Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (August 2021)
62 slides from Commonwealth Bank Of Australia's debt investor presentation, Aug 11, 2021
Slide 1: Fixed Income Investor Discussion Pack
Fixed Income Investor Discussion Pack For the full year ended 30 June 2021 Commonwealth f Bank
Slide 2: Disclaimer
The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 11 August 2021. It is information given in summary form and does not purport to be complete. Information in this presentation is not intended to be relie
Slide 3: Overview
Slide 4: GDP back above pre COVID levels, but lockdowns should see negative Q3 2021
GDP back above pre COVID levels, but lockdowns Consumer and business sentiment remain high but Consumer spending down but bounces when should see negative Q3 2021 off the peak with impact of lockdowns lockdowns are lifted Real GDP (quarterly)1 Consumer & Business Confidence2 CBA card spend tracker 3
Slide 5: Vaccine rollout gaining pace; labour supply has fallen sharply
Vaccine rollout gaining pace Labour supply has fallen sharply At a time when demand is strong at all skill levels Australian COVID-19 vaccinations (% of 16+ population)1 Non-resident worker (‘000)2 IVI Job vacancies (Index=100 Jan 10)3 % ‘000 Index 160 600 40 40 140 Level 1 Level 3 500 120 Level 2 P
Slide 6: Debt serviceability has fallen but expected to return to average
But debt serviceability has fallen a long way and Household debt levels remain high Household savings are elevated expected to return to average levels (as % of disposable income)2 CBA cash savings indicator (index, Jan 2016 = 100)3 Household debt service (% of income)1 % % In Index % % 180 180 10 1
Slide 7: Government spending has risen sharply and stays higher
Gov’t spending has risen sharply and stays higher Fiscal settings remain expansionary for longer Some central banks are starting to reduce asset Taxes and spending1 (% of GDP) Budget balance1 (% of GDP) purchases, including the RBA from September Central Bank total assets2 (% of GDP) % % % 3 80 35 F
Slide 8: Operating Income, Expenses, Loan Impairment Expense, Cash NPAT
Operating Income Operating Expenses Loan Impairment Expense Cash NPAT Continued core volume growth Investment in franchise + volume Improved economic outlook Low rates impacting NIM Additional customer remediation Provisioned for uncertainty +1.7% +3.3% -78.0% +19.8% 33bpts 461 575 Remed
Slide 9: Home lending, household deposits, business lending, business deposits
Home lending2 Household deposits3 Business lending Business deposits4 Fundings up 33% (vs FY20) RBS transaction balances +25% Double digit growth in 5 key industries New transaction accounts +37% 42% fixed rate (FY20: 17%) >900k new transaction accounts Asset finance fundings +24% ~3
Slide 10: Funding, Provisioning, Capital
Funding Provisioning Capital 73% deposit funded Improved portfolio credit quality (TIA -$1.2bn) $6bn off-market share buy-back Group transaction balances +30% Overlays of ~$900m Large capital surplus Deposit funding Troublesome & Total Credit CET1 % % of total funding Impaired Assets (TI
Slide 11: Rationale for off-market share buy-back
Rationale Financial overview In deciding to commence capital management, the Board considered: • The resilience of the domestic economy, notwithstanding recent public health measures to contain COVID-19 Estimated reduction in share • The Group’s capacity to adequately absorb potential stress events
Slide 12: Strong capital position and residual surplus
Surplus Surplus Surplus ($bn) ($bn) ($bn) • CBA’s strong capital position 4.8 2.0 0.5 8.3 (4.1) 11.5 (6.0) ~2.0 ~7.5 and our progress on executing our strategy mean that we are Chart movements in bpts 180 (91) well placed to continue to 13.1% (133) 12.1% - support our customers and 17 39-49 12.2% ma
Slide 13: Loan Impairment Expense, Arrears, TIA
