Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — H1 2009 Earnings Presentation
141 slides from Commonwealth Bank Of Australia's earnings presentation, Feb 11, 2009
Slide 1: Results Presentation
Results Presentation For the half year ended 31 December 2008 Ralph Norris CHIEF EXECUTIVE OFFICER David Craig CHIEF FINANCIAL OFFICER 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Slide 2: Disclaimer
Disclaimer The material that follows is a presentation of general background information about the Bank‟s activities current at the date of the presentation, 11 February 2009. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice
Slide 3: Agenda
Agenda Ralph Norris, CEO – Company Update and Outlook David Craig, CFO – Financial Overview Questions and Answers 3
Slide 4: Notes
Notes o Determined to be different
Slide 5: Strength in uncertain times
Strength in uncertain times ■ A solid operating result in an increasingly difficult environment: Strong Banking income result Good volume and market share gains Cost discipline ■ Strong capital and funding positions ■ Increased provisions ■ Strategy on track and delivering ■ Well positioned fo
Slide 6: Credit ratings of largest banks
Credit ratings of largest 100 banks 180 80 60 40 CBA 20 0 Source : Bloomberg. As at 20 January 2009. 6
Slide 7: A solid operating result
A solid operating result Dec 08 vs Dec 08 Dec 07 Operating Income ($m) 8,016 15% Statutory NPAT ($m) 2,573 9% Cash NPAT ($m) 2,013 (16%) Cash EPS (cents) 146.3 (19%) Return on Equity – Cash (%) 15.0 (580)bpts Dividend per Share – Fully Franked (cents) 113 - 7
Slide 8: Notes
Notes o Determined to be different
Slide 9: Managing in uncertain times
Managing in uncertain times Co-ordinated risk management response: Overseen by CFO and CRO Daily management meetings during liquidity crunch Weekly Executive Risk Committee meetings Extensive and ongoing portfolio review – across sectors/industries/geographies Ongoing stress testing Tr
Slide 10: Notes
Notes o Determined to be different 10
Slide 11: Strong customer satisfaction gains
Strong customer satisfaction gains Closing the gap to top rated peer Strong gains in Business Customer Satisfaction Roy Morgan Research MFI Customer Satisfaction1 12 month movement2 84% 11.0% 80% 76% 10.3% 4.8% 5.2% 7.8% 5.4% 4.1% 72% 68% Dec 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08 CBA Peer 1 P
Slide 12: Market shares
Market shares Dec 08 Jun 08 Dec 07 CBA BankWest Combined CBA CBA Adjusting for restatements, Retail Banking Services Jun 08 Home loan market share Home loans 20.3% 3.0% 23.3% 19.2% 18.8% would be 19.4% and Dec 07 Credit cards 18.2% 2.7% 20.9% 18.3% 18.5% Home loan market share would Personal lending
Slide 13: Strong growth in key markets
Strong growth in key markets Balance Growth CBA + CBA Dec 08 vs Dec 07 BankWest Market Share Market Share % % % Dec 08 vs CBA System Dec 08 Dec 08 Dec 07 Home Lending* 15.8 7.9 20.3 1.35 23.3 Household Deposits* 21.7 19.0 29.1 0.64 32.6 Business Lending 8.8 11.9 13.5 (0.40) 18.2 Business Deposits 21
Slide 14: Notes
Notes o Determined to be different 14
Slide 15: Determined to be different
Determined to be different Only major to improve customer satisfaction year on year Customer Service Gap to Number 1 peer reduced from 10.3% to 5.4% in 12 mths Strongest customer satisfaction gains of the major banks Business Banking Dedicated Group Executive appointed – additional focus Tec
Slide 16: Market shares
Market shares Home Lending Household Deposits Credit Cards 23.3% 32.6% 21.9% 20.9% 22.0% 23.4% 17.4% 12.6% 13.1% 11.8% 13.3% 12.9% CBA / Peer 1 Peer 2 Peer 3 CBA / Peer 1 Peer 2 Peer 3 CBA / Peer 1 Peer 2 Peer 3 BankWest BankWest BankWest Personal Lending Business Lending Business Deposits 24.8% 18.
