Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (August 2024)
63 slides from Commonwealth Bank Of Australia's debt investor presentation, Aug 14, 2024
Slide 1: Fixed Income Investor Discussion Pack
Fixed Income Investor Discussion Pack For the full year ended 30 June 2024 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 August 2024. It is information given in summary form and does not purport to be complete. Information in this presentation is no
Slide 3: Key Australian economic indicators
Key Australian economic indicators1 (June FY) GDP % Headline CPI % Unemployment rate % Financial year average Year on year, June quarter June quarter average GDP Nominal GDP 6.1 6.0 5.2 4.0 4.5 3.8 3.6 4.3 11.8 9.7 3.8 3.8 3.1 2.6 2.1 5.3 4.2 1.4 1.5 4.5 2021 2022 2023 2024 2025 2021 2022 2023 2024
Slide 4: The Australian economy
The Australian economy Slowing economic growth, population growth providing tailwinds Economy growing well below trend1 GDP per capita has fallen for five quarters1 Population growth has been a tailwind1 GDP growth Quarterly growth in GDP and GDP per capita Population growth (annual change) % % % 0.
Slide 5: The Australian economy
The Australian economy Cost of living pressures continuing to impact consumers Real per capita consumption declining1 Consumers winding back discretionary spend1 Renters feeling the pain2 Real household consumption (index = 100, Q4 19) Household consumption (annual growth contribution) Per capita ho
Slide 6: The Australian economy
The Australian economy Inflationary pressures moderating Inflation elevated but trending lower1 Certain categories keeping inflation higher1 Wide difference between essential and discretionary1 Inflation (annual change) Inflation (annual change), June quarter 24 vs June quarter 23 Inflation (annual
Slide 7: The Australian economy
The Australian economy Labour market loosening, support for households in FY25 through tax cuts and energy rebates Labour demand weakening1 Unemployment to continue to lift2 Consensus of economists expect rate cuts3 Labour demand and supply Unemployment rate (with CBA forecast) RBA cash rate Index %
Slide 8: Cost of living impacts unevenly felt
Cost of living impacts unevenly felt Last six months even tougher for younger customers Prices vs Dec 19 Spending4,5 Saving4,6 Contribution to Price Essentials Discretionary Year on year change: CPI growth1 change1 Apr – Jun 24 New dwellings 38% Age, years Oct – Dec 23 Rents: 15% Other: 15% 3.3% -1.
Slide 9: Key New Zealand economic indicators
Key New Zealand economic indicators (June FY)1 GDP % CPI % Unemployment rate % Financial year average Year on year, June quarter June quarter average 5.5 GDP Nominal GDP 7.3 4.6 6.0 4.0 3.6 8.6 3.3 6.0 8.0 6.2 3.3 3.3 4.3 2.6 3.0 3.2 0.7 0.0 2021 2022 2023 2024 2025 2021 2022 2023 2024 2025 2021 202
Slide 10: Summary
Summary
Slide 11: Financials
Financials1 Cash NPAT down 2% with income flat, higher expenses – margin stabilising Operating income Operating expenses Pre-provision profit Cash NPAT Disciplined volume growth Inflation and Flat revenue and higher Lower loan with margin stabilising technology costs operating expenses impairment ex
Slide 12: Building a brighter future for all
Building a brighter future for all Consistent, disciplined execution of our strategy Global best digital Leadership in Australia’s Reimagined products Simpler, better Our strategy experiences and recovery and transition and services foundations technology How we deliver on our Grow the economy Help
Slide 13: Why CBA?
