Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (February 2015)
55 slides from Commonwealth Bank Of Australia's debt investor presentation, Feb 11, 2015
Slide 1: Debt Investor Update for the Half Year Ended 31 December 2014
DEBT INVESTOR UPDATE FOR THE HALF YEAR ENDED 31 DECEMBER 2014 Results Presentation For the half year ended 31 December 2009 10 February Commonwealth Bank of Australia ACN 123 123 124 2010 COMMONWEALTH BANK OF AUSTRALIA | ACN 123 123 124 | 11 FEBRUARY 2015
Slide 2: Notes
Notes Disclaimer The material that follows is a presentation of general background information about the Group’s activities current at the date of the presentation, 11 February 2015. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as
Slide 3: Results & Strategy
Results & Strategy
Slide 4: CBA overview – 1H
Additional CBA overview – 1H 151 Snapshot 1H15 1 information Aust NZ Other Total Financial Customers 12.5m 2.2m 0.4m 15.1m Cash earnings ($m) 4,623 8% Staff 41,900 5,600 5,000 52,500 Branches2 1,150 140 115 1,405 ROE (Cash) 18.6% (10) bpts ATMs2 4,400 466 173 5,039 Cash EPS ($) 2.84 8% Market capita
Slide 5: Divisional results
Divisional results 1 Income 7% Cash NPAT 1H15 Costs 2% C:I 160 bpts to 34.5% Income 6% Transaction Deposits 16% Business loans 5% C:I 120 bpts to 43.5% + 12% Costs 5% NIM lower (home loans) 1,992 Income 6% Lending 5% Avg Lending 10% NIM (ASB) Loan im
Slide 6: Income
Income $m Operating Income +5% (underlying +6%) Funds & Insurance (underlying +7%) 1 Property non-recurring ($100m) 1,386 Underlying FUA 1 10% 1,389 - Funds management margin 6bpts 2,370 2,234 +6% Other Banking Income Commissions/fees/other 8% Trading 1% 7,444 +6% 7,891 Net Interest Income V
Slide 7: Expenses
Expenses Operating Expenses Cost-to-income $m 43.8% 42.9% 42.2% Underlying 1H13 1H14 1H15 +3.0% +0.4% +3.4% 22 4,914 4,892 137 4,751 (140) 144 1H14 1H14 Productivity Staff Other 1H15 FX 1H15 1H15 costs underlying 7
Slide 8: Group NIM
Group NIM bpts Group NIM (Six Months) bpts 6 Month Movement 213 214 217 214 214 212 210 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 12 month NIM (4) (1) 2 (1) 2 214 212 1 2H14 Asset Funding Basis Portfolio Other 1H15 pricing costs risk mix 1 Includes Treasury, impact from change in Non Lending Interest Earni
Slide 9: Credit quality
Credit quality Loan Impairment Expense (Cash) Group Consumer Arrears CBA Group 90+ days (basis points) 1 2 1.4% 73 Personal Loans 3 41 0.9% 25 3 Credit Cards 21 20 16 3 14 Home Loans FY09 FY10 FY11 FY12 FY13 FY14 1H15 Pro 0.4% Forma Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Commercial Portfolio Qual
Slide 10: Provisions
Provisions Individual Provisions Collective Provisions $m $m 2,870 2,779 2,763 Overlay 875 762 790 Economic 1,416 overlay unchanged 1,127 1,116 377 347 306 547 Bankwest 389 357 149 906 941 942 128 128 Consumer 720 631 610 Commercial 712 729 725 Dec 13 Jun 14 Dec 14 Dec 13 Jun 14 Dec 14 10
Slide 11: Our strategy
Our strategy Customer Focus People Productivity Technology Strength Capabilities “One CommBank” Growth Continued growth in business and institutional banking Opportunities Disciplined capability-led growth outside Australia TSR Outperformance 11
Slide 12: Focus on the customer
Focus on the customer Retail Customer Satisfaction 1 CBA MFI share by age 3 Overall 34.0% 86% CBA 45.8% 84% Peers Dec 14 42.7% 42.3% Dec 13 45.5% 82% 41.6% 80% 39.2% MFI Share 78% 29.9% 76% 28.1% 28.9% 74% 28.6% 28.5% 26.5% 72% 70% 68% 14-17 18-24 25-34 35-49 50-64 65+ Jun 07 Dec 14 % Satisfied ('Ve