Slide 17: Profitable growth
Profitable growth Low-risk strategic agenda Targeted investment and acquisition programme Focus on key growth opportunities / markets Earnings accretive investments Well positioned for medium to longer term 17
Slide 18: Notes
Notes o Determined to be different 18
Slide 19: Outlook
Outlook Increasingly difficult global and domestic outlook Slowing domestic economy, with broad customer impacts Interest rate cuts and Government stimulatory actions to soften impact Group remains cautious about the short to medium term outlook Continued focus on managing for difficult ti
Slide 20: Notes
Notes o Determined to be different 20
Slide 21: Results Presentation
Results Presentation For the half year ended 31 December 2008 David Craig CHIEF FINANCIAL OFFICER 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Slide 22: Notes
Notes o Determined to be different 22
Slide 23: A solid operating result
A solid operating result Dec 08 Dec 07 Dec 08 vs $m $m Dec 07 Operating income 8,016 6,974 15% Operating expenses 3,551 3,378 5% Operating performance 4,465 3,596 24% Impairment expense 1,607 333 Large Net profit before tax and investment 2,858 3,263 (12%) experience Tax and Minorities 713 906 (21%)
Slide 24: Other key information
Other key information Gain on BankWest acquisition: ■ Provisional estimates included in 1H09 result. Fair value procedures to be completed by Jun 09 Treasury shares valuation adjustment: CBA shares held within life insurance statutory funds (on behalf of policyholders) result in an Income Statemen
Slide 25: Statutory Profit up 9%
Statutory Profit up 9% Dec 08 Dec 07 Dec 08 vs $m $m Dec 07 Cash NPAT 2,013 2,385 (16%) Gain on BankWest acquisition 547 - Defined Benefits superannuation plan (13) (4) Treasury shares valuation adjustment 34 (13) Hedging AIFRS volatility (8) 3 Statutory NPAT 2,573 2,371 9% Provisional estimate, n
Slide 26: Other key information
Other key information 6 months % of total group operating income Dec 08 Jun 08 Dec 07 Net interest income 57% 54% 56% Other banking income 25% 24% 22% Funds management income 13% 16% 16% Insurance income 5% 6% 6% Total 100% 100% 100% Dec 08 vs Dec 07 Av interest earning assets ($m) * 436,722 400,678
Slide 27: Strong Jaws at Group level
Strong “Jaws” at Group level Dec 08 vs Dec 07 22% 14% 15% 8% 9% 8% 6% 5% 0% -8% RBS PBS WM* IFS* Group* Income Expenses * Excludes Investment Experience. 27
Slide 28: Investing for the future
Investing for the future Investment spend ($m) Expensed Capitalised Total Core Banking Modernisation Growth Finest online 311 82 229 projects Scheme debit card First Choice Plus Straight through process (WM) Productivity Home loan simplification 108 102 210 projects Retail collections
Slide 29: Expenses down 3% on prior half
Expenses down 3% on prior half Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs $m $m $m Jun 08 Dec 07 Staff expenses 1,881 1,881 1,780 - 6% Occupancy and equipment 409 394 373 4% 10% IT Services 380 410 416 (7%) (9%) Postage and stationery 108 109 108 (1%) - Underlying Fees and commissions 390 428 390 (9%)
Slide 30: NIM - 12 month movement
NIM - 12 month movement Group NIM 5 (1) (7) 206 (1) 2 204 bpts Dec 07 Asset Deposit Funding Liquids Other Dec 08 pricing and pricing and Mix / Other mix mix 30
Slide 31: Underlying NIM up 5bpts since Jun 08
Underlying NIM up 5bpts since Jun 08 5bpts 9 (2) 206 (5) 1 204 3 203 bpts 198 Product margins 1 bpt over 12 months Dec 07 Jun 08 Asset Deposit Liquids Other Underlying AIFRS Dec 08 pricing and pricing and Dec 08 Volatility mix mix 31
Slide 32: Notes
Notes o Determined to be different 32
Slide 33: Impairment expense
Impairment expense 6 months annualised (basis points) 6 months ($m) 81 1,607 14 Overlay 270 Overlay 20 Loans 405 Loans Single Names Single Names (x5) (x5) ABC ABC 32 19 597 367 Notes Notes 10 195 19 333 2 17 28 Base 565 Base 22 402 17 316 -88 * Dec 07 Jun 08 Dec 08 Dec 07 Jun 08 Dec 08 Overlay Singl
Slide 34: Notes
Notes o Determined to be different 34
Slide 35: Increased provisions
Increased provisions Individual provisions ($m) Collective provisions ($m) 1,134 2,474 BankWest Single Names Granularity 454 Overlay 1,082 Economic 1,466 Model and data 115 BankWest 238 BankWest 359 39 Consumer 568 Consumer 279 502 34 403 Commercial Commercial 245 605 709 Jun 08 Dec 08 Jun 08 Dec 08
Slide 36: Notes
Notes o Determined to be different 36
Slide 37: Exposure Mix
Exposure Mix Regulatory Exposure Mix CBA Expected Loss CBA Peer 1 Peer 2 Peer 3 (bpts) Residential Mortgages 49% 36% 36% 42% 8 Corporate, SME & 31% 43% 44% 41% 39 Spec Lending Bank 12% 10% 18% 9% 3 Sovereign 5% 2% - 3% 1 Qualifying Revolving 2% 4% 2% 4% 192 Other Retail 1% 5% 1% 1% 200 Total Advance
Slide 38: Notes
Notes o Determined to be different 38
Slide 39: Improved provision coverage
