Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — 1H19 Earnings Presentation
125 slides from Commonwealth Bank Of Australia's earnings presentation, Feb 6, 2019
Slide 1: For the half year ended 31 December 2018
For personal use only For the half year ended 31 December 2018
Slide 2: Contents
Contents For personal use only Results Presentation 4 Group Overview 33 Financial Overview 49 Home & Consumer Lending 76 Business & Corporate Lending 89 Deposits, Funding & Liquidity 101 Capital 107 Economic Overview 115 Sources, Glossary & Notes 122 Commonwealth Bank of Australia | ACN 123 123 124
Slide 3: Results Presentation
For personal use only Results Presentation Matt Comyn, Chief Executive Officer Alan Docherty, Chief Financial Officer 3 Commonwealth Bank of Australia | ACN 123 123 124 | 6 February 2019
Slide 4: Presentation agenda
Presentation agenda For personal use only Business update Matt Comyn Half-year results Alan Docherty Outlook & summary Matt Comyn Questions & Answers 4
Slide 5: Our strategy
Our strategy For personal use only Become a simpler, better bank for our customers To deliver balanced and sustainable outcomes Simplify our business Lead in retail and commercial banking Customers Better outcomes Best in digital People Shareholders Energised, Long-term Supported by stronger capabil
Slide 6: Overview
Overview For personal use only A • Addressing issues, remediating customers, earning trust simpler, • Progress on divestments and a simpler operating model better bank • Best in digital – largest customer base, leading assets • Business resilience in a challenging period This Result • Franchise stre
Slide 7: A better bank
A better bank For personal use only ► 8 million customers written to directly ► Smart alerts to help customers avoid unnecessary charges ► Teller sales incentives removed ► New Code of Conduct for staff ► Instalment lending for persistent and problematic debt ► Tailored support for drought-affected
Slide 8: Royal Commission
Royal Commission For personal use only ► Thorough examination of the industry ► Too many examples of poor customer outcomes ► We will work constructively with government and regulators ► Committed to addressing past failings ► Focused on putting our customers first 8
Slide 9: Remediating customers
Remediating customers For personal use only Remediation and Program Costs Cumulative spend and provisions $1,460m Banking customers • Package Fees 245 Wealth customers • Interest and fee remediation • Open Advice Review 1,215 • Service Delivery Review • Credit Card Plus • CommInsure Life Insurance •
Slide 10: A simpler bank
A simpler bank For personal use only Divestments/demerger/reviews A simpler, better bank • Sovereign – completed • Focused core businesses • TymeDigital – completed • Bankwest integrated into RBS • BoComm Life – announced • Small Business consolidated in BPB • CommInsure Life – announced • CFSGAM –
Slide 11: A simpler bank – cost reduction
A simpler bank – cost reduction For personal use only A lower absolute cost base underpinned by A simpler bank simpler, more focused and highly digitised businesses, with efficiencies supporting • End-to-end digitisation ongoing investment and innovation • Unit cost of technology and change • Better
Slide 12: Best in Digital
Best in Digital Leading Assets, Leading Satisfaction Proactive, Simple and Easy For personal use only Mobile App Net Promoter Score1 Customer’s likelihood to recommend main financial institution based on use of Internet Banking services via Mobile App +40 +33.1 +30 +20 +10 CBA Peers +0 Dec 17 Jun 18
Slide 13: This result
This result1 For personal use only 1H19 vs 1H19 vs 1H19 1H18 2H18 Statutory profit ($m) 4,599 (6.3%) +4.0% Cash NPAT ($m) 4,676 +1.7% +8.3% ROE (cash, %) 13.8% (40)bpts +70bpts CET1 (%) 10.8% +40bpts +70bpts EPS (cash, cents) 265.2c +0.9c Dividend per share ($) 2.00 Flat 1. Statutory profit, CET1 an
Slide 14: Key outcomes
Key outcomes1 For personal use only Operating Income Operating Expenses LIE Cash NPAT $m $m bpts of GLAA $m -1.9% -3.1% 15bpts +1.7% 12,643 12,408 5,539 16 4,676 12,271 5,456 4,598 5,289 13 4,317 Volume growth One-off costs in Generally offset by lower prior periods – benign, some NIM, markets remed
Slide 15: Franchise strength
Franchise strength For personal use only Group Lending Lending Growth2 Home Lending Growth CBA growth as a multiple of system growth4 +2% +4% +5% (6%) 0.9x BPB +2% 0.7x 758 0.6x 740 Home Business Insto. Lending Lending 3 Lending $bn 1H18 2H18 1H19 Dec 17 Dec 18 Group Deposits5 Transaction Balances5
Slide 16: Business Units
Business Units1 For personal use only Cash NPAT NIM 17 bpts Business lending 2% Risk Weighted Assets 7% Revenue 8% Home loans +4% NIM (divisional) +1 bpt Markets revenue 14% Good volume growth Transaction deposits +14% LIE – small no. of exposures (8%) (3%) (5%) +7% (3%) +1% +3% +7% 2,414 2,289 2,21
Slide 17: Balance sheet strength – supporting dividend
Balance sheet strength – supporting dividend For personal use only CET11 Dividend % cents per share 3 10.8% 200 198 198 199 200 Cash NPAT2 Payout Ratio 183 164 10.4% 10.1% 132 137 113 120 107 113 74% Organic 84% 71% 70% 70% 71% 70% 72% Capital +66 bpts 62% 62% 61% 63% 63% Dec 17 Jun 18 Dec 18 1H07 1
Slide 18: Results Presentation
For personal use only Results Presentation Alan Docherty, Chief Financial Officer Commonwealth Bank of Australia | ACN 123 123 124 | 6 February 2019 18
Slide 19: Summary