Loan Impairment Expense Arrears 2 TIA Loan loss rate (bpts)1 90+ days bpts FY20 FY21 Personal Loans Credit Cards Home Loans3 % of TCE: 0.78% 0.70% 0.61% Consumer 26 4 Corporate 50 16 1.51% 1.56% 1.48% Total 33 7 8.7 8.2 1.38% 7.5 1.23% Gross impaired 3.5 3.1 1.02% 3.4 1.09% 0.80% 2,518 0.66% 0.68% 0
Slide 14: Loan repayment deferrals
Deferrals No. of accounts • New short term repayment deferrals for home loan and small Home Loans Business Loans business loan customers made available from June 2021 158,000 • Proactively contacting eligible customers – online applications, >90% successfully automatic assessment transitioned back t
Slide 15: Our purpose and priorities
Our purpose To improve the financial wellbeing of our customers and communities Our priorities Leadership in Australia’s Reimagined products Global best digital Simpler, better recovery and transition and services experiences and technology foundations Build Australia’s leading Anticipate changing D
Slide 16: Leading customer experience and mobile banking
Leading customer experience Strong customer engagement Mobile banking leader Mobile app CommBank app users1 Digital transactions #1 Net Promoter Score5 % of total - by value2 Online banking 6.4m 70% #1 (Canstar - 12 years in a row)6 5.6 62 4.4 #1 Mobile banking 54 (Canstar – 6 years in a row)7 Jun 1
Slide 17: Customer Remediation and Royal Commission Remedial Action Plan
Customer Remediation Royal Commission Remedial Action Plan4 Committed to remediating customers quickly Well progressed on implementing the All milestones submitted recommendations of the Royal Commission 100% of milestones $3,210m submitted Refunds made 960 No action required by CBA1 31 1,038 Refund
Slide 18: Market share and metrics versus peers
MFI share 1 (%) Home Lending share 2 (%) Household Deposits share 3 (%) Business Banking share Change in FY21 (bpts) Deposit Funding Peers as at Mar 21 30 73% 71% 67% 66% Lending share (%)2 Deposits share (%)3 -6 -65 -51 21.3% 21.6% 34.6% CBA Peer 3 Peer 2 Peer 1 CBA Peer 3 Peer 1 Peer 2 25.3% 20.5%
Slide 19: Funding & Liquidity
Funding & Liquidity
Slide 20: Funding composition, wholesale funding, funding profile
Funding composition Wholesale funding Funding profile Deposit growth supporting 73% of funding Weighted to long term TFF refinance to be managed across FY23-FY25 period % of total funding FY21 Maturity6 Long term % issuance Short term 26% 11% 8% 8% 74% $50.1bn $50.1bn wholesale1 20% 18% 19% 69% TFF/
Slide 21: Deposit funding and deposits versus peers
Deposit funding Deposits vs peers1 Deposits in NSFR2 $bn As at June 2021 ($bn) 610 Peers as at March 20213 74% 477 73% Other 300 400 71% deposits 333 242 251 Household 192 CBA deposits 310 235 300 149 141 Peer 3 Dec 19 Jun 20 Jun 21 CBA Peer 3 Peer 2 Peer 1 250 Peer 1 Peer 2 200 Group transaction ba
Slide 22: Portfolio mix and short and long term funding
Portfolio mix Short term funding by product $bn Certificates of Deposits 68% Long term funding1 131 53% FI Deposits 19% Term Funding Facility 51 21% Commercial CommericalPaper Paper 12% Short term funding2 64 26% MTN 2% Long term funding by currency Long term funding by product TFF 29% Jun 21 3 Seni
Slide 23: Tier 2 capital profile
$bn Jun 21 • Based on APRA’s existing capital framework, CBA requires an additional $4.0bn of LAC qualifying issuance by 1 Jan 24 (excluding maturities). Risk Weighted Assets 450.7 • Expected Tier 2 issuance of $4-5bn in FY22. Tier 2 Requirement @ 5% by 1 Jan 20241 22.5 Existing Tier 2 at June 2021
Slide 24: Financials
Slide 25: Financial, balance sheet, capital and funding summary
Financial Balance sheet, capital & funding Statutory NPAT2 ($m) 8,843 +19.7% Capital – CET13,6 (Int’l) 19.4% +200 bpts Cash NPAT2 ($m) 8,653 +19.8% Capital – CET13 (APRA) 13.1% +150 bpts ROE2 % (cash) 11.5 +130bpts Total assets ($bn) 1,092 +7.5% 2 EPS cents (cash) 488.5 +80c Total liabilities ($bn)