Why CBA? Leading franchise – strong balance sheet settings – supporting sustainable returns Retail MFI share1 Home lending share2 Household deposits share3 Business MFI share1 Next highest peer Deposit funding Business deposits 62.1% Peers as at March 20244 market share5 45.8% 77% 71% 67% 66% 22% 20
Slide 14: Global best digital experiences
Global best digital experiences Market leading digital ecosystem – CommBank app 5.0 and CommBank Yello CommBank app CommBank Yello Simpler, more personalised app experience Rewarding our customers, highly personalised • Personalised, dynamic navigation • Australian banking first • Enhanced search fu
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 • Approved six new sector-level • New Enterprise Agreement with • Over $800m7 spent to prevent • $2m in gran
Slide 16: Group margin
Group margin Hedging returns offsetting impact of deposit competition Stable quarterly margin trends in 2H24 (excluding impact of excess liquids held to repay Term Funding Facility) Lower home lending margins +1bpt (1) (7) 3 1 5 - 200 199 Deposit pricing and mix (6) Higher earnings on capital Wholes
Slide 17: Balance sheet strength
Balance sheet strength Long-term, conservative approach to balance sheet risk management Deposit funding Long-term funding Liquid assets Capital % of total funding Weighted average maturity, yrs Average1, $bn CET1 ratio, Level 2 4 77% 5.2yrs $177bn 12.3% 5.1 69% 10.7%3 137 55% 3.5 5.0%2 50 Pre- Pre-
Slide 18: Credit risk
Credit risk Cost of living pressures impacting arrears, TIA includes small number of single name exposures Loan impairment expense Arrears2 Troublesome and impaired assets Loan loss rate, bpts1 90+ days $bn FY22 FY23 FY24 Home loans Personal loans Credit cards % of TCE: 0.72% 0.51% 0.49% 0.63% Consu
Slide 19: Provisioning
Provisioning1 Strong provision coverage maintained during period of high interest rates Total credit provisions Provisions and scenarios $bn Jun 24 TP/CRWA: 1.29% 1.64%2 1.66%2 $6.14bn $6.14bn 7.88 6.06 4.80 2.94 3.07 Corporate 3.96 3.12 3.07 Consumer $bn Pre-COVID $bn Jun 19 Dec 23 Jun 24 Central R
Slide 20: Housing sector
Housing sector Higher house prices as supply is constrained House prices rose over the past year1 Reaching fresh record highs1 Driven by large lift in investor lending2 Dwelling prices (8 capital cities) Dwelling prices (8 capital cities) Housing loan approvals (excluding refinancing) % % Index $bn
Slide 21: Home loans – CBA
Home loans – CBA1 A disciplined approach to portfolio quality, growth and sustainable returns Portfolio1 Jun 23 Dec 23 Jun 24 New business1 Jun 23 Dec 23 Jun 24 8 Total balances – spot ($bn) 584 582 596 Total funding ($bn) 72 67 69 Total balances – average ($bn) 577 580 587 Average funding size ($’0
Slide 22: Home loans – resilience
Home loans – resilience1 Credit quality remains sound – higher savings buffers, lower DLVR Customers in advance2 Average payments in advance2,3 Offset and redraw balances % of customers # of payments $bn 80% 37 36 134 78% 119 126 78% 78% 109 29 29 57 59 Redraw4 52 54 Offset 57 65 69 75 Jun 21 Jun 22
Slide 23: Total committed exposure
Total committed exposure1 Close monitoring of key sectors Provisions to total Group TCE ($bn) TIA ($bn) TIA % of TCE committed exposure % Dec 23 Jun 24 Dec 23 Jun 24 Dec 23 Jun 24 Dec 23 Jun 24 Consumer 776.2 793.0 2.0 2.5 0.3% 0.3% 0.4% 0.4% Government administration & defence 206.9 174.5 0.0 0.0 0
Slide 24: Funding, liquidity & capital
Funding, liquidity & capital
Slide 25: Funding overview
Funding overview Long-term conservative funding settings maintained – TFF fully repaid Funding composition Wholesale funding2 Funding profile % of total funding Long-term as % of total wholesale funding TFF now fully repaid 74% Maturity4 FY24 61% Short-term Issuance 80 7% 7% 9% wholesale1 26% 18% 18