Improved provision coverage Collective provisions to non housing GLAs* Total provisions to GLAs* 1.57% 1.94% 1.79% 1.23% 1.38% 1.52% 1.23% 1.11% 0.98% 0.77% 0.75% 0.69% Peer 1 CBA Peer 2 Peer 3 Peer 1 CBA Peer 3 Peer 2 Total provisions to GLAs Total provision to GLAs ex Housing Individual provisions
Slide 40: Other key information
Other key information New mortgagee in possession cases “Low doc” home loan arrears # 2.5% 45 2.0% 1.5% 30 1.0% 0.5% 15 0.0% Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 0 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 30+ days 90+ days Impairment expense to average
Slide 41: Sound consumer credit quality
Sound consumer credit quality Home loan arrears Home lending: 30+ Days % Portfolio quality remains sound 1.5% Uptick in arrears off low base 1.3% 1.1% 70% paid in advance – avg 7 mths 0.9% Avg LVR 37% on current values 0.7% Loans > 80% LVR mortgage insured Jan Feb Mar Apr May Jun Jul Aug
Slide 42: Other key information
Other key information Notes Margin Lending 6 months Dec 08 Jun 08 Portfolio size ~$5.5bn ~$8bn Aggregated Gearing 45% 42% Margin calls 64,245 18,548 Forced sales <4.6% <3.5% Losses / Write-Offs $15.4m $5.7m Loss % of Book 0.27% 0.06% Expected loss by Business Unit * Dec 08 Jun 08 Retail Banking Serv
Slide 43: Commercial Credit Quality
Commercial Credit Quality Risk-Rated Exposures Known single names covered 32% Other 31% Book quality remains sound: 21% BBB+ to BBB- 19% No systemic issues 68% 18% 68% investment grade investment 19% A+ to A- grade No exposure to foreign sub-prime 28% AAA to AA- 32% Net CDO/CLO exposure
Slide 44: Notes
Notes o Determined to be different 44
Slide 45: Solid operating performance
Solid operating performance Dec 08 Dec 07 Dec 08 vs $m $m Dec 07 Retail Banking Services 1,833 1,531 20% Premium Business Services 1,499 1,130 33% Wealth Management 450 543 (17%) International Financial Services 380 347 10% Corporate Centre 358 66 Large Eliminations/Unallocated (55) (21) (Large) Ope
Slide 46: Other key information – 6 month movements
Other key information – 6 month movements Dec 08 vs Dec 08 Jun 08 Dec 07 Dec 07 Net interest income Home loans 719 527 651 10% Consumer finance 447 403 376 19% Retail deposits 1,246 1,258 1,123 11% 2,412 2,188 2,150 12% Other banking income Home loans 82 70 71 15% Consumer finance 218 181 165 32% Re
Slide 47: Retail Banking Services
Retail Banking Services Strong volume growth: Dec 08 Dec 08 vs $m Dec 07 Home loans 16% Home loans 801 11% Deposits 22% Consumer finance 665 23% Retail deposits 1,602 10% Continuing market share gains: Distribution 116 33% Home loans 1.35% Total banking income 3,184 14% Deposits
Slide 48: Notes
Notes o Determined to be different 48
Slide 49: Retail Banking Services
Retail Banking Services Home Loan Margin Branch channel growing above system 6 month averages Home Loan Balance Growth bpts 13.4% 6 Months to Dec 08 (6) (18) 12 7.4% 6.2% 2.7% 1.5% Broker Branch Premium Total CBA Total Market Jun 07 1H08 2H08 1H09 Dec 08 Note : Width of channel columns reflects rela
Slide 50: Other key information – 6 month movements
Other key information – 6 month movements Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 07 Net interest income Institutional Banking 678 531 499 36% Private Client Services 157 119 121 30% Corporate Financial Services 311 267 243 28% Agribusiness 101 97 81 25% Local Business Banking 191 147 143 34% Elimination
Slide 51: Premium Business Services
Premium Business Services Dec 08 Dec 08 vs Strong income growth: $m Dec 07 Institutional Banking 1,180 34% Good volume growth Private Client Services 335 5% Business Banking Improved margins Corporate Financial Services 499 14% Agribusiness 151 12% Business Banking 16% Local Business Banki
Slide 52: Notes
Notes o Determined to be different 52
Slide 53: Premium Business Services
Premium Business Services Business lending growth Business deposit growth Balance Growth Balance Growth 20.0% 12 Months to Dec 08 12 Months to Dec 08 24.0% 15.0% 16.0% 10.0% 8.0% 5.0% 0.0% 0.0% CBA Peer 1 Peer 2 Peer 3 CBA Peer 1 Peer 2 Peer 3 Source: APRA NFC Market Source: APRA NFC Market Expense
Slide 54: Other key information – 6 month movements
Other key information – 6 month movements Dec 08 vs Dec 08 Jun 08 Dec 07 Dec 07 Net operating income CFS GAM 368 484 431 (15%) Colonial First State 287 313 379 (24%) CommInsure 376 358 315 19% Other (1) 6 (4) 75% 1,030 1,161 1,121 (8%) Operating expenses CFS GAM 180 178 191 (6%) Colonial First State
Slide 55: Wealth Management
Wealth Management CFS GAM: Dec 08 Dec 08 vs FUM 22% to $129bn $m Dec 07 Expenses 6% CFS GAM 368 (15%) Colonial First State: Colonial First State 287 (24%) FUA 21% to $158bn CommInsure 376 19% FirstChoice remains 2nd largest Other (1) 75% platform Net operating income 1,030 (8%) C
Slide 56: Notes
Notes o Determined to be different 56
Slide 57: Wealth Management