Slide 26: Operating income
• Volume-driven growth in retail, business and institutional lending fees and CommSec equities income • Higher one-off net profits from minority investments2 • Lower retail FX, deposit and credit card income from lower transaction volumes (COVID-19) +1.7% • Core volume growth +3.6% (4) • Lower margi
Slide 27: Net interest margin
FY22 Considerations × Low-rate environment Full year × Price competition × Home loan and deposits mix × Higher liquids TFF funding benefit (4)bpts 207 (4) 2 3 (2) 203 Minimal impact on NII (3) 2 (2) Bus. Lending (1) Consumer Fin. (1) Home loans: Impact of - Pricing cash rate cut (8) Capital (3) Hi
Slide 28: Operating expenses
Contribution to Mvt2: +0.9% +1.8% +1.1% -0.5% +3.3% 258 (321) 117 195 11,359 114 10,996 • To support increased loan processing Cumulative cost and financial crime assessment savings realised: volumes, and COVID-19 • FY21 $869m • Frontline business bankers and retail • FY20 $548m lenders • Wage incre
Slide 29: Cost reduction and investment spend
Cost Reduction Investment Spend1,2 $m $m Cumulative savings Cost approach Shift to Productivity & Growth 1,809 1,809 • Simpler, more efficient Infrastructure business for our customers and & Branches 22% people 1,437 1,437 • Continue to invest in the 1,026 Expensed business 27% Risk & • Strengthen o
Slide 30: Group lending, deposits and balance sheet
Jun 21 vs Jun 21 vs Group Lending $bn Jun 20 Dec 20 Jun 21 Dec 20 Jun 20 +4.9% Home loans 542.9 559.3 579.8 3.7% 6.8% Consumer finance 18.2 17.4 17.0 (2.3%) (6.6%) +3.0% 1 Business loans 122.3 127.6 135.2 6.0% 10.5% 794 817 779 Institutional loans 95.8 89.3 85.5 (4.3%) (10.8%) Total Group Lending 77
Slide 31: Loan loss rate
Loan Loss Rate1,2 Loan Loss Rate by business unit1 bpts bpts 22 73 Consumer Corporate 44 -6 14 -8 -13 1H21 2H21 44 41 142 36 34 33 33 26 25 76 21 20 19 50 16 16 13 11 43 16 15 15 24 23 13 20 7 7 11 8 10 14 29 3 26 17 19 17 18 18 18 18 18 17 26 16 -1 4 3 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 F
Slide 32: Total and collective provisions
Total Provisions ($m) Collective Provisions ($m) Provision Provision Coverage1 1.70% 1.81% 1.63% Coverage2 1.44% 1.58% 1.39% Jun 21 Jun 21 vs Jun 20 vs Jun 20 6,815 5,943 6,363 6,211 5,396 872 -2% 581 5,311 -2% Individually Overlays3 41 Assessed 967 900 -7% provisions 906 +Large Collective 5,943 Mod
Slide 33: Organic capital generation and CET1
Organic Capital Organic Capital Generation (bpts) 46 Expected uplift Expected uplift Movements in bpts Generation 30 DRP 10 20 (divestments) 5 (divestments & APS111) 5,6 +46bpts 6mth Historical 2H21 +39-49bpts 46-61bpts Average (2013-2021) 19.4% international 97 8 4 13.1% 13.3% 12.6% (59) APRA ‘unqu
Slide 34: CET1 comparisons and dividend per share
CET1 CET1 CET1 556% Dividend per Share APRA International (cents) Level 2 Level 1 Level 2 19.4% Payout Ratio (cash NPAT basis) Assets 431 431 13.3% 17.4% 420 429 13.1% 148% 298 350 11.9% 11.6% 88% 80% 77% 75% 71% 71% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Jun 20 J
Slide 35: Internationally comparable CET1
Internationally comparable1 CET1 CET1 APRA 13.1% Balances below prescribed threshold risk weighted, bpts Equity investments compared to 100% CET1 deduction under APRA 0.8% Balances are risk weighted, compared to a 100% CET1 Capitalised expenses deduction under APRA 0.1% Balances below prescribed thr
Slide 36: APRA capital framework changes
Change Implementation Details • Since December 2020, APRA has released a number of consultation packages on the revisions to the capital framework. APRA is targeting a capital outcome in dollar terms that remains broadly constant and consistent with the “unquestionably strong” capital benchmark. APR
Slide 37: Sustainable Outcomes
Sustainable Outcomes