Summary For personal use only ► A disciplined approach Better outcomes for customers Appropriate risk appetite and balance sheet settings Emphasis on risk-adjusted returns ► Responding to a challenging context Margin pressures – funding costs, competition Softening housing market, slower c
Slide 20: Statutory vs Cash NPAT
Statutory vs Cash NPAT For personal use only $m 1H18 2H18 1H19 Statutory NPAT 4,906 4,423 4,599 Less • CommInsure Life – higher claims, lower premiums Cash NPAT - discontinued operations 273 224 92 • GAM – lower performance fees Non-cash items: • Sovereign – sold Jul 18 - Transaction costs/gains on
Slide 21: 1H19 result
1H19 result1 – For personal use only 1H19 1H19 vs $m 1H18 Operating Income 12,408 (1.9%) Operating Expense 5,289 (3.1%) Operating Performance 7,119 (0.9%) Loan Impairment 577 (3.2%) Cash NPAT 4,676 1.7% 1. Presented on a continuing operations basis. 21
Slide 22: Operating income down 1.9%
Operating income down 1.9%1 For personal use only • Core business volume growth in Home Loans & • Customer fee removals impacted commissions (-$51m) Deposits – franchise & digital platform quality • Weaker trading performance reflecting widening • Lower property development & institutional yield cur
Slide 23: Group margin
Group margin1 For personal use only Last 5 halves This half bpts Deposits bpts Repricing +3 214 Replicating (2) -4 bpts 216 214 210 210 210 (3) 1 (2) 1 (1) 210 Home Loans bpts Switching (2) Discounting (1) SVR +3 Fixed (2) Other Pers. (1) 1H17 2H17 1H18 2H18 1H19 2H18 Asset Deposit Portfolio Basis T
Slide 24: Operating expenses
Operating expenses1 For personal use only AUSTRAC penalty (375) Remains elevated; Higher IT amortisation • Financial Crimes Compliance 7,000 Regulatory Costs (110) 6,500 • Customer remediation • Better Risk Outcomes Program 6,000 (485) -3.1% 5,500 121 76 5,456 (145) 200 5,000 66 5,289 4,500 4,000 3,
Slide 25: Balance sheet resilience
Balance sheet resilience For personal use only Credit Risk Funding Liquidity Capital • Disciplined approach • Peer leading deposits • Sound liquidity position • Focus on risk-adj. returns • Higher AASB 9 provisioning • Increased NSFR (112%) • LCR well above minimum • Enhanced risk models Total Provi
Slide 26: Credit risk
Credit risk For personal use only Group LIE/GLAA TIA Basis Points of GLAA1 BPB – Small number of larger impairments Single large institutional impairment; IB&M – Ongoing portfolio optimisation higher home loan impairments 85 % of Consumer 15 bpts 1H18 1H19 TCE 0.56% 0.60% 0.62% Corporate 15 RBS 17 1
Slide 27: Credit risk – consumer arrears & provisions
Credit risk – consumer arrears & provisions For personal use only % Arrears1 $m Collective Provisions 90+ days Provision Coverage3 Personal Loans 1.41% 1.44% 1.44% 0.76% 1.03% 1.28% 1.21% 3,814 Credit Cards 1.03% 1.03% 0.88% 0.88% v 0.94% 2,772 2,350 Consumer 0.70% Home Loans2 0.67% 1,473 0.60% 0.59
Slide 28: Wholesale funding
Wholesale funding For personal use only Wholesale Funding Indicative Funding Costs2 Weighted Average Maturity (WAM), Years1 3.0% New issuance (YTD) 5.7 10yr market funding cost 2.5% 5.1 5.0 2.0% 4.1 67% 66% v Long Long 1.5% 60% Term Term Portfolio Long Term 1.0% 5yr market funding cost 0.5% Jun 17 J
Slide 29: Capital
Capital For personal use only bpts CET1 Organic1 +66 bpts Estimated 107 31 (2) 10.8% divestment uplift 3 10.1% (21) 27 (72) bpts CFSGAM +60 Credit Risk - CMLA +38 IRRBB 24 BoComm +18 Market Risk 7 PTCL +7 Op Risk - Jun 18 Jun 18 AASB Sovereign 2H18 Dividend Cash Risk Other Dec 18 Dec 18 2 9 & 15 Div
Slide 30: Capital generation
Capital generation For personal use only Organic Capital Generation 1H19 $m Bpts IB&M Credit RWA RBS 2,419 54 -31% Future Opportunities BPB 1,701 38 106 73 • Simpler operating model IB&M 1,215 28 $bn • Cost reduction New Zealand 381 9 Jun 16 Dec 18 • Emphasis on regulatory risk-adjusted returns IFS
Slide 31: Economic outlook
Economic outlook For personal use only Last 12 months ► GDP at trend ► Stable lending policy ► Full employment ► Approval rates unchanged ► Growing population ► Average loan size increasing ► Wage growth edging higher ► Borrowers not utilising capacity ► Budget on path to surplus ► Lower application
Slide 32: Summary
Summary For personal use only ► Focus on core business momentum ► Addressing issues and earning trust ► Increased funding costs ► Discipline on costs and capital 32
Slide 33: Group Overview
For personal use only Group Overview
Slide 34: CBA overview
CBA overview For personal use only Our Bank Our Profits 1 Profit before tax $6.5bn Customers1 16.1m approximates Tax Expense Staff1 48.0k One of Australia’s largest taxpayers 1.9 29% Branches 1,192 Dividends ATMs 4,118 Returned to ~800,000 shareholders (+ millions more via Super) 3.5 54% Market #2 C
Slide 35: CBA overview
CBA overview For personal use only Over 16 million customers1 Largest share of MFI customers2 Leading digital assets and advocacy Mobile App Net Promoter Score3 35.1% +40 33.1 Including 6.7m digital customers 16.1 All others combined 23.0% +30 17.9% +20 12.7% 11.3% +10 CBA Peers +0 Dec Dec Dec Dec D
Slide 36: Franchise strength
Franchise strength For personal use only Dec 13 MFI share1 48.5% Dec 17 46.4% Dec 18 Others CBA MFI 42.2% CBA Share 23.0% 35.1% 32.5% Peer 3 11.3% 27.0% 27.3% 12.7% 17.9% Peer 2 Peer 1 CBA MFI share1 Aged 14-17 Aged 18-24 Aged 25-34 Aged 35-49 Aged 50-64 Aged 65+ Customer Starting Spending Paying We
Slide 37: Best in Digital