Slide 26: Deposit funding
Deposit funding Highest share of stable customer deposits in Australia Customer deposits vs peers1 Customer deposits by segment4 ($bn) ($bn) % of total funding 68% 77% 67% 71% 66% 819 825 834 5 yr 834 80 10% ASB & Other 77 80 CAGR 174 652 651 IB&M 164 153 154 18% 570 1% 597 94 155 216 216 26% Other
Slide 27: Deposit switching
Deposit switching Rate of switching stabilised Domestic retail deposits1,2 Domestic business deposits1,2,3 $bn $bn Non-interest bearing mvt %4 Non-interest bearing mvt %4 1Q24 2Q24 3Q24 4Q24 1Q24 2Q24 3Q24 4Q24 (4.3%) (3.3%) (2.5%) (2.4%) (8.5%) 2.1% (4.7%) 9.1% 196 201 189 188 185 178 177 176 167 1
Slide 28: Wholesale funding
Wholesale funding Wholesale funding diversified across differing products, currencies and tenor – TFF fully repaid Portfolio mix Short-term funding by product4 Jun 24 39% 61% Short-term funding 1 Certificates of deposit 49% Long-term funding2 Dec 23 30% 58% 12% Commercial paper 23% Term Funding Faci
Slide 29: Total Capital
Total Capital Well placed to meet APRA requirements for loss-absorbing capacity (LAC) • Total capital ratio at 30 Jun 24 of 20.9%, $12.5bn above 1 Jan 26 requirement of 18.25%. • With 6.6% of Tier 2 at 30 Jun 24 CBA is well positioned to meet the 1 Jan 26 LAC requirement of 6.5%. 30 Jun 2024 1 Jan 2
Slide 30: CET1 – International
CET1 – International APRA’s revised capital framework remains more conservative than Basel framework CET1 International adjustments1 Level 2 Definition of Risk weighting equity investments, deferred tax assets, capitalised expenses which are fully deducted from CET1 1.7% capital under APRA rules 19.
Slide 31: Capital – regulatory changes
Capital – regulatory changes A number of regulatory changes in progress Change Implementation Details Minor amendments to • Revised APS 330 on public disclosure requirements which aligns with both APRA’s new capital framework and the Basel Committee’s APS 112, 113 internationally agreed minimum requ
Slide 32: Financial overview
Financial overview
Slide 33: Overview – FY24 result
Overview – FY24 result1 Key outcomes summary Financial Balance sheet, capital & funding Statutory NPAT ($m) 9,481 (6.1%) Capital – CET12,5 (Int’l) 19.1% Flat Cash NPAT ($m) 9,836 (2.3%) Capital – CET12 (APRA) 12.3% +10bpts ROE (cash) 13.6% (30bpts) Total assets ($bn) +0.1% 1,254 EPS cents (cash) 588
Slide 34: Sequential half operating income
Sequential half operating income1 Lower other operating income and two fewer days, partly offset by volume growth • Lower Markets trading and sales income • 2 fewer days ($125m) • Timing of dividend income from minority interests, partly offset by • Volume growth2 +0.7% • Higher volume driven fee in
Slide 35: Group margin – 12 months
Group margin – 12 months Competitive pressures and deposit switching partly offset by hedging returns Increased deposit price competition and higher wholesale Home lending (5) funding costs partly offset by Earnings on capital 4 Consumer finance (1) benefit of rising rates Lower NZ earnings (1) (6)
Slide 36: Sequential half operating expenses
Sequential half operating expenses1 Technology and FTE related growth driving cost uplift Cost to income1 44.0% 45.2% Contribution to mvt: +2.6% +1.4% (2.2%) (135) +1.8% 155 87 6,118 6,011 • Higher remediation costs and operational losses Cumulative cost savings • Timing of marketing and launch cost
Slide 37: Capital
Capital Strong capital position maintained Movements in bpts Organic capital generated (net of dividend) Level 1 (+17bpts / $0.8bn) 12.4% 12.3% (76) 104 (11) (3) (14) >11% target 12.3% operating range5 10.25% APRA minimum6 Credit Risk1 (5) MTM changes (HQLA) (6) IRRBB (9) Non-cash loss on disposals