Slide 38: Supporting customers, community and people
Supporting our Supporting our Good business Engaging our people customers community practices • Committed to a freeze on forced sales • We increased our support for people • Refreshed our values to Care, Courage, • Embedded sustainability further into our for COVID-19 home loan deferral impacted by
Slide 39: Our climate commitment
Our climate commitment Strengthening governance Embedding processes We are committed to playing our part in limiting • Enhanced Board’s focus on climate risks and • Established a group-wide work program to uplift climate change in line with the goals of the Paris opportunities. our approach to E&S r
Slide 40: Carbon neutrality
Committed to a best practice carbon positive roadmap Greenhouse Gas emissions (tCO2-e) Scope 1 & 2 per FTE Energy Efficiency Peers (FY20)4 Group2,3 • 40% reduction in Scope 1&2 emissions (including 3.3 Australian data centres) since 2014 2.8 3.0 • Average NABERS rating of 5 stars 2.3 1.8 1.8 1.5 Ons
Slide 41: Asset Quality
Asset Quality
Slide 42: Group TCE by sector
Provisions to total Group TCE ($bn) TIA ($bn) TIA % of TCE committed exposure % Dec-20 Dec 20 Jun-21 Jun 21 Dec-20 Dec 20 Jun-21 Jun 21 Dec-20 Dec 20 Jun-21 Jun 21 Dec-20 Dec 20 Jun-21 Jun 21 Consumer 685.8 710.5 1.7 2.0 0.2% 0.3% 0.5% 0.4% Government Administration & Defence 149.1 189.2 0.0 0.0 0.0
Slide 43: Commercial property exposure profile
• Exposure diversified across sectors and by counterparty, with the top Group exposure Jun 20 20 counterparties representing 15% of the portfolio and having a Dec 20 weighted average rating of BBB equivalent. 80.0 Jun 21 73.5 77.5 • Stable credit quality with investment grade concentration steady an
Slide 44: Airlines and aircraft lessors
Airlines & Aircraft Lessors 1 Group exposure Jun 20 • Exposure reduced by ~$1.2bn over the last year largely due to active Dec 20 portfolio management, amortisation and FX movements. 28.1 26.8 26.5 Jun 21 • ~72% of our airline portfolio exposure is to strong counterparties; state-owned, flag carrier
Slide 45: Entertainment, leisure and tourism exposure
• Diverse industry with many sub-sectors (including Accommodation, Casinos Group exposure and Cinemas) impacted by government restrictions, including border closures, Jun 20 shutdowns and social distancing initiatives. Dec 20 12.9 12.9 13.0 Jun 21 • The sector remains susceptible to snap-lockdowns a
Slide 46: Retail trade exposure
Group exposure Jun 20 • Retail in general has remained resilient through the pandemic, Dec 20 buoyed by Government stimulus and the retention of cash in the 12.4 Jun 21 Australian economy with international borders closed. 11.3 11.9 28 21 22 • Increasing home prices, improving employment and the for
Slide 47: Sector exposure profile
• As a designated essential industry up until the NSW lockdown in July, Group exposure Jun 20 the sector had continued to operate through COVID-19 with some Dec 20 level of disruption and productivity loss due to lockdowns and social 9.9 9.9 10.3 Jun 21 distancing, more materially in Victoria. The i
Slide 48: Oil, gas and energy exposure
Group exposure Jun 20 • Exposures of $8.7bn (0.7% of Group TCE), reduced by $0.4bn over Dec 20 the past 6 months mainly from reduced Oil & Gas facilities. 10.9 Jun 21 9.1 8.7 • Stable performance over the past 6 months: 73 69 68 • Investment grade marginally down to 68% of portfolio; 1.0 0.8 0.7 1.9
Slide 49: Credit cards and personal loans 90+ day arrears
Credit Cards 1 Personal Loans 1 Group 90+ days Group 90+ days 1.22% 0.66% 0.61% 1.51% 1.48% 1.09% 9,574 9,615 9,237 6,016 5,284 5,091 $m 118 64 56 $m 91 78 55 Arrears Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio balance balance balance balance b
Slide 50: Credit cards and personal loans 30+ and 90+ day arrears