Slide 13: Productivity
Productivity Improving service 1 Cost to Income % Personal loans funded Productivity same day 27% 43.8% saving $140m 42.9% Asset Finance – Credit approval time 67% 42.2% Home insurance claims – turnaround time 39% 1H13 1H14 1H15 1H Investment spend Transaction Banking – client on-boarding time 30% B
Slide 14: Leading technology, innovative solutions
Leading technology, innovative solutions Contactless Tap & Pay Fast in-store $48 million+ in spend payments (12 mths) CBA market leading 2.3 million+ transactions in cards and (12 mths) terminals Average spend per 33% of all credit transaction $21 transactions CommBiz Mobile Small Busine
Slide 15: Digital Banking Ecosystem
Digital Banking Ecosystem TYME technology enables an ecosystem of partners to collectively deliver real-time banking services at ultra-low cost through a distribution network of proprietary and third party channels Mobile Network Banking Partner Operator Product Banking license Customer base
Slide 16: Strength
Additional information Strength Result quality 1 Group NIM ROE 2.5 Cash basis % 18.6% 2.4 16.4% 15.3% 2.3 2.2 9.1% 2.1 2.0 1.9 1.8 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Dec 14 CBA Peer 3 Peer 1 Peer 2 CBA Peers 2 Capitalised Software 2 Capital $m APRA CET1 2,533 9.2% 2,070 2,126 1,979 9.0
Slide 17: Funding, Capital & Liquidity
Funding, Capital & Liquidity
Slide 18: Funding and Liquidity
Funding and Liquidity Funding Funding sources $bn Source of funds Use of funds Dec Jun $bn 14 14 Transactions 82 77 63% Deposit 18 (17) Savings 163 155 Funded Investments 198 193 Other 15 14 20 (23) Total customer 458 439 deposits Wholesale funding 274 250 16 (23) Total funding 732 689 7 Equity 51 4
Slide 19: Liquidity
Liquidity ♦ Full Liquidity Coverage Ratio (LCR) compliance Liquidity1 from 1 Jan 2015 $bn 151 ♦ CBA pro-forma LCR at 31 Dec 2014 - 115% 137 140 128 115% LCR ♦ RBA Committed Liquidity Facility (CLF) $18bn 52 buffer – Available to meet AUD cash outflows 100% LCR 53 3 – 15bp commitment fee on approved
Slide 20: Funding – deposits and costs
Additional information Funding – deposits and costs Funding Australian Deposits Retail Deposit Mix $bn Total Deposits $bn (excl CD’s) Total Deposits +8% 394 343 Dec 13 Dec 14 279 4 191 233 5 NBS & Goal Saver 179 18 23 175 42 52 Business Online Saver 129 203 39 32 43 Investment accounts 164 62 104 10
Slide 21: Funding - Portfolio
Funding - Portfolio Funding Composition Wholesale Funding by Product 1% Customer Deposits 4% 2% Structured MTN 5% 5% 9% 13% Vanilla MTN ST Wholesale Funding Commercial Paper 4% 1% LT Wholesale Funding maturing Debt Capital < 12 months 27% LT Wholesale Funding maturing 9% CDs 17% >= 12 months Securit
Slide 22: Funding – Issuance and Maturity
Funding – Issuance and Maturity 1 Funding strategy driven by market and investor diversity, appropriate maturity profile and overall cost Term wholesale funding requirement has eased materially since FY 2010 $bn 60 50 Weighted Average Maturity 3.9yrs 9 40 7 Expected funding 30 requirement 8 2 7
Slide 23: Capital Position
Capital Position 1 CET1 - APRA International 13.3% 9.3% (100) 131 (47) 19 (13) 9.2% 8.5% 8.0% 2 Dec 13 Jun 14 Jun 14 Cash Credit Credit Other Dec 14 APRA Dec 14 APRA APRA Final NPAT RWA RWA Min Dividend Volume Quality 2016 (DRP Neutral) (DRP Neutral) 1 The Group has revised its international measure
