expenses1 Inflation driving cost growth – technology and other costs more than offset by productivity Cost to Income 42.4% 44.0% Contribution to mvt: +4.8% +1.4% +0.7% (2.8%) 80 43 (164) +4.1% 279 6,011 5,773 Cumulative cost savings realised (last 5 yrs): • Insourcing of engineering and te
Slide 37: Group margin – 12 months
Group margin – 12 months Continued competitive pressures and higher funding costs, partly offset by hedging returns Benefit of rising rates more than offset by: Continued competitive • Increased deposit price competition Higher earnings on pressures • Deposit switching replicating portfolio • Increa
Slide 38: Capital
Capital1 Strong capital position maintained Movements in bpts Level 1 Level 1 12.5% ~12.3% 12.3% ~12.2% 32 (3) (11) 12.2% ~$10bn ~$9bn 107 surplus surplus Cash NPAT 10.25% RWA 11 APRA minimum3 2H23 dividend (DRP neutralised) (86) Jun 23 Organic capital On-market Other Dec 23 Dec 23 Level 2 generatio
Slide 39: Loan losses
Loan losses Loan impairment expense remains low Loan loss rate1 Loan loss rate by business unit1,2 bpts bpts 11 13 13 17 Consumer Corporate 11 12 1H23 1H24 1H23 2H23 41 33 25 24 76 18 21 20 19 50 16 16 15 15 16 12 10 9 11 43 24 7 9 9 9 23 13 11 20 10 14 8 15 2 26 17 19 17 18 18 18 18 18 17 26 16 4 1
Slide 40: Provisions
Provisions1 Peer leading provision coverage of 1.64% Provision coverage2/CRWA Provisions by stage % Credit Credit Stage 2 exposures exposures provisions by credit grade3 1.64 Total 1.58 $m Jun 23 Dec 23 Jun 23 Dec 23 provision 1.45 coverage 1.26 Stage 1 921,565 913,693 1,709 1,752 $198bn $188bn 7 We
Slide 41: Balance sheet
Balance sheet1 Lending flat vs 2H23, growth in higher yielding deposits Dec 23 vs Dec 23 vs $bn Dec 22 Jun 23 Dec 23 Jun 23 Dec 22 Group lending Home loans 639.3 652.2 650.5 (0.3%) 1.7% +1.8% (0.5%) Consumer finance 17.0 17.0 17.5 2.6% 3.0% Business loans2 156.1 164.7 169.2 2.7% 8.4% 910.5 930.8 926
Slide 42: Volume growth
Volume growth Disciplined approach, targeted growth – focus on sustainable returns Home lending1,2 Business lending1,2,3 Household deposits1,4 Business deposits1,5 CBA CBA (excl. IB&M) CBA CBA System CBA (incl. IB&M) System System System (incl. Institutional lending) 7.4% 9.6% 5.5% 6.1% 4.2% 6.7% 6.
Slide 43: Market share
Market share1 Disciplined approach to growth % Dec 22 Jun 23 Dec 23 Home lending2,9 Household deposits3,9 CBA Peers CBA Peers Home loans – RBA2 25.1 25.1 24.5 40% Break in series 40% Break in series Break in series from Jun 21 3 Home loans – APRA 25.8 25.8 25.3 30% Break in series from Jun 21 from M
Slide 44: Deposit switching
Deposit switching Rate of switching has slowed Domestic retail deposits1,2 Domestic business deposits1,2,3 $bn $bn Non-interest bearing mvt %4 Non-interest bearing mvt %4 3Q23 4Q23 1Q24 2Q24 3Q23 4Q23 1Q24 2Q24 (7.5%) (4.1%) (4.3%) (3.3%) (8.5%) 1.0% (8.5%) 2.1% 196 188 193 181 185 172 177 177 177 1
Slide 45: Cost approach
Cost approach Ongoing productivity savings creating capacity for long-term investment Cost reduction Investment spend Cumulative savings Cost approach Continued focus on productivity & growth (last 5 years) Capitalised software ($bn) 1.9 1.8 1.7 1.9 2.0 1.3 1.4 1.4 • Simpler, more efficient 761 busi
Slide 46: Asset quality
Asset quality
Slide 47: Commercial property
Commercial property Well diversified, moderately leveraged portfolio • There have been moderate declines in property values, although some assets with more challenging tenancy profiles, higher vacancies, location or significant capex for refurbishing are experiencing larger declines in Group exposur
Slide 48: Entertainment, leisure & tourism
Entertainment, leisure & tourism Performance steady despite cost of living challenges Group exposure 16.1 16.6 Dec 22 14.8 • Recent portfolio growth has focused on higher quality and diversified Jun 23 operators with strong LVRs. Dec 23 • Pubs and clubs have traded well, though operators are cautiou
Slide 49: Retail trade
Retail trade Household spending moderating Group exposure 15.4 16.1 Dec 22 14.7 32.0 29.6 • Growth in Retail Trade was predominantly within non-discretionary Jun 23 23.7 sectors with caution exercised due to emerging cost of living challenges. Dec 23 • The CommBank Household Spending Insights (HSI)
Slide 50: Construction
Construction Sector remains challenged, growth directed to well-performing counterparties and sub-sectors Group exposure Dec 22 12.5 11.8 11.8 Jun 23 • Growth directed to sub-sectors less exposed to high risk, fixed price contracts. Dec 23 5.9 6.4 6.3 • For the half year to December 2023, Non-Buildi
Slide 51: Mining, oil & gas
Mining, oil & gas Managing sub-sector exposures in line with strategy, stable portfolio performance Group exposure Dec 22 • Overall decrease in Oil and Gas extraction sub-sector. Jun 23 68.0 66.3 64.1 Dec 23 • Stable performance over the past 6 months: 7.5 7.4 6.8 – Investment grade largely stable a
