Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — H1 2006 Earnings Presentation
131 slides from Commonwealth Bank Of Australia's earnings presentation, Feb 15, 2006
Slide 1: Presentation of Half Year Results
Presentation of Half Year Results for 31 December 2005 Ralph Norris Michael Cameron Chief Executive Officer Chief Financial Officer 15 February 2006 woe Which Bank ConmonweaithBank
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, 15 February 2006. 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 = Half Year Results — Ralph Norris ~ Highlights ~ Outlook » Half Year Results — Michael Cameron Questions yet Which Bank ConmonweailthBak
Slide 4: Other Key Information
Other Key Information Which new Bank In launching Which new Bank (WnB) the Bank said that, subject to market conditions continuing over the three years of the program, it would target: = Cash EPS growth exceeding 10% CAGR = 4-6% CAGR productivity improvements = Profitable market share growth across
Slide 5: Highlights
Highlights Cash NPAT $2,061m | 17% 19% Cash EPS (excl HK) 149.5cps | 13% | 13% Dividend 94c - 11% Which new Bank benefits $506m | 20% | 68% ConmonwealthGark
Slide 6: Notes
Notes ee Which Bank ConmonwealthBark
Slide 7: Good half year result
Good half year result 145 $2,061m Volume Growth (25) 86 v 80 2 a i ene 759m aa we ea Interest Margin v Non Int.Income v Expenses ov Provisions v Tax vv 1 : 1 : 1 : 1 ; Cash EPS Vv Cash Banking Funds Insurance S/H WnB Cash = Profiton Cash NPAT Mgt investment Profit pre sale of NPAT Jun 05 returns HK
Slide 8: Other Key Information
Other Key Information a Notes e The payout ratio (cash basis) is calculated according to the following criteria: Payout ratio = DPS (in $) x number of shares (end of period) Cash NPAT 94c x 1,289 ie. ______________ =_ 8.8% 2,061 * Payout ratio excluding HK sale = 63.2% ee Which Bank ConmonwealthGark
Slide 9: Highlights - dividend
Highlights - dividend Dividend (cents per share) 200 5 160 5 120 5 Cents 80 40 2002 2003 2004 2005 2006 © First Half l@ Second Half ConmonwealthGark
Slide 10: Other Key Information Notes
Other Key Information Notes DecO5 Jun05 DecO4 Jund4 Jun 03 Banking Home loans 18.9% 19.0% 18.9% 18.9% 19.2% Credit cards 21.8% 22.8% 22.8% 22.7% 22.8% Retail deposits 228% 23.0% 23.6% 23.6% 24.2% Personal lending “ 16.0% 167% 16.7% 15.0% NIA Business lending 13.0% 128% 13.1% 138% NIA Transaction ser
Slide 11: Highlights - market position
Highlights - market position Home Loans NZ Lending Credit Cards Funds Mgft. — Aust. Retail Transaction Services (corporate) Transaction Services (commercial) Personal Lending NZ Deposits Equities Trading (CommSec) Retail Deposits Business Lending Aust.Life Insurance (total risk) LN ®BNN KN NN KK {1)
Slide 12: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 13: Which new Bank
Which new Bank » Financial targets are being exceeded » CommSee deployment and technical training complete * CommWay delivering faster processes » Customer satisfaction not yet acceptable aa Which Bank ConmonweailthBak
Slide 14: Notes
Notes woe Which Bank ConmonweaithBank
Slide 15: Which new Bank
Which new Bank Strength of Relationship 6.1 6.1 5.8 58 | «5.9 — T T Jun03 Sep03 Dec03 Mar04 Jun04 Sep04 Dec04 Mar05 Jun05 Sep05 Dec 05 Source: Research International a Which Bank ConmonwealthGark
Slide 16: Notes
Notes woe Which Bank ConmonweaithBank
Slide 17: CEO Priorities
CEO Priorities # Customer Service : Business Banking « Technology a Trust & Team Spirit *» Superior operating and financial results yet Which Bank ConmonweailthBak
Slide 18: Notes
Notes woe Which Bank ConmonweaithBank
Slide 19: 2006 outlook
2006 outlook « Global Economy Economic growth expected to remain solid Oil prices and rate of growth in China will influence domestic economy = Domestic Economy Business credit growth strong Consumer credit growth moderated, particularly housing Credit quality, employment and business confidence str