Slide 24: APRA & International Comparison
APRA & International Comparison The following table provides details on the differences, as at 31 December 2014, between the APRA Basel III prudential requirements and capital as measured on an Internationally Comparable basis1. % CET1 Basel III (APRA) 9.2% Equity investments 1.0% Deferred tax asset
Slide 25: Strong Capital Position under various regulatory regimes
Additional Strong Capital CBA CET1 Position under various regulatory regimes 1 information +4.1% +2.6% +3.3% +3.6% 13.3% 2 13.3% 0.8%4 0.8%4 12.8% 12.5% 11.8% 8.0% 9.2% D-SIB buffer 1.0% CBA if regulated in Singapore CBA if regulated in Canada Internationally Comparable CBA if regulated in Europe CC
Slide 26: International Peer Basel III CET1
International Peer Basel III CET1 % 15.7 13.7 13.3 13.1 13.0 Peer bank average CET1 ratio 12.7 12.0 11.8 11.7 11.7 11.6 (ex. Australian banks): 11.4 11.1 11.1 10.8 10.8 10.8 10.7 10.7 10.5 10.5 10.4 10.4 10.4 10.4 10.4 10.3 10.8% 10.2 10.1 10.1 9.9 9.8 9.7 9.6 9.6 9.5 9.4 8.9 Intesa Sanpaolo 2 UniCr
Slide 27: D-SIB and CCB Buffer
D-SIB and CCB Buffer In December 2013, APRA announced % of earnings that the Australian major banks are able to be used for discretionary domestic systemically-important banks CET1 ratio Value payments (D-SIBs) Above top of PCR + 3.5%, 100% CCB and above From 1 January 2016, D-SIBs are Fourth qu
Slide 28: Interest Rate Risk in the Banking Book
Interest Rate Risk in the Banking Book bpts 24 29 43 47 43 13 $1,303m $1,403m $1,181m $880m $781m $388m Optionality Optionality Risk Risk Basis Risk Basis Risk Repricing & Yield Repricing and Curve Risk Yield Curve Risk Embedded Gain (offset to capital) Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Capi
Slide 29: Dividends
Additional information DividendsDividend per Share Payout ratio (cash) 74.2% 75.0% 78.2% 73.9% 73.2% 75.8% 75.9% 75.1% 81% 90% 81% 70% 84% 70% 84% 71% 88% 87% 62% 62% 63% 63% 84% 74% 61% cents 107 149 113 153 113 115 120 170 132 188 137 197 164 200 183 218 198 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Slide 30: Outlook
Outlook On-going focus on long-term strategy to strengthen the franchise in an increasingly competitive environment Some signs of positive transition in Australian economy: reality ahead of sentiment But clear, long term policy needed to build confidence so as to sustain and accelerate the tra
Slide 31: Credit & housing
Credit & housing
Slide 32: Credit Exposures by Industry
Credit Exposures by Industry 1 Dec 14 Dec 14 Jun 14 Jun 14 Consumer 54.2% 55.8% Agriculture 1.9% 2.0% Mining 1.9% 1.5% Manufacturing 1.6% 1.8% Energy 1.0% 1.0% Construction 0.9% 0.8% Retail & Wholesale 2.3% 2.2% Transport 1.5% 1.5% Banks 8.3% 9.0% Finance – other 4.5% 3.4% Business Services 1.2% 1.2
Slide 33: Sector Exposures
Sector Exposures Commercial Exposures by Industry 1,2 Top 20 Commercial Exposures2 AAA A+ BBB+ $bn Other Total to AA- to A- to BBB- A+ 35.9 38.9 3.6 1.8 80.2 A- Banks A Finance Other 23.1 12.1 4.4 4.1 43.7 A- A Property 1.3 4.8 12.5 41.0 59.6 BBB+ BBB- Sovereign 74.9 9.8 0.6 0.2 85.5 AA- AA- Manufac
Slide 34: Resources Exposure
Resources Exposure We recognise that we play a crucial role in enabling the economic and social development of Australia, supporting jobs, growth, innovation and opportunities for people and businesses. We also recognise our role in addressing the challenge of climate change, including helping organ