Best in Digital For personal use only CommBank App users Monthly unique customers (m)5 5.3m 5.0 4.8 4.4 4.1 3.7 3.4 3.0 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 6.7m Active digital customers 1 Digital transactions 6.7m Digitally active customers 1 % of total transactions - by value6 6
Slide 38: Best in Digital
Best in Digital For personal use only Leading customer advocacy “A global mobile banking leader” Mobile App Net Promoter Score1 Forrester Banking WaveTM: Global Mobile Apps Customer’s likelihood to recommend main financial institution based Asia Pacific 20183 on use of Internet Banking services via
Slide 39: Best in Digital – a history of technology leadership
Best in Digital – a history of technology leadership For personal use only NetBank – 1997 CommBank App – 2013 Ceba – 2018 • Full functionality 24 hour • #1 Mobile Banking App • AI-powered chatbot to assist online banking service 3yrs in a row from 2016 with 340 banking tasks • #1 Online Banking 9yrs
Slide 40: Leading blockchain commercialisation
Leading blockchain commercialisation For personal use only CBA founding CBA develops CBA pilots CBA platform member on R3 and QTC issues a commodities enables global first blockchain prototype bond inventory automation blockchain bond by consortium of on blockchain blockchain platform World Bank ban
Slide 41: Best in Digital
Best in Digital For personal use only Making payments faster Improving health care payments Expanding the Beem it instant payment solutions to micro Delivering a best-in-class integrated payments, and small businesses, in collaboration with two other claiming, and healthcare directory solution for m
Slide 42: Re-segmentation
Re-segmentation For personal use only + Bankwest + Commonwealth Financial Planning An integrated retail bank, + General Insurance (non core) supported by simple _ RBS Small Business (to BPB) financial planning and insurance offerings Home Lending Deposits and Everyday Banking unchanged Consumer Fina
Slide 43: Enhanced customer propositions - home buying
Enhanced customer propositions - home buying For personal use only Looking for a home Financial education Property Online App appointment booking Lead acquisition #1 proprietary Buying a home lending team Value chain Core CBA eChoice Salaried broking partners Strong broker experience channel Owning
Slide 44: Deliver balanced and sustainable outcomes
Deliver balanced and sustainable outcomes For personal use only • Better customer outcomes Our Purpose • Lead in customer experience #1 Customers Improve the NPS1,2 • Resolve issues fairly and quickly financial wellbeing of our customers and communities • Earn trust Top quartile Community • Contribu
Slide 45: Deliver balanced and sustainable outcomes
Deliver balanced and sustainable outcomes For personal use only Customers – NPS1 Business - NPS2 20 15 Goal - #1 0 Goal - #1 10 -5 5 -10 -19.9 0 -2.2 -15 -5 -20.3 - 8.9 -20 -10 Peers CBA -25 Peers -28.4 -12.6 CBA -15 -30 -30.1 -20 Dec 15 Dec 16 Dec 17 Dec 18 -14.5 -35 Dec 15 Dec 16 Dec 17 Dec 18 Com
Slide 46: Doing business sustainably
Doing business sustainably For personal use only 1st Australian 65% of the Group’s $7.86 million raised in 5 year Bank@Post corporate to join the national electricity conjunction with our partnership with global Renewable needs sourced from people, customers and Australia Post to provide Energy 100
Slide 47: Doing business sustainably
Doing business sustainably For personal use only Community investment Employee engagement Renewable energy Total community investment ($m)1 CBA Employee Engagement Index (%)2 Exposure ($bn)3 152 81 3.7 131 132 140 77 78 73 3.3 122 67 2.3 1.7 1H15 1H16 1H17 1H18 1H19 1H15 1H16 1H17 1H18 1H19 1H16 1H1
Slide 48: Task Force on Climate-related Financial Disclosures
Task Force on Climate-related Financial Disclosures1 For personal use only Delivered first TCFD disclosures in 20182 Updated disclosures to be published in 2019 Annual Report Governance Strategy Risk management Metrics and targets • Board oversight of climate • First phase of scenario • Risk identif
Slide 49: Financial Overview
For personal use only Financial Overview
Slide 50: 1H19 – result overview
1H19 – result overview1 Financial Balance Sheet, Capital & Funding For personal use only Statutory NPAT2 ($m) 4,599 (6.3%) Capital – CET1 (Int’l)4 16.5% 20 bpts Cash NPAT3 ($m) 4,676 1.7% Capital – CET1 (APRA) 10.8% 40 bpts Total assets ($bn) 980 1.9% ROE3 % (cash) 13.8 (40)bpts Total liabilities ($
Slide 51: 1H19 – result overview
1H19 – result overview Cash NPAT1 ($m) NIM1 Cost-to-income1 Cash ROE1 For personal use only +1.7% (6)bpts (60) bpts (40) bpts 4,676 216 4,598 214 43.2% 45.1% 42.6% 14.2% 210 13.1% 13.8% 4,317 1H18 2H18 1H19 1H18 2H18 1H19 1H18 2H18 1H19 1H18 2H18 1H19 Cash EPS1 (cents) DPS (cents) CET1 (APRA) CET1 (
Slide 52: Key Comparative Financial Metrics
Key Comparative Financial Metrics For personal use only Incl. discontinued operations Continuing operations Half year ended (“cash basis”) Dec 18 Dec 18 v Dec 17 Dec 18 Dec 18 v Dec 17 Cash net profit after tax $4,768m (2.1%) $4,676m 1.7% Cost-to-income1 44.4% 10 bpts 42.6% (60)bpts Effective tax ra
Slide 53: Total income drivers
Total income drivers1 For personal use only (1.9%) Funds & Insurance (6.2%) 12,649 2 12,411 2 Average FUA 6.5% 680 638 Insurance income (39.3%) 2,706 2,636 Other Banking Income (2.6%) Derivative Valuation Adjustment (DVA) +$18m Lending fees (9.3%) Trading (ex DVA) (14.5%) 9,257 9,134 Commissions (3.
