Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — UBS Warburg 2003 Global Financial Services Conference
47 slides from Commonwealth Bank Of Australia's conference presentation, Apr 28, 2003
Slide 1: UBS Warburg 2003 Global Financial Services Conference
UBS Warburg 2003 Global Financial Services Conference Michael Cameron Chief Financial Officer 28-30 April 2003 www.commbank.com.au Commonwealth Bark |” a
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, 29 April 2003. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to
Slide 3: Speaker's Notes
Speaker’s Notes Speaker's notes for this presentation are attached below each slide. To access them, you may need to save the slides in PowerPoint and view/print in “notes view.” Commamaeaithie: i» 3
Slide 4: Agenda
Agenda Current Environment Focus Platforms for Growth Commamaeaithiz: ip 4
Slide 5: Current Environment
Current Environment
Slide 6: Australia's Economy has been relatively resilient given global conditions
Australia’s Economy has been relatively resilient given global conditions ECONOMIC GROWTH: CREDIT 2002 9, (3 month-ended annual rates} ,, China ° ° South Korea 30 30 Thailand Oth New Zealand OUSIRG Australia -, Indonesia Ft es Se ee ee JIN—4 99 Taiwan Canada United States f Singapore 410 Hf / a a 10
Slide 7: Domestic housing demand has been strong
Domestic housing demand has been strong $1900 i ‘i Established ® Wisest House Place for Prices feocity NA New {national} ey Savings? py (Melbourne 40 Institute) Prgt” 20 ~~ Ct ee 20 Julso ie wu HG Sen?) Sop-e8 Sep Swp-o7 Sop-ae House Price Debt % Sensitivity 7 Rep: (% deviation wncennese4tep i Level
Slide 8: Business confidence has been subdued, but is expected to gain momentum
Business confidence has been subdued, but is expected to gain momentum * CAPEX INVESTMENT ACTIVITY: ws we (cumulative % contribution, 2001 base yr} ’ {annual % change) “a 30 36 Agriculture CBA Mining o - Manufact 6 5 Construction Wholesale 0 6 Retait Transp & stor Finance & insur as 5 3: 1 Prop & bu
Slide 9: While equity markets have showed some resilience, returns and fund flows have declined
While equity markets have showed some resilience, returns and fund flows have declined Equity Markets Totat Net Retail Fund Flows Index {for quarter ended) (Base 100) $m 100 95 90 8a 75 ; ; : ; Sul-02 Aug-02 Oct-02 Onc02 — Fab-03 sure [REA Grcivarins ITI jasciwons | [Pwnage aay, _ = Conmanneann =] S
Slide 10: Commonwealth Bank's 1st Half result reflects modest growth in an uncertain environment
Commonwealth Bank’s 1st Half result reflects modest growth in an uncertain environment Dec 2002 Dec2001 % Change Net Profit After Tax (cash basis)* $1,208m $1,192m 1% Comprising: Banking $1,079m $975m 11% Funds Management $135m $182m (26%) Life Insurance ($6m) $35m {117%} * ie excluding appraisal va
Slide 11: The Bank's credit quality and capital adequacy strengthened during the half
The Bank’s credit quality and capital adequacy strengthened during the half oy Bad Debt Expense to RWA* Capital Adequacy Ratios 2.0888 0.0888 % RWA 0.004 0.081% %e RWA Dec 2001 dun 2002 Dec 2002 OCBA mM ANZ A NAB @ WBC j| Tier 1 Capital gg Tier 2 Capital Target Range NE: liek weigtted assole Commenw
Slide 12: The Bank's dividend payout ratio remains high relative to peers
The Bank’s dividend payout ratio remains high relative to peers Dec 2002 Dec 2001 Change Dividends per Share 69cps 68cps te Dividend Payout Ratio 72.7% 72.6% - «and EPS has improved Earnings per Share 95cps 94eps 1ce Return on Equity 12.39% 12.43% (4bps) Banking Cost to Income Ratio (underlying basi
Slide 13: Meeting the challenges in the current environment and the longer term
Meeting the challenges in the current environment and the longer term immediate focus: Productivity Implementation of strategic initiatives Longer-term focus: key competitive strengths Scale Brand Risk Profile Products and Businesses Distribution Innovation People ip 13 The outlook for the full fina
Slide 14: Focus