Slide 35: Commercial Property Market
Commercial Property Market CBD Office Supply Pipeline1 CBD Vacancy Rates % of Total Stock 1991 Recession Jun 14 Dec 14 Peak 1990s Jun 14 Dec 14 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% Sydney Melbourne Brisbane Perth Adelaide Sydney Melbourne Brisbane Perth Adelaide Source
Slide 36: RBS Home Loan Portfolio
RBS Home Loan Portfolio Dec 14 Jun 14 Dec 13 Dec 14 Jun 14 Dec 13 Total Balances - Spot ($bn) 310 302 293 Total Funding ($bn)1 40 73 37 Total Balances - Average ($bn) 306 293 289 Average Funding Size ($’000)1 267 254 252 Total Accounts (m) 1.5 1.5 1.4 Serviceability Buffer (%)8 1.5 1.5 1.5 Variable
Slide 37: Home Loan Growth Profile
Home Loan Growth Profile Home Loan Balances Channel Growth1 $bn Broker Proprietary 14 (41) 40 10.9% (4) 7.5% 4.6% 302 310 3.7% New Redraw Repayments External 1 1 Jun 14 Dec 14 CBA Majors CBA Majors fundings & / Other refinance Excludes Bankwest interest Excludes Bankwest Australian Investment Home L
Slide 38: RBS Home Loans – LVR & Arrears
RBS Home Loans – LVR & Arrears Home Loan Dynamic LVR1 Profile Home Loan Arrears Rates by Vintage 90+ days Average 70% Dynamic 2.0% LVR1 Dec 13 49% 60% Jun 14 48% Proportion of Total Portfolio Dec 14 48% 1.5% 50% FY09 40% FY08 1.0% FY07 30% FY10 20% 0.5% FY11 FY12 10% FY13 FY14 0% 0.0% 0-60% 61-75% 7
Slide 39: Consumer Arrears (Group)
Consumer Arrears (Group) Credit Cards 1 Personal Loans 1 90+ days 2.0% 90+ days 2.0% 1.0% 1.0% 0.0% 0.0% Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 RBS Bankwest ASB RBS Bankwest ASB Home Loans 1 Retail Banking Services Home Loans 2.0% 90+ days 2.0% 90+ days 1
Slide 40: RBS Home Loans – Stress Test
RBS Home Loans – Stress Test 1 Key Assumptions Cash Rate Unemployment Hours under-employed Cumulative reduction (%) (%) (%) in house prices (%) (32) (32) 15.8 18.4 (15) 10.5 11.5 10.1 11.4 5.9 7.0 2.5 2.75 1.0 1.0 Base Yr 1 Yr 2 Yr 3 Base Yr 1 Yr 2 Yr 3 Base Yr 1 Yr 2 Yr 3 Base Yr 1 Yr 2 Yr 3 Key Ou
Slide 41: Market Share
Additional information Market Share Market Share 1 % Dec 14 Jun Dec Home Loan Market Share 1 14 13 Home loans 25.2 25.3 25.3 Credit cards – RBA2 25.2 24.9 24.7 28% Other household lending3 18.6 18.8 18.2 26% 25.2% Household deposits4 28.8 28.7 28.6 Business lending – RBA 17.2 17.7 17.9 24% Business
Slide 42: Housing market dynamics
Housing market dynamics Population growth is solid in Australia High population growth increased because of a high migration program demand for housing POPULATION DRIVERS CBA: HOUSING DEMAND & SUPPLY '000 '000 '000 '000 200 200 450 450 Supply Net migration 100 100 300 300 Demand Pent-up demand 150 1
Slide 43: Housing market dynamics
Housing market dynamics State population growth Dwelling price growth STATE POPULATION GROWTH 3 Years 12 mths 6 mths '000 (annual change) '000 to to to 100 100 change (%) Dec 14 Dec 14 Dec 14 Vic 75 Qld 75 Sydney 30.6 12.4 6.5 Melbourne 13.4 7.6 4.5 50 50 WA Brisbane 9.2 4.8 2.5 NSW 25 25 SA Adelaid
Slide 44: Housing market dynamics
Housing market dynamics Are investors a problem? Rental yields RENTAL YIELDS HOUSING LOAN APPROVALS % (2 bedroom "other" dwelling) % $bn $bn 9 9 12 Investor 12 Term deposit CBA TEI & THE CASH RATE special rate %pa %pa 7.0 8 9 9 6 6 O-Occupier Cash (ex refin & FHB) rate 6.4 (lhs) 5 6 Refinancing 6 5.