Wealth Management Funds under Administration down 21% FirstChoice & Avanteos net flows remain positive -21% FirstChoice & Avanteos $200bn ($9bn) $1,239m ($33bn) $158bn $950m $763m $647m Mar 08 Jun 08 Sep 08 Dec 08 Dec 07 Net Flows Investment Returns Dec 08 Good investment performance Inforce premium
Slide 58: Other key information – 6 month movements
Other key information – 6 month movements Dec 08 vs Dec 08 Jun 08 Dec 07 Dec 07 Net interest income ASB 376 402 382 (2%) Other 55 69 51 8% 431 471 433 (0%) Other banking income ASB 212 160 157 35% Other 35 40 26 35% 247 200 183 35% Total banking income ASB 588 562 539 9% Other 90 109 77 17% 678 671
Slide 59: International Financial Services
International Financial Services Dec 08 Dec 08 vs $m Dec 07 ASB Cash NPAT 6% in NZD ASB 616 8% Sovereign 96 (11%) Growing Asian contribution Other 111 35% Total operating income 823 9% Sovereign NPAT 12%: Operating expenses 443 8% Operating performance 380 10% Income distorted by revised
Slide 60: Other key information
Other key information Wholesale Funding - Geographic Distribution Wholesale Funding by Product Structured MTN 6% 3% 3% 3% Australia 10% Vanilla MTN 10% Commercial Paper 9% Other Asia 43% Europe Structured Finance Deals 6% Debt Capital United States 22% 5% 16% CDs Japan Securitisation United Kingdom
Slide 61: Strong funding and liquidity positions
Strong funding and liquidity positions Source of Funding * AA credit rating, stable outlook 20% Well advanced with FY09 funding task – 2% 59% 5% 88% completed 12% 2% Strong funding profile: Retail Funding Long Term Wholesale maturing in FY09 Short Term Wholesale Long Term Wholesale maturing af
Slide 62: Notes
Notes o Determined to be different 62
Slide 63: A strong capital position
A strong capital position 14% 12.08% 12% 11.58% 11.39% 10.74% 10% $4.2bn 8% 8.75% buffer 8.17% 8.17% 7.58% Tier 1 6% Minimum 4% 2% 0% Dec 07 1 Jun 08 1 1 Jul 08 Dec 08 2 Tier 1 Capital Total Capital 1 Ratios exclude interest rate risk in the banking book (IRRBB). 2 December 2008 ratios treat BankWes
Slide 64: Tier 1 movement in half year to Dec 08
Tier 1 movement in half year to Dec 08 10.0% 1.67% (0.76%) 9.5% 9.0% (0.57%) 0.31% (0.17%) 0.01% 8.75% 0.30% 8.5% 0.84% (0.69%) 0.23% 8.0% 7.58% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% Tier 1 Cash Ord. DRP 1 Share BankWest 2 Growth Currency 3 Innovative 4 Capitalised Other Tier 1 Jun 08 NPAT Dividends $548m i
Slide 65: Capital ratios compare favourably to peers
Capital ratios compare favourably to peers Domestic Peer Comparison Tier 1 ratio of 8.75% as at Dec 08 Tier 1 Capital Ratios 1 8.75% 8.35% 8.29% 8.32% $2bn of capital raised in Oct 08 to 7.71% 7.35% 7.58% ensure BankWest acquisition capital neutral CBA Peer 1 Peer 2 Peer 3 Dec 08 Sep 08 Sep 08 (
Slide 66: Notes
Notes o Determined to be different 66
Slide 67: Key Messages
Key Messages A solid operating result: Core business performing well Income up 15%, underpinned by strong Banking volumes Disciplined cost management - expenses down 3% on prior half Considered approach to strategic opportunities Well placed in challenging times: Strong capital positio
Slide 68: Notes
Notes o Determined to be different 68
Slide 69: Agenda
Agenda Ralph Norris, CEO – Company Update and Outlook David Craig, CFO – Financial Overview Questions and Answers 69
Slide 70: Supplementary Materials
Supplementary Materials For the half year ended 31 December 2008 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Slide 71: Index
Index Contents Page Group and Banking Overview 72 Wealth Management 85 International Financial Services 92 BankWest 96 Credit Quality and Risk Management 101 Capital, Funding and Liquidity 117 Sustainability 128 Economic Indicators 132 71
Slide 72: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 72
Slide 73: Summary
Summary Disciplined cost management underpins strong, positive “jaws” Holding $82bn in liquid assets (post BankWest funding) FY09 funding well advanced — deposit growth outstripping asset growth Business mix weighted to lower risk segments Low risk strategic agenda — on track and delivering results
Slide 74: Cost Growth
Cost Growth Cost-to-income targets by Expense Growth Business Unit (on prior half) Underlying growth of 5% ex GST credits 8% Highly focused investment spend – and IWL/ANK emphasis on strategic priorities investments (e.g Core Banking) Expenses 4% 4% down 3% 3% on prior half Critical review of
Slide 75: Dividends
Dividends Dividend (cents per share) 280 240 200 153 149 Second Half First Half Cents 160 130 112 104 120 82 85 113 113 80 107 85 94 79 68 69 40 0 2002 2003 2004 2005 2006 2007 2008 2009 Payout Ratio Cash Basis 75.9% 73.9%* 74.9% 70.5% 74.2% 75.0% * Which new Bank costs added back. 75
Slide 76: Other Banking Income