Focus Turning now to the Bank's key areas of focus in both an immediate an longer term context. 14
Slide 15: Immediate focus is on improving efficiency
Immediate focus is on improving efficiency Four strategic initiatives... ..to achieve: + Abetter service experience for customers, through greatly improved turnaround times Remove back-office functions from branches Streamline Business Banking processes + Elimination of duplication and Rationalise i
Slide 16: The Bank is a leading player in Australia with the highest number of relationships
The Bank is a leading player in Australia with the highest number of relationships... Customer Share: % All Relationships ist in Home Lending a 4st in Credit Cards ist in Retail Deposits 20 ist in Online Broking Largest customer base Most points of access Dec-01 Jun-02 Dec-02 o CBA “WBC Best known b
Slide 17: and achieve consistently high ratings from retail customers
and achieve consistently high ratings from retail customers Average across all brand attributes for CBA % VS average of ANZ, NAB and Westpac | | | i * Is doing new and | | different things A HII * Has knowledgable | | | | * Has friendly and and competent staff Mar May Juf Sep Nov Jan Mar May Jul Sep
Slide 18: Australia's Most Accessible Bank
Australia’s Most Accessible Bank* “Distribution channel numbers have been rounded Commmewmeatitis: ip 18 With regard to distribution, the Bank manages the largest financial services distribution network in Australia meeting the needs of customers through well over 100,000 points of service. Over rec
Slide 19: Platforms for Growth: Banking
Platforms for Growth: Banking Having outlined the Bank’s focus in relation to the positioning of its businesses, I'll turn now to the platforms for growth being utilised to drive longer term growth strategies in each of our business segments. I'll start with Banking. 19
Slide 20: Several key trends are shaping the future of the home loan market
Several key trends are shaping the future of the home loan market + Interest rates at historical lows - but affordability has weakened + Slowing housing credit demand likely + Historically fow cradit losses + Property sector attractive compared to other asset classes + Mortgage market a high demand
Slide 21: Share of wallet improving - cross-sell, retention and service initiatives are in train
Share of wallet improving - cross-sell, retention and service initiatives are in train Share of Wallet by Financial Institution 100 i 80 12001 i 2002 | 60 : * rS45 3942 39422 40 : “PE THRE ° | StGeorge = CBA Group: NAB Group Suncorp WBC Group ING/Merc ANZ Group Bendigo Group Mutual Basis: if a custo
Slide 22: Youth Customers: Addressing the change and growth in banking needs
Youth Customers: Addressing the change and growth in banking needs Banking needs change and grow as customers age and pass through different life stages Competitor Activity Credit Card needs /Wansacting needs / eaings needs 0.65 12 18 24 30 Age of Customer Sjonpoid enied ioubiLy Lower involvement pr
Slide 23: Premium Customers: Offering a Differentiated Business Model
Premium Customers: Offering a Differentiated Business Model Advisory Services s Direct investment Broking . Platform Indirect investment Debt Products Equity Products Borrowing Services orm Lending Services Transactional Banking | 77 Sep Priniary: Relationship Manager: Sata Secondary: Relationship:
Slide 24: Republic: Providing a comprehensive view of premium customers
Republic: Providing a comprehensive view of premium customers p Please nie information on these date sctoens has bevn scrambled for plvacy puposes ~ Cemmemmastiiatici. | 24 A key milestone in the rollout of the premium model has been the development of the Republic system. Republic is the PFS relati
Slide 25: Republic: Providing a comprehensive view of premium customers
Republic: Providing a comprehensive view Please nole information on these data screens has been scrambled for privacy purposes ~" - Cemmoanwealtinisrs < ¢ 25 This screen provides a profile of a client's key family and business relationships. By understanding a client's wider network of relationships