Slide 38: Loan losses
Loan losses Loan impairment expense remains low Loan loss rate1 Loan loss rate by business unit1,2 bpts bpts 9 8 13 19 Consumer Corporate 7 4 FY23 FY24 1H24 2H24 41 33 25 23 76 19 21 20 19 50 16 16 15 15 16 12 12 12 43 24 7 9 9 23 13 11 20 8 10 14 6 6 6 15 26 17 19 17 18 18 18 18 18 17 26 16 4 11 16
Slide 39: Provisions
Provisions1 Peer-leading provision coverage of 1.66% Provision coverage2/CRWA Provisions by stage % Credit Credit Stage 2 exposures Total exposures provisions by credit grade3 provision 1.66 1.59 coverage 1.51 $m Jun 23 Jun 24 Jun 23 Jun 24 1.25 Stage 1 921,565 941,150 1,709 1,795 $191bn $188bn Coll
Slide 40: Balance sheet
Balance sheet1 Disciplined and targeted lending growth, switching to higher yielding deposits stabilised in 2H24 Jun 24 vs Jun 24 vs $bn Jun 23 Dec 23 Jun 24 Dec 23 Jun 23 Group lending Home loans 652.2 650.5 664.7 2.2% 1.9% +1.8% Consumer finance 17.0 17.5 16.8 (4.1%) (1.6%) +2.3% Business loans2 1
Slide 41: Volume growth
Volume growth Disciplined approach to 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) 7.2% 4.6% 10.0% 5.4% 6.6% 4.5% 8.1% 7.7
Slide 42: Market share
Market share1 Strong market shares % Jun 23 Dec 23 Jun 24 Home lending2,9 Household deposits3,9 Home loans – RBA2 25.1 24.5 24.5 CBA Peers CBA Peers 40% 40% Break in series Home loans – APRA3 25.8 25.3 25.2 Break in series from Jun 21 Break in series from Jun 21 from Mar 19 30% Break in series from
Slide 43: Asset quality
Asset quality
Slide 44: Commercial property
Commercial property Moderate growth, well secured portfolio, market conditions easing • Softening in yields and capital values has started to ease, although vacancies Group exposure Jun 23 remain high for Office property in specific metropolitan Sydney and Melbourne Dec 23 locations. Jun 24 • Mainta
Slide 45: Agriculture & forestry
Agriculture & forestry Sector performing well – underpinned by sound fundamentals • The portfolio grew ~8% this year, mostly in the livestock and mixed farming Group exposure Jun 23 sectors. Dec 23 Jun 24 • Weather conditions have been favourable, with good subsoil moisture. 32.5 30.0 31.2 There wer
Slide 46: Entertainment, leisure & tourism
Entertainment, leisure & tourism Stable performance • Portfolio growth has focused on higher quality, well secured and diversified Group exposure Jun 23 operators. Dec 23 Jun 24 • LVRs are well positioned, typically lower than 55%. 18.2 16.1 16.6 • Spending on Hospitality has increased in the year,
Slide 47: Wholesale & retail trade
Wholesale & retail trade Essential spending driving retail consumption, wholesale trade impacted by single name exposure Wholesale trade Retail trade • Portfolio growth of ~6% across the year. • Portfolio growth of ~2% across the year, predominantly within non-discretionary sectors. 64% of Retail Ex
Slide 48: Construction
Construction Sector remains challenged • Portfolio growth focused on supporting existing clients. Group exposure Jun 23 Dec 23 • Residential and commercial builders have largely worked through the loss Jun 24 making fixed priced contracts that challenged the sector. 13.1 12.5 11.8 10.8 • Civil and n
Slide 49: Consumer finance – arrears
Consumer finance – arrears1 Elevated ASB arrears due to delays in collections during system implementation Credit cards Portfolio Group Portfolio Group By year 2020 BWA BWA 2021 Group 30+ days Group 90+ days Group 90+ days ASB ASB 2022 6.0% CBA 2.0% CBA 2023 1.4% 2024 1.5% 4.0% 1.0% 0.8% 2.0% 0.5% 0
Slide 50: Home lending
Home lending
Slide 51: Home loans – disciplined execution