Other Banking Income 6 months Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs $m $m $m Jun 08 Dec 07 Commissions 977 919 908 6% 8% Lending Fees 617 507 469 22% 32% Trading Income 448 346 200 29% Large Other 141 100 128 41% 10% 2,183 1,872 1,705 17% 28% AIFRS reclassification of (147) (101) (164) (46%) 10%
Slide 77: Segment Revenue
Segment Proportions of total banking income Revenue Dec 08 vs Proportion of Total Banking Income Dec 08 Dec 07 Dec 07 Home Loans 801 722 11% Other, 8% Home Loans, 12% Consumer Finance 665 541 23% ASB, 9% Consumer Retail Deposits 1,602 1,451 10% Local Finance, 10% Business Banking, 4% Institutional B
Slide 78: System Housing
System Banks accounting for an increasing share of Housing system approvals Share of approvals – Number Share of approvals – Value Banks (LHS) Non Banks (RHS) Banks (LHS) Non Banks (RHS) % % % % 90 30 95 30 90 25 85 25 \ 85 20 80 20 80 15 75 15 75 10 70 10 70 5 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan
Slide 79: Volume Growth
Volume Strong volumes underpin revenue position Growth 12 Months 6 Months 3 Months to to Dec 08 to Dec 08 Dec 08 Annualised Annualised % % % CBA System CBA System CBA System Home Lending 15.8 7.9 15.0 5.4 17.5 5.3 Household Deposits 21.7 19.0 23.8 25.8 24.0 28.9 Business Lending 8.8 11.9 10.6 12.1 1
Slide 80: CBA Growth vs Market
CBA Growth vs Market Twelve months to December 2008 Home lending Personal lending 0.2% -0.1% 12.7% 15.8% 14.7% 14.6% -9.5% -11.7% 7.9% -11.7% 7.2% 7.8% -23.5% -22.5% CBA Peer 1 Peer 2 Peer 3 Peer 4 CBA Peer 1 Peer 2 Peer 3 Peer 4 Credit cards Household deposits 26.8% 19.8% 9.0% 19.0% 15.0% 7.4% 21.7
Slide 81: CBA Growth vs Market
CBA Growth vs Market Six months to December 2008 Home lending Personal lending -2.7% -3.2% -9.8% 5.7% 7.5% 7.9% -11.1% 6.9% -11.4% 2.7% 2.3% -18.9% -20.0% 1.9% CBA Peer 1 Peer 2 Peer 3 Peer 4 CBA Peer 1 Peer 2 Peer 3 Peer 4 Credit cards Household deposits 7.3% 13.6% 12.9% 3.8% 17.7% 16.8% 3.0% 11.9%
Slide 82: Home Loan Growth
Home Loan Branch channel performance continues Growth to improve Balance Growth by Channel - 6 months 15.8% 13.5% 13.4% 7.7% 6.8% 6.2% 7.4% 5.9% 5.2% 5.2% 4.6% 3.5% 2.7% 1.5% -0.5% Dec 07 Jun 08 Dec 08 Broker Branch Premium Total CBA Total Market Note : Width of channel columns reflects relative pro
Slide 83: Replicating Portfolio
Replicating Portfolio No change Easing Scenario Replicating Portfolio Yield Replicating Portfolio Yield Target Cash Target Cash Rate Rate 2001 Current 2011 2001 Current 2011 83
Slide 84: Core Banking Modernisation
Core Banking Core Banking Our Journey so far Modernisation Improving the Front-End Addressing the Back-End Sales & service training A step change in customer service Over 1,000 new frontline staff Faster systems and processes New design branches Productivity and efficiency gains Market
Slide 85: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 85
Slide 86: Global Asset Management
Global Asset Management Globally: $129bn FUM*, 986 people North America Japan $1.3bn FUM $3.2bn FUM 4 People Asia ex China & Japan Middle East $9.8bn FUM $4.6bn FUM 111 People UK & Europe Australia & New Zealand $12.6bn FUM $97.1bn FUM 189 People 682 People 25% FUM raised from offshore clients, 40%
Slide 87: Funds under Administration
Funds under Administration Half Year to Dec 08 Investment Funds Under Administration Opening Income & Closing Balance Inflows Outflows Netflows Other5 Balance FirstChoice 38,707 5,548 (4,805) 743 (6,278) 33,172 Avanteos 6,257 1,231 (564) 667 (1,197) 5,727 Cash management 2,576 754 (1,114) (360) 83 2
Slide 88: Funds under Management
Funds under Management * Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs $m $m $m Jun 08 Dec 07 Australian equities 16,725 23,502 29,618 (29%) (44%) Global equities 29,679 35,589 40,945 (17%) (28%) Cash and fixed interest 56,813 66,729 66,694 (15%) (15%) Property and alternative 25,377 27,120 27,102 (6%) (
Slide 89: Product mix
Product Well diversified mix Funds Under Administration 31 December 2008 Total FUA = $158 bn Internationally sourced FirstChoice/Avanteos 19% (19% as at Dec 07) 25% (25% as at Dec 07) Other 2% (2% as at Dec 07) Cash management Property 1% 13% (1% as at Dec 07) (9% as at Dec 07) Other Retail 15% (17%
Slide 90: Investment experience mix
Investment experience mix Investment experience profile Australia New Zealand Asia Total Local equities 1% - - - International equities - - 12% 1% Property 17% - 29% 14% Growth 18% - 41% 15% Fixed Interest 33% 60% 58% 40% Cash 49% 40% 1% 45% Income 82% 100% 59% 85% Total 100% 100% 100% 100% 90
Slide 91: Insurance Analysis - CommInsure
Insurance Analysis - CommInsure As At Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs Sources of Profit from CommInsure $m $m $m Jun 08 Dec 07 The Margin on Services profit from ordinary activities after income tax is represented by: Planned profit margins 75 74 71 1% 6% Experience variations 10 11 1 (9%)