Slide 20: Notes
Notes woe Which Bank ConmonweaithBank
Slide 21: Michael Cameron
Michael Cameron Half Year Results ConmonweaithBank
Slide 22: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 23: Highlights - NPAT growth
Highlights - NPAT growth Dec 04 Dec 05 vs Dec 05 vs Jun 05 Dec 04 NPAT (statutory) 1,712 18% 17% Add back AIFRS non cash items 21 (13%) Large NPAT (cash) 1,733 17% 19% Less profit on sale 0 . . Hong Kong business NPAT (cash excluding HK) 1,733 9% 11% ee Which Bank ConmonwealthGark
Slide 24: Contributions to profit
Contributions to profit Banking Funds Management Insurance NPAT (underlying) Shareholder invest. Returns {after tax) Initiatives incl. WnB {after tax) Profit on sale of HK business NPAT (cash basis) Defined benefit plan pension expense Treasury share valuation NPAT (statutory basis} Pref. dividend p
Slide 25: Highlights - underlying profit by business
Highlights - underlying profit by business Jun 05 Dec 04 $M $M Banking 1,509 1,404 Funds Management 181 170 Insurance 89 67 Total AIFRS 1,779 1,641 AIFRS Impact 23 23 Underlying AGAAP equivalent (*) 1,802 1,664 “) 7% growth Dec 05 vs June 05 15% growth Dec 05 vs Dec 04 aa Which Bank ConmonweailthBan
Slide 26: Other Key Information
Other Key Information Balance of capitalised software costs $million Dec05 Jun05 Dec04 Jun04 Dec 03 Capitalised software 188 182 163 107 73 Expense ratios Dec05 Jun 05 Dec04 Jun 04 Dec 03 : Banking : Expense to income 48.4 50.7 50.5 56.4 62.4 : Underying Expense to Income 48.4 48.6 50.2 80.8 50.7 Fu
Slide 27: Highlights - productivity
Highlights - productivity Expense ratios () WnB 54.7% Target nn CAGR = 5.7% AT) 50.4% owen Bo reli 48% = 9 an CAGR = 8.4% insurance” 42% 40.5% ° 0.87% Funds ° CAGR = 6.8% ar te 0.74% 0.73% (2) Jun 03 Dec 05 On a cash basis ®) Expense to income © Expense to average funds under administration ) AGAAP
Slide 28: Other Key Information
Other Key Information Comparable expenses Staff expenses Occupancy and equipment IT services Postage and stationery Fees and commissions Advertising, marketing etc. Other Total comparable expenses Dec 05 Jun05 Dec 04 $M 1,386 310 502 109 314 146 200 2,967 $M 1,339 308 476 108 295 162 200 2,878 $M 1,
Slide 29: Operating expenses by half year
Operating expenses by half year Compliance Projects $M Other $M Dec 04 Jun 05 Dec 05 ee Which Bank ConmonwealthGark
Slide 30: Other Key Information
Other Key Information Notes Which New Bank estimates 2006 Benefits 2004 2005 Est. Targets (1) 200 620 900 Actual 237 724 (} These were the original full year targets set out in the September 2003 presentation investment | 2004 2005 | 2006 spend Act. Act. Est. Total Original 660 510 310 1,480 Revised
Slide 31: Which new Bank - Benefits
Which new Bank - Benefits 2004/05 $724m {target was $620m) 506 a 2003/04 $237m NN 174 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Cost Saving © Revenue Benefit ConmonwealthGark
Slide 32: Other Key Information
Other Key Information P&L Impact Investment spend for the period (gross) Less provision utilised Less investment capitalised Net WnB expense Less normal project spend Incremental WnB expense before tax Less tax Incremental WnB expense after tax Jun 05 346 (40) (64) 222 (100) 122 (36) 86 (9) Conmonwe
Slide 33: Which new Bank - Expenditure
Which new Bank - Expenditure Dec 05 P&L Impact $M Investment spend for the period (gross) 148 Less provision utilised (28) Less investment capitalised (35) Net WnB expense 85 Less normal project spend (85) Incremental WnB expense 0 Which Bank ConmonweailthBank
Slide 34: Notes
Notes woe Which Bank
Slide 35: Segment Results : Banking
Segment Results : Banking woe Which Bank ConmonwealthBark
Slide 36: Other Key Information