Home loans – disciplined execution Disciplined strategic and operational execution in a competitive market Consistent market share performance1 Fundings weighted towards proprietary distribution, reduction in owner occupied and fixed rate lending 24% 25% 22% 21% Fundings mix2 Fundings mix3 Fundings
Slide 52: Home loans – serviceability assessment
Home loans – serviceability assessment1 90% 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 ve
Slide 53: Home loans – borrowing capacity
Home loans – borrowing capacity1 Improved borrowing capacity from recent changes to individual income tax rates and thresholds2 Borrowing capacity3 Application gross income band7 % of applicants with Change in maximum borrowing capacity3 – indexed Dec 16 additional capacity to borrow4 6 months to Ju
Slide 54: Home loans – savings and repayment buffers
Home loans – savings and repayment buffers Higher savings and repayment buffers Repayment buffers Jun 23 Repayment buffers Dec 23 (Payments in advance1, % of accounts) Jun 24 (Payments on time1, % of accounts) 33% 34% 33% 22% 22% 20% 20% 20% 5% 22% 6% 6% 20%20% 16%16%16% 5% Residual 3% 3% Structural
Slide 55: Home loans – portfolio DLVR
Home loans – portfolio DLVR1 Strong portfolio DLVR of 43% – supported by growth in house prices Dynamic LVR bands2 Average dynamic LVR3 Jun 23 Negative equity4 Dec 23 % of total portfolio balances Jun 23 45% Jun 24 Proportion of balances in negative equity • 63% of customers ahead of repayments Dec
Slide 56: Home loans – impaired loans, losses and insurance
Home loans – impaired loans, losses and insurance1 Modest increase in impaired home loans, predominantly well secured – portfolio losses remain low Impaired home loans2 Impaired home loans – by state3 Higher Australian impaired home loans due to an increase in predominantly well secured home loans a
Slide 57: Home loans – arrears (30+ days)
Home loans – arrears (30+ days) Increase in arrears as higher cost of living impacting some borrowers Portfolio Product Repayment and interest type 30+ days Group 30+ days1 Owner occupied 30+ days1 Principal & interest Variable BWA Investment Interest only Portfolio ASB Fixed 2.0% 1.5% 1.5% CBA 1.5%
Slide 58: Home loans – arrears (90+ days)
Home loans – arrears (90+ days) Increase in arrears as higher cost of living impacting some borrowers Portfolio Product Repayment and interest type 90+ days Group 90+ days1 Owner occupied 90+ days1 Principal & interest Variable BWA Investment Interest only Portfolio ASB Fixed CBA 0.8% 0.8% 0.8% 0.6%
Slide 59: Sources, glossary & notes
Sources, glossary & notes
Slide 60: Sources and notes
Sources and notes Slide 12 1. Source: APRA Monthly Authorised Deposit-taking Institution Statistics (MADIS). CBA Business lending multiple is based on Business Banking growth rate (excluding Institutional Banking and Markets) over published APRA and RBA Total Business Lending data (excluding estimat
Slide 61: Sources and notes
Sources and notes Slide 25 1. Includes other short-term liabilities. 2. Represents long-term wholesale funding as a proportion of total wholesale funding. 3. Represents the Weighted Average Maturity of outstanding long-term wholesale debt with a residual maturity greater than 12 months as at reporti
Slide 62: 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 – Individuals aged 18-24 years old. prepared in accordance with the Corporations Act 2001 (Cth) and the Australi
Slide 63: Our reporting suite
Our reporting suite Committed to transparent reporting Annual Report Climate Report Corporate Governance Profit Announcement Pillar 3 Report Statement Investor Discussion Pack Sustainability Reporting Appendix Modern Slavery and Human Trafficking Statement 63
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