Slide 45: Housing market dynamics
Housing market dynamics First time buyers Housing debt FIRST TIME BUYERS HOUSING DEBT RATIOS % (% buying an investment property) % % % 24 24 160 40 Source: Mortgage Choice First Time Housing debt Investor Survey 140 to disposable income, (lhs) 35 120 30 16 16 100 25 Housing debt to housing assets (r
Slide 46: Replicating Portfolio and Funding Costs
Replicating Portfolio and Funding Costs 2 Replicating Portfolio 1 Average Long Term Funding Costs Actual and Forecast Scenario % Margin to BBSW Portfolio average cost 2.00 Indicative spot market cost Replicating Portfolio Yield Predicted 1.75 funding costs if current market rates remain 1.50 unchang
Slide 47: CFSGAM – Global Reach
CFSGAM – Global Reach Edinburgh London Frankfurt Paris New York Beijing Tokyo Dubai Hong Kong Shenzhen Singapore Australia and New Zealand AUM $110.9 billion1 Jakarta UK, Europe and Middle East AUM $56.7 billion Asia AUM $18.8 billion Sydney North America Melbourne Auckland AUM $5.2 billion2 Portfol
Slide 48: CBA in Asia
CBA in Asia Japan ♦ Tokyo CBA branch, First State Investments China ♦ Bank of Hangzhou (20%): 159 branches ♦ Qilu Bank (20%): 102 branches ♦ County Banking - Henan: 7 Banks and 4 branches (5 Banks and 4 branches @ 80% and 2 Banks @ 100% shareholding) - Hebei: 8 Banks (5 Banks @ 80% and 3 Banks @ 100
Slide 49: Economic indicators
Economic indicators
Slide 50: Economic Indicators
Additional information Economic Indicators Economic Indicators Economic Summary – Australia 2015 2016 2017 2011 2012 2013 2014 (f) (f) (f) Credit Growth % – Total 2.7 4.3 3.0 5.1 5-7 4½-6½ 4-6 Credit Growth % – Housing 6.0 5.0 4.6 6.4 6-7 5½-7½ 5-7 Credit Growth % – Business -2.2 4.4 0.9 3.5 4-6 3-5
Slide 51: Australian economy – growth transition
Australian economy – growth transition Growth drivers from Key resource exports Labour market indicators mining peak LABOUR MARKET INDICATORS GROWTH DRIVERS FROM MINING PEAK KEY RESOURCE EXPORTS '000 % (cumulative contribution to GDP since end 2012) Mt Mt 1000 100 45 7.0 % 6 % 6 pts Unemployment rat
Slide 52: Growth transition – Infrastructure & business investment
Growth transition – Infrastructure & business investment Infrastructure spend Business finances INFRASTRUCTURE SPEND NON-FINANCIAL BUSINESS $bn % $bn (State & Federal) FINANCES 60 900 70 Thousands States Projections 700 63 40 Business Credit (lhs) 500 55 Business Bank 20 Deposits (lhs) 300 48 Busine
Slide 53: Growth transition – the role of the consumer
Growth transition – the role of the consumer Unemployment Households: Greatest fear Saving ratio Expectations & Wages HOUSEHOLDS: GREATEST FEAR EXPECTATIONS & WAGES % SAVING RATIO % % % %pa (% of respondents) % 20 20 30 30 5.0 -20 Unable to pay *Source: Melbourne Institute mortgage/rent Losing WPI j
Slide 54: Growth transition – housing construction
Growth transition – housing construction Dwelling commencements CBA Dwelling starts forecast DWELLING COMMENCEMENTS '000 '000 Calendar year Dwelling starts Thousands Thousands Boosted by government 190 stimulus 190 package 2012 151k CBA (f) 170 170 2013 168k 2014e 198k 150 150 2015f 193k Average 200
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Commonwealth Bank of Australia — Debt Investor Presentation (February 2015) on 6ix