Other Key Information Av interest earning assets ($m) © Net int income (excl securitisation ($m) Net interest Margin (AIFRS) (bp) hot rating incom: Net interest income Other banking income Funds Mgt. income Insurance income Total Dec 05 267,169 3,247 241% Dec 05 57% 24% 12% 1% 100% 3 Has been adjust
Slide 37: Banking - underlying profit
Banking - underlying profit 13% underlying profit " + 0, : growth on pcp Underlying profit up 5% since June 05 216 (46) 59) 1,589 en a e Margin maintained in soa 1508 [ competitive market » Strong growth in net interest income NIL Other Expenses BDD Tax& Dec income O€El 05 » Cost to income ratio con
Slide 38: Other Key Information
Other Key Information Notes Reconciliation of Net Dec 05 Jun05 Dec04 Dec05vs Dec d5vs Interest Margin Jun 05 Dec 04 Net Interest Income on 3,244 3,033 2,933 7% 11% AGAAP equivalent basis(!) Average interest earnings 267,169 250,357 = 239,150 7% 12% assets (excl securitisation) Net interest pro-forma
Slide 39: Banking - margins maintained
Banking - margins maintained Half year average NIM (bp) > 246b 244bp 241bp Half year average NIM (bp) 244bp (1bp} ibp (3bp) Din a 241 bp Jun05 Funding Asset Other “) Dec 05 AIFRS Mix Mix AIFRS ©) includes negative 2bps impact from increase in liquid assets and net negative 1bp for pricing Conmonweal
Slide 40: nel
nel SIONS Home Loans Investment/owner occupied home loans and secured lines of credit Retail Deposits Retail savings accounts, transaction accounts, cash management accounts and other personal investment accounts Personal Loans Personal loans and credit cards Corporate and Business Transactions Busi
Slide 41: Banking - Revenue by product
Banking - Revenue by product Other 2% Offshore Banking 1% Home Loans 15% Lending & Finance 12% / Financial Retail Markets. Deposits 10% 28% Corporate & Business Personal Loans Transactions 10% W% The current half has been affected by AIFRS: Dec O5vs Dec 05vs Dec 05 Jun 05 Dec 04 Home Loans 701 14% 2
Slide 42: Other Key Information _ Notes
Other Key Information _ Notes AIFRS Impact of hedging derivatives Dec 05 $M Net Interest Income 55 Other banking income (69) Net Impact (14) 0s pe Which Bank Conmonwealth8ark
Slide 43: Other Banking income - key components
Other Banking income - key components Dec 04 Dec 05vs Dec 05 vs $m Jun 05 Dec 04 Commissions & Fees 777 6% 5% Lending Fees 349 1% 11% Trading Income 219 10% 11% Other 38 (58%) (3%) Total AGAAP 1,383 2% 7% Hedging derivatives - - - Total AIFRS 1,383 (3%) 2% ee Which Bank ConmonwealthBark
Slide 44: Other Key Information
Other Key Information Dec 05 Jun 0S Dec04 DecOSv Dec dSv Jun05 Dec 04 Domestic growth profile ($bn)} Loan Funded 213° 20.9 22.6 2% (5%) Reduction 18.2126 13.0 21% 17% Net Growth 61 8.3 9.5 Total home lending Australian Home Lending assets ($bn} 136.0 129.9 121.7 5% 12% Securitisation (Sb) (9.4) (10.
Slide 45: Banking - Home Lending (domestic)
Banking - Home Lending (domestic) Spot Balances (including securitisation) $136bn » Orderly market slow down $122bn $130bn CBA balance growth: « +12% vs Dec 04 +5% vs Jun 05 Dec 04 Jun 05 Dec 05 Market Share a Market share steady at 18.9% *” Margin remains stable 19% eo Dec 03 Jun 04 Dec 04 dun 05 D
Slide 46: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 47: Home Loan Growth by Channel
Home Loan Growth by Channel (Balances sourced from each channel as a % of total CBA housing growth) Dec 04 Jun 05 Dec 05 i Brokers & Branch @ Premium © Total CBA 5! Total Market ConmonwealthGark
Slide 48: Other Key Information _ Notes
Other Key Information _ Notes Household Deposits (APRA) - Balance Growth Dec 05 Jun 05 Dec 04 Dec05v Dec05v i {$bn) ($n) ($bn) Jun 05 Dec 04 CBA 80.5 765 75.6 5.1% 6.5% WBC 387 36.6 35.5 5.8% 8.9% ANZ 28.7 268 25.8 TA% 11.0% NAB 36.7 34.1 33.3 TAM 10.2% SGB 28.1 265 26.5 5.9% 6.2% Subtotal 212.6 200
Slide 49: Banking - Deposits (domestic)