Slide 54: Operating income by line of business
Operating income by line of business1 For personal use only % 1H19 vs 1H18 Assets: +3% 2 Assets: +6% 2 Margin: (17)bpts Margin: +1 bpt 3 OBI: (6%) FUA: +6% FMI: +17% Assets: +1% 2 IB: (4%) Margin: +1 bpt Markets: (14%) 6.7% 5.8% 1.1% RBS 4 BPB IB&M WM ASB (NZD) Group (4.3%) (1.9%) (7.3%) 1. Presente
Slide 55: Net Interest Income
Net Interest Income1 For personal use only Volume: +1.4% Margin: (6)bpts (5)bpts +2 bpts +1 bpt (4)bpts +1 bpt (1)bpt 134 (1.3%) 9,257 (215) 43 86 (171) 43 (43) 9,134 Impact of home Impact of Higher non- loan discounting deposit Higher lending and customer repricing, partly margin Impact of interest
Slide 56: Balance Sheet
Balance Sheet Dec 18 Dec 18 For personal use only vs vs $m $m Dec 17 Jun 18 Dec 18 Jun 18 Dec 17 Group Lending Home Loans 492,688 501,665 512,505 2.2% 4.0% +2% Consumer finance 23,593 23,317 22,690 -2.7% -3.8% +1% Business and corporate loans 223,981 222,367 222,996 0.3% -0.4% Total Group Lending 74
Slide 57: Volume growth and market share
Volume growth and market share1 For personal use only Home Lending Business Lending Household Deposits Volume growth Volume growth Volume growth System CBA System CBA System CBA annualised annualised annualised 4.6% 3.5% 3.7% 3.5% 6.9% 7.3% 4.7% 6.3% -3.4% 5.0% 4.7% -1.9% 12 Months 6 Months 12 Month
Slide 58: Market share
Market share1 % Dec-18 Jun-18 Dec-17 For personal use only Home loans 24.3 24.4 24.6 Credit cards (2) 26.6 27.2 27.3 Other household lending (3) 28.2 28.0 27.3 Household deposits 28.3 28.4 28.5 Business lending – RBA 15.0 15.8 16.2 Business lending - APRA 17.0 17.8 18.4 Business deposits – APRA 19.7
Slide 59: Group NIM
Group NIM1 For personal use only bpts 12 months 216 (5) 1 2 (4) 210 1 (1) Impact of home Impact of Higher non- loan discounting deposit Higher lending and customer repricing, margin Impact of interest switching, partly partly offset transaction AASB 152 earning offset by home by replicating deposits
Slide 60: Group margin – basis risk and replicating portfolio
Group margin – basis risk and replicating portfolio For personal use only % Basis Risk Replicating Portfolio Every 5 bpts = 1 bpt of NIM 1.0% 2H18 1H19 8.0% RP Hedge Rate Dec 17 Jun 18 Dec 18 0.5% 4.0% Avg 30bpts 3mth BBSW RBA Official Cash Rate Cash Rate Forecast (Market Implied) 0.0% 0.0% 0.0% Jun
Slide 61: Margins by division
Margins by division For personal use only RBS BPB IB&M NZ (ASB) Driven by higher funding Higher deposit balances and NIM favourably impacted by Increased margin pressures costs and home loan business lending margins partly adoption of AASB 15 this half margin pressures offset by lower home loan marg
Slide 62: Other banking income
Other banking income For personal use only Other banking income1,2 Trading income $m $m 2,613 2,488 Other 196 2,369 Derivative 556 84 236 Valuation 1H19 vs 1H18 5 494 1H19 vs 1H18 Trading 556 469 Adjustment 469 494 23 Weaker trading Implementation of Trading 163 10 performance AASB 15 and lower 107
Slide 63: Sequential operating income up 1.1%
Sequential operating income up 1.1%1 For personal use only 3 additional days +$151m Hedging 80 non-recurrence of restructure of economic hedge Margin: -4 bpts Trading 25 favourable Derivative Valuation Adjustment Volume2: Commissions/Lending/Other 14 Home Loans +2.2% Business Loans +2.5% NSW/Vic sto
Slide 64: Sequential operating expenses down 4.5%
Sequential operating expenses down 4.5%1 For personal use only AUSTRAC penalty (325) Higher FTE, wage inflation Regulatory costs (45) and employee entitlements -4.5% (145) 22 (61) 91 (370) 13 200 5,539 5,289 $m 2H18 2H18 Prior period AUSTRAC Mortgage NewCo Risk and Software Staff, IT, and 1H19 1H19
Slide 65: Investment spend
Investment spend1 For personal use only Investment spend Investment spend $m $m 1,282 676 +13% Total 597 2nd Half 685 292 -2% Capitalised 298 1st Half 597 676 384 +28% Expensed 299 FY18 1H19 1H18 1H19 Investment spend Capitalised software balance % of total $bn 8% 2.23 Average amortisation Branches
Slide 66: Divisional contributions
Divisional contributions1 For personal use only 1H19 vs 1H18 % of Group Cost-to- 2 Operating Operating Operating Cash Business Unit NPAT LIE Income Income Expenses Performance NPAT 1H19 1H19 3 RBS 47.7% (4.3%) 2.3% (7.9%) (2.8%) (8.4%) 37.6% BPB 30.1% 1.1% 3.5% (0.1%) 54.6% (3.1%) 34.3% IB&M 12.4% (
Slide 67: Business Units