Slide 52: Consumer arrears
Consumer arrears1 Arrears increasing modestly from historic lows Credit cards Personal loans ASB CBA Group 30+ days Group 30+ days Group 6.0% Bankwest 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Credit cards Personal loans 1.5% Group 90+ d
Slide 53: Home lending
Home lending
Slide 54: Home loans – growth
Home loans – growth Consistent and disciplined execution in a highly competitive market Consistent market share performance1 Disciplined approach to balance growth2 New fundings 3 94 76 76 77 72 67 $bn 65 CBA Group CBA (ex Bankwest) Peer 1 Peer 2 Peer 3 1H21 2H21 1H22 2H22 1H23 2H23 1H24 67 (7) (16)
Slide 55: Home loans – fixed rate maturities
Home loans – fixed rate maturities Ongoing resilience across the portfolio Fixed rate expiry schedule1 Arrears Savings2,3 Spending2,4 90+ day arrears Year on year change, Year on year change, Dec 2023 per customer per customer 31 Dec 2023 13 weeks to 7 Jan 2024 Expired 41 34 29 0.52% 1.5% 16.2% 14 2
Slide 56: Home loans – resilience
Home loans – resilience Strong repayment and savings buffers Repayment buffers Repayment buffers (Payments in advance 1, % of accounts) Payments on time 1, % of accounts) 34%33%34% Dec 22 Jun 23 Dec 23 22% 22% 20% Residual 4% 5% 22%22% 20% 4% 6% Structural: e.g. fixed rate loans 15%16%16% 5% 5% 3% N
Slide 57: Home loans – resilience
Home loans – resilience1 88% of the book originated under tightened standards since FY16 Key serviceability changes by year2 New loan assessment (from FY16)3 • Increased serviceability buffer and buffers on existing debts • All income used in application to assess serviceability is verified • Remove
Slide 58: Home loans – resilience
Home loans – resilience1,2 Targeted support for customers in the highest risk segment (~0.4% of book) Portfolio Risk profile $491bn $26.5bn4 5% $1.9bn (0.4%)5 DLVR > 90%, no LMI Exposures with the capacity to deleverage or 8% Higher $3.2bn (0.7%)5 DLVR 80-90%, no LMI reduce expenditure3 risk $2.5bn
Slide 59: Home loans – resilience
Home loans – resilience1 Portfolio DLVR strong and stable at 45% Negative equity2 Dynamic LVR bands3 Proportion of balances in negative equity % of total portfolio balances Average dynamic LVR4 • 59% of customers ahead of repayments Dec 22 44% Dec 22 • 20% of home loans in negative equity have Lende
Slide 60: Home loans – resilience
Home loans – resilience1 Portfolio remains resilient – modest uptick in arrears, remain low Customers in advance2 Average payments in advance2,3 Dynamic LVR4 % of customers # of payments Portfolio averages 78% 78% 78% 79% 38 32 30 46% 45% 45% 29 44% Dec 21 Dec 22 Jun 23 Dec 23 Dec 21 Dec 22 Jun 23 D
Slide 61: Home loans – capacity
Home loans – capacity1 Higher interest rates continue to impact 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 customer rate3 + buffer, or
Slide 62: Home loans – resilience
Home loans – resilience1 Impaired loans and portfolio losses remain low Impaired home loans2 Impaired home loans – by State3 Modest increase in Australian home loan impairments as higher interest rates continue to provide upward pressure on households Other 8% NSW 26% 22% WA 1.2 1.1 1.2 14% QLD $bn
Slide 63: Home loans – resilience
Home loans – resilience Modest uptick in arrears, however remain low Arrears by portfolio Bankwest Arrears by product Owner Occupied Arrears by repayment and interest type Group 90+ days CBA 90+ days1 Investment Loans 90+ days1 Group Principal & Interest ASB 1.0% Interest Only 1.0% Fixed 0.8% 0.8% V
Slide 64: Sources, glossary & notes
Sources, glossary & notes
Slide 65: Sources and notes
Sources and notes Slide 10 1. Average monthly unique customers who engaged with one of our money management features in the CommBank app between July to December 2023. Money management features include Money Plan, Spend Tracker, Bill Sense, Category Budgets, Cash Flow View, Goal Tracker, Credit Scor
Slide 66: Sources and notes
Sources and notes Slide 27 1. CBA data as at 31 December 2023. Peer data based on Regulatory Disclosures as at 30 September 2023. 2. Total retail transaction accounts, excluding offset accounts, includes Bankwest. 3. Transactions include non-interest bearing deposits and transaction offsets. Online
Slide 67: Glossary
Glossary Term Description Term Description 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 – Business DBM Atlas (part of RFI Global) Business MFI Share. Data on a 6 month roll weighted to the Australian
Slide 68: Our reporting suite
Our reporting suite Committed to transparent reporting Investor Discussion Pack Annual Report Climate Report Corporate Governance Statement Sustainability Reporting Appendix Profit Announcement Pillar 3 Report Green, Social and Modern Slavery and Human Sustainability Funding Trafficking Statement Im
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