Banking - Deposits (domestic) Balances $123bn $127bn Market remains competitive « Total deposits (ex CDs) up 3% Dec 04 Jun 05 Dec 05 « Strong inflows into Netbank Saver & Streamline any Market Share (1) 30% nd 20.8% 29.0% « Over 50% of Netbank inflows 28% are new to the Bank BM BM wer oy m2 - 22% +
Slide 50: Other Key Information
Other Key Information Half ending Personal lending Dec05 Jund05 Dec04 Dec05 Dec 05 gross balances $M $M $M Vv v Jun 04 Dec 04 Credit cards 6,707 6,507 6,298 3.1% 6.5% Personal loans* 3992 4,659 4,172 (14.3%) (4.3%) Margin loans 4,664 4,311 3,847 8.2% 21.2% Totai Personal Lending 15,363 15,477 14,317
Slide 51: Banking - Personal Lending (domestic)
Banking - Personal Lending (domestic) CBA Balance growth » +7% vs Dec 04 e -1% vs Jun 05 # Personal Lending market share and balance growth affected by DEET buy-back 2 Credit card market share loss to low rate cards # Margin lending strong, particularly in CommSec 2 Personal loans bad debts increase
Slide 52: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 53: Banking - Business Lending
Banking - Business Lending » Buoyant and competitive market e Above market growth in balance »+21% vs Dec 04 #+14% vs Jun 05 Expanding capabilities to broker channels Credit quality of book remains strong CBA Business, Corporate and Institutional Lending Balances () $78.2bn $68.4bn $64.7bn Dec 04 Ju
Slide 54: Notes
Notes ee Which Bank ConmonwealthBark
Slide 55: Banking - Business Deposits
Banking - Business Deposits Business deposits growth of 4% over last 6 months versus market growth of 2% # Quoted term deposit book performing well Business Deposits 272.7 22) CBA 29 Market —@= Market Share (1) Financial and Non financial corporations deposits — Source APRA ConmonwealthGark
Slide 56: Other Key Information
Other Key Information Notes Dec ast” RWA $202,667 Charge for BOD (6 mths) $188m Charge for BOD to RWA (annualised) 0.19% Gross impaired Assets"?! $396m Individually assessed provisions $179 Collective provisions $1,044m General reserve for credit losses (pre-tax) $404m Collective Provisions + Genera
Slide 57: Banking - bad and doubtful debts
Banking - bad and doubtful debts Bad debt expense to RWA (annualised) 02% 0.19% 0.19% 0.19% 19% o, 9.19% 0.19% Tas Ot 188 176 Jun03 DecO3 Jun04 DecO4 Jun0S Dec 05 % to RW, 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% + 8.20% 8.00% Gross impaired assets to RWA dun Dee Jun Dee Jun Dec Jun Dec Jun Dec Jun Dec o
Slide 58: Other Key Information Notes
Other Key Information Notes For the half ending ASB: New Zealand Dec05v Dec05v NZSM Dec 05 Jun 05 Dec 04 Jun05 = Dec 04 Net interest income 392 395 381 (1.0%) 2.9% Other income 175. 137 131 27.7% 33.6% Total operating income 567 532 512 6.6% 11.1% Operating expenses (243) (234) (236) 3.8% 3.0% Charg
Slide 59: Banking - New Zealand (ASB)
Banking - New Zealand (ASB) Operational Lending* Balances (Spot — in NZD) « Market remained competitive $33.3bn $36.6bn « Cash profit up +19% vs Dec 04 e +9% vs Jun 05 Dec 04 Jun 05 Dec 05 os Lend ing balance up 41 0% * Operational lending = excludes treasury & structured finance NZ Housing Lending
Slide 60: Notes
Notes woe Which Bank ConmonweaithBank
Slide 61: Segment Results: Funds Management
Segment Results: Funds Management woe Which Bank Conmonweaith’ark
Slide 62: Notes
Notes Other Key Information Dec 05 Jun05 Dec04 | FUA | Av. FUA ($bn) 136 124 112 Spot. FUA ($bn} 137 123 447 Margins Operating income/ av. FUA 1.16 1,08 1.09 Net income/ av. FUA 0.95 0.93 097 | Expenses Operating expenses/ av.FUA 0.70 071 O73 Market shares a Platforms (latest is Sep 05)* 44.2% 10.8%
Slide 63: Funds Management
Funds Management « Underlying profit before tax up Underlying profit after tax «a +22% vs Dec 04 77 (61) a+7% vs Jun 05 181 » After tax profit affected by loss of transitional tax relief » Funds under administration grew 11% to $137bn » Positive net fund flow and | improving performance Dec 04 Jun05