Business Units For personal use only ~ 95% of Group NPAT1 Divestments/Demerger/ Strategic Reviews Movements are 1H19 vs 1H18 Life 12 (8%) IFS Discontinued (30) Sovereign - 2,212 Eliminations (5) (3%) 1,407 ASB +6% (5%) 7% 82% (44%) 7% (23%) (70%) (large) 580 574 $m 118 (336) 147 115 13 (23) 2 RBS BP
Slide 68: Retail Banking Services (RBS)
Retail Banking Services (RBS)1 For personal use only NPAT Margin Volume growth2,3 Expenses 2,414 Driven by higher funding Balancing growth and Higher expenses over the 2,289 2,212 costs and home loan returns - managing period $m margin pressures regulatory requirements 1H18 2H18 1H19 +2.3% Home loan
Slide 69: Business & Private Banking (B&PB)
Business & Private Banking (B&PB) For personal use only NPAT Margin Volume growth Revenue Higher deposit balances and 12 months to Dec 18 Strong growth in business 1,452 1,393 1,407 business lending margins partly product income - lower retail $m offset by lower home loan Agri +7% products income du
Slide 70: Institutional Banking and Markets (IB&M)
Institutional Banking and Markets (IB&M) For personal use only NPAT Margin Revenue Volumes 608 562 580 NIM favourably impacted by Weaker trading performance Portfolio optimisation of adoption of AASB 15 reflecting widening yield Credit RWA $m curves and lower sales 1H18 2H18 1H19 1H19 vs 1H18 (4.4%)
Slide 71: ASB
ASB For personal use only NPAT Margin Volume growth Revenue 575 568 608 Increased margin pressures Solid volume growth in lending and deposits $m +7% 1H18 2H18 1H19 12 months to Dec 18 +3% 1H19 vs 1H18 227 1,363 220 221 7% 1,277 1,323 6.7% 6% 5.7% 4.6% Rev. Exp. NPAT 1H18 2H18 1H19 Deposits Lending
Slide 72: Wealth
Wealth For personal use only WM CFSGAM Life (Continuing) (Discontinued) (Discontinued) FUA growth from market Lower investment markets and Higher claims experience and momentum in 1H18 performance fees lower Inforce Premiums from loss of schemes 5.7 % (3.9%) (18.4%) 147 211 1,280 (47.6%) 5.8% (8.3%)
Slide 73: Divestments and demerger status
No Divestments and demerger status Divestments - Completed Completion Date For personal use only Sovereign • NZ life insurance operation July 2018 • Divestment to AIA Group TymeDigital • South African operation Nov 2018 • Sale to minority shareholder, African Rainbow Capital Target Completion Divest
Slide 74: NewCo – indicative
No NewCo1 – indicative Profit & Loss Key Financial Metrics For personal use only $m 1H18 1H19 Mvt % 1H18 1H19 Mvt % Operating expense to total Operating income 515 577 122 operating income (%) 63.7 64.5 80 bpts Operating expenses (328) (372) (13)2 FUA – average ($m) 3 129,203 136,742 6 Net profit be
Slide 75: CBA excluding NewCo – indicative
No CBA excluding NewCo – indicative1 Financials Key Financial Metrics For personal use only CBA CBA CBA CBA Including Excluding Mvt Including Excluding 1H19 ($m) “cash basis” NewCo NewCo $m Key Metrics NewCo NewCo Mvt Total banking income 11,770 11,634 (136) NIM 2.10% 2.10% Flat Funds management inc
Slide 76: Home and Consumer Lending
For personal use only Home and Consumer Lending
Slide 77: Home lending – system overview
Home lending – system overview Housing credit growth …with much of the slowing reflecting Regulation and softer market conditions For personal use only has slowed…. tighter regulatory control are weighing on house prices… Housing Credit1 % Credit & Regulation1 % Dwelling Prices2 % (annual % change)
Slide 78: Home lending - CBA
Home lending - CBA1 CBA took early measures to manage ….ceding some market share as a Growth is now broadly in line with regulatory requirements… result, particularly in FY18 system ….. For personal use only 12 month rolling growth Market share CBA Lending growth as a 28% multiple of system growth C
Slide 79: Borrowing capacity relatively stable
Borrowing capacity relatively stable1 Maximum borrowing capacity stable over …few borrowers utilise their full …with minimal change in average loan the last 12 months for average income capacity size and approval rates For personal use only Change in maximum borrowing capacity2 CBA applicants with a
Slide 80: Portfolio quality remains sound
Portfolio quality remains sound1 Approximately 61%2 of the book ….with significant interest rate buffers in Despite recent house price softening, originated under tightened standards… place LVR’s remain strong… For personal use only 10% Mortgage portfolio by year of origination Interest rate buffers
Slide 81: Serviceability Assessment
Serviceability Assesment1 For personal use only All income used in application to assess serviceability is verified Applicant Gross Income Band 80% or lower cap on less stable income sources (e.g. rent, 45% Fundings3 $ Income bonuses) 6 months to Dec 18 40% Limits on investor income allowances
