Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Investor Presentation (September 2009)
20 slides from Commonwealth Bank Of Australia's investor presentation, Sep 9, 2009
Slide 1: Managing interest rate risk
Determined to offer strength in uncertain times. For personal use only David Craig CHIEF FINANCIAL OFFICER Lyn Cobley GROUP TREASURER Alden Toevs CHIEF RISK OFFICER Managing interest rate risk 9 September 2009 Commonwealth Bank of Australia ACN 123 123 124 1
Slide 2: Disclaimer
Disclaimer For personal use only The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 9 September 2009. It is information given in summary form and does not purport to be complete. It is not intended to be
Slide 3: Agenda
Agenda For personal use only Introduction David Craig Replicating Portfolios Lyn Cobley Balance Sheet Lean and Alden Toevs Duration of Equity Questions & Answers Panel 3
Slide 4: Group NIM FY09
Group NIM FY09 For personal use only Management of interest rate Domestic Pricing risk contributed 24 bpts to the +13 -24 Group’s FY09 NIM movement Personal Lending +6 -9 Transactions +24 +2 Business Lending +3 DOE & Balance +4 Sheet positioning Home Loans +4 -9 Savings +4 Capital bpts 202 -6 Invest
Slide 5: CBA Balance Sheet - Overview
CBA Balance Sheet - Overview For personal use only Assets Liab + Equity 4% Balance sheet has a Cash 5% Capital high level of natural hedging Home Loans 55% Deposits 49% (4 yrs) Commercial (2 yrs) (21% household Household (4 yrs) deposits) Interest rate risk arises from re-pricing Long Term c
Slide 6: Managing interest rate risk
Managing interest rate risk For personal use only To smooth the impact Portfolio of Rate insensitive of interest rate fixed rate 1 Replicating deposits assets Portfolios volatility on the Group’s NIM and earnings through a combination of passive 2 Balance (RP, Duration of Assets Sheet Lean Liabiliti
Slide 7: Agenda
Agenda For personal use only Introduction David Craig Replicating Portfolios Lyn Cobley Balance Sheet Lean and Alden Toevs Duration of Equity Questions & Answers Panel 7
Slide 8: Replicating Portfolios
Replicating Portfolios For personal use only Portfolio of Rate A selected portfolio of fixed rate Replicating insensitive 1 fixed rate assets with assets Portfolios deposits repricing characteristics that mirror that subset of Balance the Group’s retail Assets Sheet Lean Liabilities deposit base whi
Slide 9: Replicating Portfolios
Replicating Portfolios For personal use only In place for over 15 years – a consistent strategy Represents approximately $70bn of retail deposit balances Includes 15 different deposit products All products individually assessed Formal annual review, ongoing monitoring, APRA oversight No
Slide 10: Replicating Portfolio over time
Replicating Portfolio over time For personal use only 8% 7% 6% 5% Replicating 4% Portfolio Yield 3% Official Cash Rate 2% 1% 1996 2001 2005 Current 10
Slide 11: Rising Rate Scenario #1
Rising Rate Scenario #1 For personal use only Scenario #1: 8% Rising Rate Period 7% Replicating Portfolio Yield 6% 5% 4% Official Cash Rate 3% 2% 1% 1996 2001 2005 Current 2015 11
Slide 12: Rising Rate Scenario #2
Rising Rate Scenario #2 For personal use only Scenario #2: 8% Rising Rate Period 7% Replicating Portfolio Yield 6% 5% 4% Official Cash Rate 3% 2% 1% 1996 1996 2001 2001 2005 2006 Current 2011 2015 12
Slide 13: Agenda
Agenda For personal use only Introduction David Craig Replicating Portfolios Lyn Cobley Balance Sheet Lean and Alden Toevs Duration of Equity Questions & Answers Panel 13
Slide 14: Balance Sheet Lean
Balance Sheet Lean For personal use only Portfolio of Rate fixed rate Replicating insensitive assets Portfolios deposits Active management of the Group’s asset and liability “mis-match” 2 Balance within a carefully Assets Sheet Lean Liabilities managed risk and (if any) regulatory framework Portfoli
Slide 15: Duration of Equity
Duration of Equity For personal use only Portfolio of Rate fixed rate Replicating insensitive assets Portfolios deposits Managing the earnings impact of free Balance capital, primarily with Assets Sheet Lean Liabilities regard to term invested (Investment Term of Capital or ITOC) Portfolio of Equity
Slide 16: Duration of Equity
Duration of Equity For personal use only 12% Scenario: Rising Rate Period 10% Portfolio of 5 year fixed rate instruments 8% (CBA preference) 6% 4% Official Cash Rate Portfolio of 1 year fixed rate instruments 2% (APRA preference in APS117) 0% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 16
Slide 17: Duration of Equity: Potential Offset to Credit Cycle Losses
Duration of Equity For personal use only Potential Offset to Credit Cycle Losses (US industry perspective 1963-2003) Realised Gains Coupon Income LIE (bpts) 10 Year UST Yield Source: Historical interest rates from Federal Reserve data. Net charge-offs data from FDIC (weighted average for all FDIC-in
Slide 18: Interest rates vs credit spreads
Interest rates vs credit spreads For personal use only 9% 4% 8% 3 year swap rate (LHS) 7% 3% 6% 5% 2% 4% 3% 1% 2% BBB spread (RHS) 1% 0% 0% 2002 2003 2004 2005 2006 2007 2008 2009 18
Slide 19: Capital Impacts - APS117
Capital Impacts - APS117 For personal use only $1,286m Optionality (retail) $716m -$70m (ie zero) Optionality Basis Risk (retail) Basis Risk Repricing and Yield Curve Risk Repricing and Yield Curve Risk Embedded Loss Embedded Gain (offset to capital) Fixed rate asset portfolios serve to offset NIM c
Slide 20: Questions & Answers
Determined to offer strength in uncertain times. For personal use only Questions & Answers 9 September 2009 Commonwealth Bank of Australia ACN 123 123 124 20
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