Slide 92: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 92
Slide 93: ASB
ASB ASB well-placed to navigate tougher market conditions Credit growth slowing, particularly housing ASB growth remains ahead of system % 12 months to Dec 08 25 20 15.0% 15 11.4% 10 c 6.0% 5 4.4% 0 -5 Jan 94 Jan 97 Jan 00 Jan 03 Jan 06 Retail Deposits Home Lending Agriculture Household Business ASB
Slide 94: Asia
Asia Growing Asian footprint China Indonesia Staff numbers 4,288 101 – CBA 1,433 PT Bank Commonwealth 2,448 - Bank of Hangzhou 317 PT Commonwealth Life 1,739 - Jinan City Commercial Bank 94 China Life CMG (includes staff & sales 18 First State Investments agents) 65 First State Cinda Fund Management
Slide 95: Asia
Asia Targeted growth strategy China 20% Jinan City Commercial Bank (Increased from 11% in Dec 2008) 19.9% Bank of Hangzhou Beijing and Shanghai – Representative offices China Life CMG – JV life insurance First State Cinda Fund Management Company Japan Branch India Bank license granted to operate in
Slide 96: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 96
Slide 97: BankWest Reporting
BankWest Reporting No earnings included with 1H09 results Provisional estimates made as at 31 December 2008 of: Assets and liabilities acquired Purchase consideration; and Gain on acquisition Fair value procedures to be completed during 2H09 Non cash items to include: Restructuring p
Slide 98: BankWest Overview
BankWest Snapshot of merged operations Overview BankWest & CBA Combined St. Andrew’s Australia Branches (Domestic) 1,011 131 1,142 Market Share – Home Loans 1 20.3% 3.0% 23.3% Market Share – Household Deposits 1 29.1% 3.5% 32.6% Market Share - Business Lending 13.5% 4.7% 18.2% Market Share – Busines
Slide 99: BankWest Growth
BankWest Six months to December 2008 Growth Home Lending Personal Lending -2.7% -3.2% -4.4% -9.8% 7.5% 7.9% 5.9% 6.9% 2.7% -18.9% -20.0% 1.9% CBA Peer 1 Peer 2 Peer 3 BankWest CBA Peer 1 Peer 2 Peer 3 BankWest Credit cards Household deposits 6.9% 12.9% 3.8% 17.7% 16.8% 5.1% 11.9% 12.4% 3.2% 6.9% 2.4
Slide 100: BankWest Overview
BankWest Comparable banking transactions Overview (as at time of BankWest acquisition announcement) Comparable price-to-book values Comparable price-to-earnings multiples (LTM) (Acquiror / Target) (Acquiror / Target) Westpac / St. George 2.7x Bank of Queensland / Bendigo 21.1x Bendigo / Adelaide 2.6
Slide 101: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 101
Slide 102: Key Indicators Summary
Key Indicators Summary CBA ex CBA + BankWest BankWest Gross loans and acceptances (GLA) ($m) 408,174 466,868 Gross impaired assets ($m) 1,944 2,714 Gross impaired assets as % of GLA 0.48 0.58 Collective provision as a % of Credit RWA – Basel II 0.86 0.95 Individually assessed provisions as a % of gr
Slide 103: Home Lending
Home Modest increase in arrears consistent with cycle – Lending portfolio quality remains sound Home loan portfolio mix Home loan arrears by State % 90+ Days % Dec 08 Jun 08 0.7 0.6 Owner-Occupied 56% 55% 0.5 0.4 Investment 33% 34% 0.3 0.2 Line-of-Credit 11% 11% 0.1 0 Dec 06 Mar 07 Jun 07 Sep 07 Dec
Slide 104: Home Loans LVR
Home Strong LVR profile Loans LVR Original LVR of Portfolio Strong average LVR profile: 100% 51% based on original value 75% 80%+ 50% 60-80% 37% based on current values 0-60% 25% 51% on new loans 0% Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 % of loans at <60% LVR: Current Market pro
Slide 105: Home Loan Stress Test
Home Loan Even under highly stressed conditions, portfolio Stress Test losses would remain modest and manageable Stress test scenarios modelled, based on experience of UK recession of the late 1980s / early 1990s, which saw Up to 6 fold increase in PD Unemployment of 10% Expected loss $m PD st
Slide 106: Consumer Arrears 90+ days
Consumer Modest uptick in longer-dated arrears Arrears 90+ days consistent with economic conditions Home loans Credit cards 0.6% One-off change in minimum repayment requirement – adjusted 1.2% position also shown 0.5% 1.1% 0.4% 1.0% 0.3% 0.9% 0.8% 0.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Slide 107: Sector Exposures
Sector Portfolio remains well diversified across Exposures industry sectors Dec 08 Jun 08 Dec 08 Jun 08 Consumer 47.8% 46.9% Agriculture 2.4% 2.3% Mining 1.4% 1.2% Manufacturing 3.3% 2.9% Energy 1.8% 1.8% Construction 0.8% 0.8% Retail & Wholesale 2.6% 2.7% Transport 1.8% 1.7% Banks 11.4% 11.8% Finan
Slide 108: Sector Exposures
Sector Exposures * Dec 08 Jun 08 AAA to A+ to BBB+ Other Total AAA A+ to BBB+ Other Total AA- A- to to AA- A- to $bn BBB- BBB- Banks 42.8 18.8 2.2 0.7 64.5 41.7 14.7 1.8 0.4 58.6 Finance Other 15.1 11.2 5.7 6.7 38.7 17.0 11.0 5.4 5.7 39.1 Property 0.3 5.7 10.5 24.5 41.0 0.3 6.3 8.2 22.5 37.3 Soverei
Slide 109: Large Exposures