Slide 82: Home loan portfolio – CBA
Home loan portfolio – CBA For personal use only Portfolio1 Dec 17 Jun 18 Dec 18 New Business1 Dec 17 Jun 18 Dec 18 Total Balances - Spot ($bn) 444 451 458 Total Funding ($bn) 49 45 49 Total Balances - Average ($bn) 440 443 455 Average Funding Size ($’000)6 320 319 326 Total Accounts (m) 1.8 1.8 1.8
Slide 83: Home loan portfolio – CBA ex Bankwest
Home loan portfolio – CBA ex Bankwest For personal use only Portfolio1 Dec 17 Jun 18 Dec 18 New Business1 Dec 17 Jun 18 Dec 18 Total Balances - Spot ($bn) 374 381 388 Total Funding ($bn) 42 39 42 6 Total Balances - Average ($bn) 371 374 384 Average Funding Size ($’000) 316 317 325 Total Accounts (m)
Slide 84: Portfolio mix and growth
Portfolio mix and growth1 For personal use only % Portfolio Balances by State2 % State Profile SA/NT Dec18 vs Jun18 Balance Growth 5% WA 2.5% NSW 16% 34% 2.4% 1.2% 0.7% QLD 18% VIC/TAS (0.4%) 27% NSW/ACT VIC/TAS QLD WA SA/NT $bn Balance growth $bn Fundings OO IHL 18 (51) 49 49 49 (9) 45 451 458 14 1
Slide 85: Interest only (IO) home loans
Interest only (IO) home loans1 IO loans accounting for a reducing proportion of total A recent modest uptick in IO arrears rates in part driven by the portfolio balances “denominator” effect of reduced IO balances For personal use only IO % of total home loans Arrears 90+ days Offset balances ($bn)
Slide 86: Home loan arrears
Home loan arrears For personal use only Arrears by Portfolio Arrears by Product Arrears by Year 1.8% Group 90+ days Group 90+ days1 Group 90+ days 1.0% Bankwest 1.0% CBA 1.2% ASB 0.5% 0.5% 0.6% Owner Occupied 2014 0.70% 0.67% 2015 0.60% 0.59% Portfolio 2016 2017 Investment Loans 2018 0.0% 0.0% 0.0%
Slide 87: Portfolio losses, insurance and stress testing
Portfolio losses, insurance and stress testing1 For personal use only Losses to average gross loans2 Portfolio Insurance Profile3 2.5% % of Home Loan portfolio Excess of loss re- Insurance with Genworth insurance 4% or QBE for higher risk 2.0% 21% loans above 80% LVR CBA Home Loans Group Total Loan
Slide 88: Consumer arrears
Consumer arrears For personal use only Credit Cards Group Personal Loans Group Group 90+ days Bankwest Group 90+ days Bankwest CBA CBA 1.8% 1 1.8% 1 ASB ASB 1.2% 1.2% 0.6% 0.6% 0.0% 0.0% Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 2014 2014 Credit Cards 2015 Personal Loans
Slide 89: Business and Corporate Lending
For personal use only Business and Corporate Lending
Slide 90: Business and Corporate Lending
Business and Corporate Lending Total lending balances remain …driven in large part by portfolio IB&M Credit RWA’s have reduced relatively flat… optimisation in the Institutional book significantly over recent years For personal use only Business and BPB +2% Business and Corporate Lending Credit RWA
Slide 91: Corporate lending
Corporate lending For personal use only Corporate Corporate LIE Total Credit Exposures Basis Points of GLAA $bn bpts 470 478 455 448 435 397 352 361 185 309 306 98 47 32 18 19 14 13 15 8 11 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18 1H19 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18 1H19 91
Slide 92: Portfolio quality
Portfolio quality1 For personal use only Exposures by Industry Corporate Portfolio Quality Group TCE by Geography Investment Grade BBB+ Dec 17 Jun 18 Dec 18 AAA A+ TCE $bn to Other Dec 18 to AA- to A- BBB- Australia 77.7% 77.6% 77.9% Sovereign 100.0 7.7 0.6 - 108.3 68.0% 67.9% 67.9% New Zealand 9.9%
Slide 93: Credit exposure summary
Credit exposure summary For personal use only Group TCE TIA $m TIA % of TCE Jun 18 Dec 18 Jun 18 Dec 18 Jun 18 Dec 18 Consumer 57.4% 57.8% 1,659 1,832 0.27% 0.29% Sovereign 9.3% 10.0% - - - - Property 6.2% 6.2% 632 652 0.94% 0.97% Banks 5.5% 4.6% 9 9 0.01% 0.02% Finance – Other 5.2% 4.9% 31 78 0.05%
Slide 94: Sectors of interest
Sectors of interest For personal use only 67.8 67.2 67.2 Commercial Property Dec 17 Mining, Oil and Gas Dec 17 Jun 18 71 72 72 Jun 18 Dec 18 Dec 18 33 34 34 13.813.813.6 6.3 6.2 6.2 0.9 0.9 378 304 1.0 90 83 78 0.13 0.12 0.12 1.3 1.3 1.3 3.0 2.6 2.3 272 2.8 2.2 2.0 TCE ($bn) % of Group % of portfoli
Slide 95: Commercial property
Commercial property For personal use only Group Exposure Dec 17 Exposure has remained flat in the half year. 67.8 67.2 67.2 Jun 18 Diversified across sectors and by counterparty. Dec 18 Lower apartment development exposures. Top 20 counterparties primarily investment grade 33 34 34 (weighted