Credit Cards 1 Personal Loans 1 ASB 6.0% Group 30+ days Group 30+ days CBA 5.5% Group 4.0% 4.5% Bankwest 3.5% 2.0% 2.5% 0.0% 1.5% Jun 19 Dec 19 Jun 20 Dec 20 Jun 21 Jun 19 Dec 19 Jun 20 Dec 20 Jun 21 Credit Cards 1 Personal Loans1 Group 90+ days Group 90+ days 1.8% 1.8% 1.2% 1.2% 0.6% 0.6% 0.0% 0.0%
Slide 51: Home Lending
Home Lending
Slide 52: Residential property market conditions
Residential property prices are rising strongly Investors returning to the market Strong preference for fixed rate lending Dwelling prices1 (8 capital cities) Housing loan approvals2 (excluding refinancing) CBA fixed rate lending3 (% of total) % % Index Index $Abn $Abn 60 60 16 20 200 Sydney 200 16
Slide 53: Home lending portfolio and new business metrics
Portfolio1 Jun 20 Dec 20 Jun 21 New Business1 Jun 20 Dec 20 Jun 21 Total Balances - Spot ($bn) 485 498 516 Total Funding ($bn) 53 65 76 Total Balances - Average ($bn) 482 492 507 Average Funding Size ($’000) 7 354 344 374 8 Total Accounts (m) 1.8 1.9 2.0 Serviceability Buffer (%) 2.5 2.5 2.5 Variabl
Slide 54: Market share gains and strong growth in fundings
Consistent market share gains1 Net growth driven by strong new lending2 Strong growth in new fundings $bn Home Loan Fundings ($bn)3 FY21: $141bn (+33%) 24.6% 25.3% 141 Internal Refinance 22 (22) 23.0% 21.5% (30) 76 (58) 65 20.7% 21.5% 119 49 49 53 53 45 43 14.9% 516 13.8% 485 14.6% 13.5% Dec 17 Jun
Slide 55: Mortgage book by year of origination and loan assessment
~77% of the book originated under tightened standards since FY16 New Loan Assessment • All income used in application to assess serviceability is verified • 80% or lower cap on less stable income sources (e.g. rent, bonus, overtime) Mortgage portfolio by year of origination • Applicants reliant on l
Slide 56: Borrowing capacity
Borrowing capacity remains elevated over the period Driven by low interest rate environment and lower serviceability assessment floor rate Change in maximum borrowing capacity2 - Indexed Dec 16 140% (Loans assessed based on the higher of the customer rate3 + buffer, or minimum floor rate) 120% 7.62%
Slide 57: Home loan arrears by portfolio, product and vintage
Arrears by portfolio Arrears by product Arrears by repayment type Group 90+ days Group 90+ days1 Group 90+ days1 0.8% Bankwest 0.8% 0.8% 0.6% CBA 0.6% 0.6% Group 0.4% 0.4% 0.4% ASB Owner Occupied 0.2% Interest Only 0.2% 0.2% Investment Loans Principal & Interest 0.0% 0.0% 0.0% Dec 18 Jun 19 Dec 19 J
Slide 58: Sources, Glossary & notes
Sources, Glossary & notes
Slide 59: Notes: Continued above system volume growth
Delivering – Continued above system volume growth in all core markets Slide 9 1. Home lending source: RBA Lending and Credit Aggregates. Household deposits source: APRA Monthly Authorised Deposit-taking Institution Statistics (MADIS). CBA business lending multiple estimate is based on Business Banki
Slide 60: Notes: Global best digital experiences
Global best digital experiences Slide 16 1. The total number of customers that have logged into the CommBank mobile app at least once in the month of June for years 2017, 2019 and 2021. Includes Face ID logins. 2. The total value ($) of transfers and BPAY payments made in digital (NetBank, CommBank
Slide 61: Cash Profit
Cash Profit The Profit Announcement discloses the net profit after tax on both a statutory and cash basis. The statutory basis is prepared in accordance with the Corporations Act 2001 (Cth) and the Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS).
Slide 62: Glossary: Funding & Risk, Capital & Other
Capital & Other Funding & Risk Risk Weighted Assets The value of the Group’s On and Off Balance Sheet assets are adjusted by Liquidity Coverage The LCR is the first quantitative liquidity measure that is part of the Basel III (RWA) risk weights calculated according to various APRA prudential standar
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