Large Exposures Top 20 Commercial Exposures * Large Exposures % 20 largest exposures as a % $m as at Dec 08 of Total Committed Exposures 4.0% A- BBB Note 1 3.0% A- 2.0% BBB A- 1.0% A BBB+ 0.0% A- Jun 04 Jun 05 Jun 06 Jun 07 Dec 07 Jun 08 Dec 08 * CCC Note 2 Ex-BankWest BB+ Note 3 A- Notes: A- The ra
Slide 110: Troublesome Exposures
Troublesome* Increasing vigilance in uncertain times Exposures Troublesome Exposures as a % of Total Commercial Exposures 1.60% Volatility of financial markets and 1.20% uncertain economic conditions 0.80% requiring increased vigilance across 0.40% 0.00% sectors Jun 07 Dec 07 Jun 08 Dec 08 Trouble
Slide 111: Property
Well diversified portfolio with strong security cover Property and conservative LVR‟s Represents 7.1% of total exposures Real Estate Investment Trust Up from 6.9% as at Jun 08 due to: Industrial 33% 34% Retail Exchange rate movements 12% 16% 5% Residential Existing client lending Commercial
Slide 112: Impairment Expense - Historical
Impairment Expense - Historical Impairment Expense - Percentage of Gross Loans & Acceptances bpts 3.50% 350 3.00% 300 2.50% 250 2.00% 200 1.50% 150 1.00% 100 0.50% 50 0.00% 0 CBA Peers 112
Slide 113: Impairment Costs - Historical
Impairment Costs - Historical Early 1990’s Recession Dec 89 Current Economy GDP 4.25% 1.9% Unemployment 5.7% 4.5% (peaking at 10.8% in Dec 92) CPI 7.83% 3.7% Cash Rate 17.0%* 3.25% Vacancy Rates 4% 3-4% (peaking at 22% in Dec 92) CBA Commercial Lending % of GLA 67% 46% Consumer Lending % of GLA 33%
Slide 114: Counterparty & Other Exposures
Counterparty & Other Exposures No exposures to foreign sub-prime. US Debt/Agency No exposure to Fannie Mae, Freddie Mac or Federal Home Loan Bank. Net exposure to Sallie Mae ~ $150m. Non-Conforming $48m of investment grade Australian RMBS (~$30m rated AAA). Mortgage-Backed $1bn of warehous
Slide 115: Counterparty & Other Exposures
Counterparty & Other Exposures Lenders Mortgage Mortgage insurance outsourced to Genworth (98%) and PMI (2%). Insurance “Extreme stress” scenario* - expected loss demand on LMI of ~$598m. CDOs Total exposure of ~$60m, with $7m collateralised by cash and AAA Australian RMBS. No material expos
Slide 116: Risk Weighted Assets
Risk Weighted Six months to December 2008 Assets ■ Strong Credit RWA growth (18%) driven by: RWA Movement (%) Tier 1 ratio „Flight to quality‟ volume growth Total impact (bpt) Additional liquidity holdings Credit Risk 18% (116) Currency depreciation Traded Market Risk -8% 1 IRRBB Nil 59 Chan
Slide 117: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 117
Slide 118: Capital Considerations
Capital Considerations Target Range Tier One Capital target range amended to in excess of 7%. PERLS II $750m to be redeemed in March 2009. Pre-funded by share issue PERLS II in December 2008 Offer period from 16th February to 11th March Share Purchase Plan Pricing is the lower of $26 and the
Slide 119: UK Comparison
UK Comparison PricewaterhouseCoopers has worked with the Bank in identifying, in principle, the key differences between the APRA and FSA method of calculating regulatory capital. Summarised below are details of the major differences: Impact on Bank’s Item Items impacting published total capital
Slide 120: UK Comparison
UK Comparison The following table estimates the impact on CBA capital, as at December 2008, of the differences between the APRA Basel II guidelines and those of the UK regulator, Financial Services Authority (FSA) Net Tier 1 Total Fundamental Capital Capital Capital1 December 08 Actual 6.6% 8.8% 11.
Slide 121: European Comparison (Normalised)
European The Bank‟s Tier 1 Capital Ratio compares favourably to Comparison domestic and international peers P Basel II Tier 1 Capital 13.7% 14% P P P E 11.9% 11.7% 11.6% 12% 11.3% P P P Europe 10.3% P 9.8% P Average 10% 9.0% 8.9% 8.8% 8.4% Tier 1 : 9.6% 7.9% 7.8% 7.7% 8% 6.9% Europe Average 6% Core
Slide 122: Total Capital Movement
Total Capital Half year to December 2008 Movement 13.0% 1.67% (1.53%) 12.5% 12.0% 0.84% (0.69%) 0.21% (0.17%) 11.5% 0.93% (0.04%) 11.39% (0.80%) 0.23% 11.0% 10.74% 10.5% 10.0% 9.5% 9.0% Total Capital Cash Ord. DRP 1 Share BankWest 2 Growth Currency 3 Debt issue Capitalised Other Total Capital Jun 08
Slide 123: Regulatory Expected Loss
Regulatory Expected Loss Jun 08 Dec 08 $m $m Regulatory Expected Loss (EL) – before tax 2,372 3,382 Eligible Provision 1 Collective provision 1,346 1,879 Individually assessed provisions 367 896 Other credit provisions 32 30 Fair value credit adjustments 22 4 Subtotal 1,767 2,809 less tax effect imp
Slide 124: Hybrid Instruments
Hybrid Instruments Hybrid dividends paid Franked/ Dec 08 Jun 08 Dec 07 Jun 07 Imputed PERLS II 22 23 20 19 F PERLS III 34 35 31 31 F PERLS IV 1 46 42 23 F Trust Preferred Securities 2003 16 17 18 17 N/A Trust Preferred Securities 2006 26 23 25 27 N/A ASB Capital prefs 6 6 5 5 I ASB Capital No.2 pref
Slide 125: Capital Treatment