Slide 96: Residential apartments – weighted to Sydney
Residential apartments – weighted to Sydney For personal use only Profile Apartment Development1 exposure reduced by $1.2bn Total Residential Apartment Development1 in the 6 months to Dec 18. $10.0bn (15% of CP) $2.6bn (0.2% of TCE) Other Facilities being repaid on time from pre-sale Perth $0.3b
Slide 97: Mining, oil & gas
Mining, oil & gas For personal use only Exposures of $13.6bn (1.3% of Group TCE). Group Exposure Dec 17 71 72 72 Jun 18 Stable performance over the past 6 months: Dec 18 72% investment grade Diversified by commodity/customer/region. 13.813.813.6 Focus on quality, low cost projects with str
Slide 98: Agriculture
Agriculture For personal use only Group agriculture exposure of $22.4bn (2.1% of Group Group Exposure Dec 17 TCE) – well diversified by geography, sector and client 21.5 21.8 22.4 Jun 18 base. Dec 18 Australian agriculture portfolio performance stable with 14 13 12 some headwinds from weak seaso
Slide 99: Drought affected areas
Drought affected areas For personal use only Drought has become more pronounced in NSW and Victoria, with conditions drier than long term averages. Past droughts have not materially impacted the portfolio’s performance due to diversification by geography, industry and exposure size. The impact
Slide 100: Retail trade
Retail trade For personal use only Group Exposure The retail trade sector remains challenged by low wage 12.2 11.711.7 Dec 17 Jun 18 growth, pressure on consumer disposable income, online 31 Dec 18 disrupters and continued subdued consumer sentiment 27 23 (despite an improvement in employment cond
Slide 101: Deposits, Funding and Liquidity
For personal use only Deposits, Funding and Liquidity
Slide 102: Funding overview
Funding overview For personal use only $bn Sources of funds Uses of funds Long term - 66% of total wholesale funding Wholesale funding WAM at 5yrs 69% Deposit Funded LCR at 131% 5.1 5.0 67% 68% 69% 67% 66% 66% 135% 133% 131% 58% 60% 3.8 4.1 4.1 121% 124% 51% 63% Jun 15 Jun 16 Jun 17 Jun 18 Dec 18 Ju
Slide 103: Deposit funding
Deposit funding For personal use only Deposit Funding Deposits vs Peers1 Deposits in NSFR5 69% 495 As at 31 December 2018 ($bn) 68% 421 Peers as at 30 September 20186 67% Other 342 250 66% 233 CBA deposits 206 267 Peer 1 63% 211 148 Peer 2 Household 262 215 200 Peer 3 deposits 131 119 CBA overweight
Slide 104: Wholesale funding
Wholesale funding For personal use only Weighted Average Maturity Average long term funding costs Indicative funding cost curves Portfolio, Years1 200 2.00 Margin to BBSW (bpts) Margin to BBSW (bpts) 1.75 Dec 17 Jun 18 Dec 18 5.1 5.0 140 126 150 1.50 120 112 115 108 1.25 111 4.1 100 90 102 108 67% 6
Slide 105: Wholesale funding – issuance and maturity
Wholesale funding – issuance and maturity For personal use only 1H19 benchmark issuance New term issuance New term issuance by currency by tenor Date Type Tenor (yr) Volume (m) Spread at Issue (bpts) 25% 23% 21% Jul-18 GBP Senior 3 GBP 250 3m GBP Libor +45 44% 38% 42% >5 years 50% Jul-18 USD Covered
Slide 106: Funding and Liquidity Metrics
Funding and Liquidity Metrics1 For personal use only NSFR 112% NSFR (%) Dec 18 643 572 (0.8) 112% Wholesale 2.0 Liquids and Other Assets 2 (0.3) Funding & Other 112% (1.1) 1.0 Other Loans Retail/SME Deposits Residential Mortgages ≤ 35% risk weight 3 $bn Capital Required Stable Funding Available Stab
Slide 107: Capital
For personal use only Capital
Slide 108: Capital Overview
Capital Overview For personal use only CET1 CET1 CET1 433% International APRA 16.3% 16.5% 10.8% 15.5% 10.4% 10.1% Assets 123% 2007 2009 2011 2013 2015 2017 1H19 Dec 17 Jun 18 Dec 18 Dec 17 Jun 18 Dec 18 22.0 International CET1 ratios 16.8 16.8 16.5 16.1 15.5 14.9 G-SIBs in dark grey 14.7 14.6 14.5 1
Slide 109: Capital drivers
Capital drivers For personal use only CET1 Total Risk Weighted Assets Organic +66 $bn 459 (0.2) (10.5) TMR (3.0) 0.2 445 31 (2) 10.8% IRRBB 24 8 5 14 10.1% (21) 27 (72) 107 Op Risk 57 57 Credit RWA - IRRBB 24 Market RWA 7 Credit CET1 impact bpts1 369 Op RWA - 370 - 24 7 - 31 Jun 18 AASB Sovereign Di
Slide 110: APRA's LAC proposal
APRA’s LAC proposal For personal use only 18.5% - 19.5% • APRA commenced consultation on a proposed Capital Surplus 3.0% 4%-5% increase in LAC for D-SIBs by 2023. • The 4 majors are collectively engaging with APRA 14.5% on the proposal. CCB, 3.5% • APRA proposes Tier 2 as the primary instrument Capi