Slide 64: Other Key Information Notes
Other Key Information Notes Total net flows Bec 05 Jun 05 Dec 04 $M $M $M FirstChoice & Avanteos 3,936 2,970 3.142 Cash Met. (255) (458) 6) i Other retail (2,316) (1,965) (2,493) : Wholesale 4.189 (640) (2.869) : Property (366) 79 (44) International 583 294 984 Other °) (76) (674) 436 : Total 2,805
Slide 65: Funds Management - net funds flows
Funds Management - net funds flows Retail net flows ($m) (s0"2 Pa? for Life) First Choice continued to soo 2 OBA Industry attract record retail flows and reaches $20bn industry « Turnaround of flows into wholesale funds ~1000 & Good International inflows Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar
Slide 66: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 67: Investment Performance
Investment Performance December 2005 moe * Gross performance and quartile ranking - dyr % pa Quartile 3yr % pa Quartile Aust. Share — Core 27.1% 1 24.3% 1 imputation 24.3% 2 22.1% 3 Property Securities 16.7% 4 19.8% 1 Global Resources 48.3% 1 30.0% 1 Diversified 16.6% 3 12.6% 4 Australian Bond 6.2%
Slide 68: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 69: Segment Results: Insurance
Segment Results: Insurance woe Which Bank ConmonwealthBark
Slide 70: Other Key Information Notes months ended
Other Key Information Notes 6 months ended Dec0S Jun05 Dec04 Claims expense as % of net earned premium General 51% 72% 60% Life 49% 47% 53% Sources of profit $M $M $M Planned profit margins 69 60 62 Experience variations 49 28 (yy Other 2 (8) - General insurance operating margin 43 6 7 Operating mar
Slide 71: Insurance Results - total
Insurance Results - total # Underlying profit : Underlying profit up 16% since June 05 # +54% on Dec 04 4 403 11 sg ens = +16% on Jun 05 * oO. fa. » After adjusting for sale of HK, operating income up 8% on prior half « Largest life insurer in Australia and New Zealand Dec Jun 04 05 Australia NZ Asi
Slide 72: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 73: Capital Management
Capital Management woe oO Which Bank ConmonwealthBark
Slide 74: Other Key Information
Other Key Information Credit Ratings Long Term Short Term Standard & Poors! AA- AT+ Moody's investor Senices Ags P-4 Fitch Ratings AA Fit Dec 05 Jun 05 Adjusted Common Equity $M. $M. Tier One Capital 15,292 14,744 Deduct: Eligible loan capital (317) (304) (298) | Preference share capital (687) (687)
Slide 75: Capital ratios
Capital ratios 11% 10% 9% 8% T% 6% 5% 4% 3% 2% 1% 0% T Dec 2004 Jun 2005 Dec 2005 * Adjusted Common Equity % Tier one capital %& Tier two capital | Target Range ConmonwealthGark
Slide 76: Other Key Information Notes
Other Key Information Notes Surplus capital in Life Companies Dec 05 Jun 05 Dec 04 $M $M. $M. ‘Australia Statutory Funds 251 102 138 Shereholder Funds 62 188 144 Sub-Total a3 270 262 NZ a1 a7 5a Other FS 58 132 124 Other fincluding CFS} (245) 131 123 General insurance 30 23 15 Sub-Total (06) 333 313
Slide 77: Generation and use of Tier capital
Generation and use of Tier 1 capital 1.02% (0.60%) B.5% 8.0% 0.03% 7.54% 75% 7AB% yom 7.0% 6.5% 6.0% T T T T T at Tier 1 June Cash Ord. Growth in DRP Currency Tier 1 Dec 2005 NPAT Dividends RWA $221m and Other 2005 $14,144 $2,061m ($1,211m) $13,108m Movements $15,290m $78m ConmonwealthGark
Slide 78: Notes
Notes o Ec Which Bank ConmonwealthBark
Slide 79: Capital Management update Sale of CMG-Asia
Capital Management update 2 Sale of CMG-Asia On market buyback Hybrid considerations « Introduction of new APRA prudential standards expected 1 July 2006: EMVONA deducted from Tier 1 capital (decreases Tier 1 by approx 57bp) Potential Tier 1 deduction for capitalised software expenses (decreases Tie
Slide 80: Notes
Notes woe Which Bank ConmonweaithBank
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Commonwealth Bank of Australia — H1 2006 Earnings Presentation on 6ix