Capital Treatment AIFRS APRA Accounting Tier 1 Tier 2 Total Shareholders' Equity Ordinary Share Capital P P P Other Equity Instruments P P P Reserves General Reserve & Capital Reserve P P P Asset Revaluation Reserve P P P Other reserve accounts P Retained Earnings P P P Minority Interests P P P Hybr
Slide 126: Interest Rate Risk
Interest Capital Assigned to Interest Rate Risk in Rate Risk Banking Book - APS117 $1,187m 3yr swap rate reduced by $1,286m almost 4.00% during period Optionality (retail) -$70m Basis Risk (ie zero) Optionality (retail) Repricing and Basis Risk Yield Curve Risk Repricing and Yield Curve Risk Embedde
Slide 127: Funding Costs
Funding Costs Long Term Funding Costs bpts 250 195 200 180 165 Current Guaranteed Offshore Margin to BBSW 150 145 Unguaranteed Domestic 138 130 Guaranteed Domestic 115 105 30 Jun 08 100 90 60 50 30 17 1 Jun 07 13 14 8 3 0 1 year 2 year 3 year 4 year 5 year Term 127
Slide 128: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 128
Slide 129: Sustainability Metrics
Sustainability Metrics 1H09 2008 2007 2006 2005 2004 Customers Customer satisfaction rating – Main Financial Institution (MFI) Retail1 72.5% 70.1 % 70. 5% 64. 9% 65. 4% 63. 2% Customer satisfaction rating – Business2 76.8% 73.9% 60. 7% 56. 5% 55. 5% 54. 0% Customer satisfaction rating – Wealth3 annu
Slide 130: Sustainability Progress
Sustainability Progress Environmental Updated Environment Policy endorsed by Board in October 2008 Greener property portfolio with occupation of two new buildings at Sydney Olympic Park targeting 5 star NABERS environmental rating, and the development of environmentally-friendly 6 star Darling W
Slide 131: Sustainability Focus
Sustainability Focus Further embedding sustainability into our business processes Enhanced reporting and disclosure Supporting diversity and financial wellbeing in the community Helping our customers to meet their sustainability goals Creating greener workplaces Creating a culture of cus
Slide 132: Supplementary Information
Supplementary Information Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 132
Slide 133: Economic Summary
Economic CBA Economists summary of key indicators Summary Year ended 30 Jun 1 1 2005 2006 2007 2008 2009 (f) 2010 (f) Credit Growth % – Total 13.5 14.4 15.5 11.8 5½ to 7½ 9-11 Credit Growth % – Housing 14.7 13.7 13.0 9.9 6-8 9½ to11½ Credit Growth % – Business 11.8 16.6 19.1 16.3 6½ to 8½ 9½ to 11½
Slide 134: Global Backdrop
Global Backdrop Global Recession in 2009 Commodity prices have fallen WORLD GROWTH CBA COMMODITY PRICE INDEX (annual % change) Index Index % % (1997=100) 8 8 400 400 Source: IMF USD 6 6 Long-run 300 300 average 4 4 200 200 2 2 SDR Global recessions 0 0 100 100 1960 1966 1972 1978 1984 1990 1996 2002
Slide 135: Domestic Protection
Domestic Protection Lower AUD helps offset external shocks Demographics are supporting housing THE AUSTRALIAN DOLLAR POPULATION USD USD '000 '000 (rolling annual increase) 1.00 1.00 350 350 0.80 0.80 300 300 250 250 0.60 0.60 200 200 0.40 0.40 150 150 Jan-95 Jan-99 Jan-03 Jan-07 Sep-79 Sep-86 Sep-93
Slide 136: Domestic Risks
Domestic Risks The pace of activity has slowed sharply Unemployment is edging higher GDP UNEMPLOYMENT RATE % % % % (% change) 5.5 5.5 6 6 Annual 5.0 5.0 3 3 4.5 4.5 0 0 4.0 4.0 Quarterly -3 -3 3.5 3.5 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08 Jul-05 Jul-06 Jul-07 Jul-08 Some capex projects are being
Slide 137: Credit Drivers
Credit Drivers Credit Growth Housing CREDIT HOUSING CREDIT & DEMAND %pa '000 (annual % change) 27 60 40 % 40 % Housing 30 30 credit (lhs) Housing 19 20 20 20 10 10 11 -20 Pent up 0 0 demand Other Business (adv 6 qtrs, personal rhs) -10 -10 3 -60 Sep-82 Sep-87 Sep-92 Sep-97 Sep-02 Sep-07 Sep-86 Sep-9
Slide 138: Housing Indicators
Housing Indicators Housing loan approvals Housing affordability improving $bn $bn DEBT & HOUSE SALES Ann 15 15 %pa ch 60 -7.0 H/hold interest payments 3¼% Total (% of income, inverted) cash (ex refin) (adv 5 qtrs, rhs) 10 10 27 -3.0 Established (exc refin) 5 5 -7 1.0 Construction related House sales
Slide 139: Housing Indicators
Housing Indicators 55% customers paying in advance REPAYMENT RATES Easing financial pressures % HOUSEHOLD INDICATORS % Index % 100 5.0 225 15 Household M o rtgage debt servicing 83 rate 6.3 188 (% of income, rhs) 12 (inverse, rhs) 150 9 65 7.5 113 6 48 Custo mers repaying 8.8 Housing 3¼% affordabili
Slide 140: System Credit Quality
System Credit Quality Sub-prime housing market Housing loan arrears Arrears by State Arrears by region 140
Slide 141: Results Presentation
Results Presentation For the half year ended 31 December 2008 Ralph Norris CHIEF EXECUTIVE OFFICER David Craig CHIEF FINANCIAL OFFICER 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Commonwealth Bank of Australia — H1 2009 Earnings Presentation on 6ix