Slide 111: CET1 – internationally comparable
CET1 – internationally comparable For personal use only Internationally Comparable1 CET1 bpts 23 15 (1) 5 16.5% 137 15.5% (23) 39 (95) Jun 18 AASB Sovereign Dividend Cash Credit 3 Market Operational Other Dec 18 2 Int'l 9 & 15 Divestment (net of DRP) NPAT RWA RWA RWA Int'l 1. Internationally compara
Slide 112: Regulatory expected loss
Regulatory expected loss For personal use only $m Dec 17 Jun 18 Dec 18 Regulatory Expected Loss (EL) 4,592 4,453 4,600 Eligible Provisions (EP) Collective Provisions1 2,525 2,484 3,4532 Specific Provisions1,3 1,813 1,581 1,650 General Reserve for Credit Losses adjustment 554 589 539 Less: ineligible
Slide 113: Leverage ratio
Leverage ratio For personal use only Leverage ratio introduced to constrain the build-up of leverage in $m Dec 18 the banking system. Tier 1 Capital 57,518 Leverage ratio = Tier 1 Capital Total Exposures 1,026,240 Total Exposures Leverage Ratio (APRA) 5.6% $m Dec 18 6.1% 6.3% 6.4% Group Total Assets
Slide 114: Regulatory capital change timetable
Regulatory capital change timetable 2018 2019 2020 2021 2022 2023 For personal use only Capital to exceed APRA’s unquestionably unquestionably strong strong benchmark of CET1 >10.5% by 1 Jan 2020 APRA commenced consultation in 2018 on: APRA’s revisions the ADI • Revisions to risk-based capital requi
Slide 115: Economic Overview
For personal use only Overview Economic
Slide 116: Key economic indicators (June FY)
Key economic indicators (June FY) GDP % CPI% Unemployment Rate % For personal use only GDP Nominal GDP 6.2 2.8 2.8 2.8 5.8 5.9 5.7 6.2 5.5 2.6 2.7 5.0 2.3 2.3 4.7 4.9 4.1 1.9 1.8 1.7 1.7 1.4 2.4 1.5 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2
Slide 117: Key economic indicators (June FY)
Key economic indicators (June FY) 2013 2014 2015 2016 2017 2018 2019 2020 For personal use only World GDP 3.5 3.6 3.5 3.3 3.8 3.7 3.5 3.6 Australia Credit Growth % – Total 3.1 5.0 5.9 6.2 5.4 4.5 3-5 3½-5½ Credit Growth % – Housing 4.6 6.4 7.3 6.7 6.6 5.6 3½-4½ 4-6 Credit Growth % – Business 1.2 3.4
Slide 118: Global growth risks have increased
Global growth risks have increased The global expansion is becoming more uneven... …as trade issues and fears of a policy mistake bite For personal use only Pts Global PMI Momentum1 World Export Volumes2 4 % (annual change in composite PMI) (smoothed annual % change) 8 Advanced economies Emerging Ec
Slide 119: Australia – a favourable starting point
Australia – a favourable starting point Economy in good shape – growth at trend, …with major economic imbalances …and the drag from falling mining For personal use only at full employment, stable inflation… narrowing… capex at an end Key Indicators1 Key balances1,5 Mining Capex1 % % (rolling annual
Slide 120: Australia – some risks easing, some lifting
Australia – some risks easing, some lifting Wages growth slowly lifting The long awaited pick up in non-mining Demographics limit the residential For personal use only capex is underway construction downside Wage Price Index1 Non-Mining Capex1 Population Growth1 % $bn ‘000 ‘000 (annual % change) (ro
Slide 121: New Zealand
New Zealand Dairy prices have remained relatively NZ’s terms of trade expected to remain Inflation is likely to range between 1-2% For personal use only steady since late 2016 near record highs over next few years Global dairy trade auction results1 NZ Terms of Trade2 % NZ CPI inflation3 Index 6,000
Slide 122: Sources, Glossary & Notes
For personal use only Sources, Glossary & Notes
Slide 123: Sources
Sources Best in digital (slides 12, 38) For personal use only 1. Net Promoter Score – Mobile App (via mobile app on a mobile phone or tablet): Roy Morgan Research. Australian population 14+ who used the internet banking services of their (self-nominated) main financial institution in the last 4 week
Slide 124: Glossary
Glossary Capital & Other Funding & Risk For personal use only Risk Weighted Assets or The value of the Group’s On and Off Balance Sheet assets are Liquidity coverage ratio The LCR is the first quantitative liquidity measure that is part of the Basel III RWA adjusted by risk weights calculated accord
Slide 125: Notes – Disclaimer
Notes Disclaimer The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 6 February 2019. It is information given For personal use only in summary form and does not purport to be complete. Information in this
Commonwealth Bank of Australia — 1H19 Earnings Presentation on 6ix