Slide 26: Transforming Business and Corporate Banking
Transforming Business and Corporate Banking Transformation Agenda Structured In Three Phases Status Initiatives Segment clients and create differentiated business models to Completed improve client service experience Introduce streamlined credit processes Underway G 6) Lift performance of bottom qua
Slide 27: No change to credit standards
No change to credit standards Consumer Portfolio Commercial Portfolio Composition of [100% —_— —_— Housing Portfolio 80" 36 39 40 El owner @ccupied ———. 4 Investment 60% 45 Dec 01 Jun62 Dec 62 i5 14 2AM o 407 60% Bad debt charge as 20 19 v7 jnvest. 20% 4 annualised % of unsecured grade 29 27 lending
Slide 28: Platforms for Growth: Funds Management
Platforms for Growth: Funds Management 28
Slide 29: The Bank maintains its leadership position in Australian funds under management
The Bank maintains its leadership position in Australian funds under management Group Funds Under Management Australian Funds Under Management™ by Country of Source by Asset Class December 2002 December 2002 1% % 86% % 10% Qiustralia Dunited Kingdom — ONawZoatand Ohustralianshares @ntomationai share
Slide 30: Several key trends are shaping the future of the Australian Funds Management industry
Several key trends are shaping the future of the Australian Funds Management industry Projected Size of Various Product Segments « Strong inherent growth in the funds management market expected, particularly retail « Growth of mastertrusts « industry consolidation « Institutionalisation of distribut
Slide 31: FirstChoice has been further enhanced...
FirstChoice has been further enhanced... and other initiatives are underway EirstChoice Other Strategic Initiatives nefits, including further rationalisation of legacy systems Offer increased style diversification Leverage internal distribution Opportunities Leverage scale to reduce costs Grow alter
Slide 32: Platforms for Growth: Life Insurance
Platforms for Growth: Life Insurance 32
Slide 33: The Bank ranks second in the Australian life insurance market
The Bank ranks second in the Australian life insurance market Market Size* and Growth Prospects: Commonwealth Bank Premiums*: By Product By Product 4500 $4.3bn CBA total annual inforoe premiums 4000 $3.4bn = $548 3200 & 2400 +600 600 ° 2082 2007 projected [Bren & Trauma ODisability 3rd Party | [wter
Slide 34: Focus is on distribution, service and risk pricing
Focus is on distribution, service and risk pricing « Increase internal distribution through: « Personal Insurance Consultants Business Investment Managers » Repricing of premiums » Upskilling of call centre staff « Product rationalisation » Systems migration Commanaeaithiitzn op 34 Going forward, we
Slide 35: Key Points
Key Points » Resilient Australian economy = Strong first half growth in our banking business x Strong franchise: scale, brand, distribution, innovation, people » Cross sell, retention and service initiatives in train in retail and business bank « Maintenance of high credit standards « Leadership in
Slide 36: UBS Warburg 2003 Global Financial Services Conference
UBS Warburg 2003 Global Financial Services Conference Michael Cameron Chief Financial Officer 28-30 April 2003 www.commbank.com.au Commonwealth Bark |” a 36
Slide 37: 9% growth in lending assets
9% growth in lending assets 200 169 161 160 4 $ billion 100 4 50 4 Dec 2001 Jun 2002 Dec 2002 Lending Assets**: i Housing {| f Personal Business & Corporate ag Bank Acceptances _”* Excludes securitised housing loan balances $5.9b (Dec 02), $7.6b (Jun 02), $5.7b (Dec 01). Sommonnwesiitin fk ip 37 37
Slide 38: A number of one offs impacted funds under management
A number of one offs impacted funds under management Sbn Underlying reduction of (2) $8bn One off reduction of net $3bn 2 (4) Dec-0t Net Flows investment Other FUM returns T T T Underlying Gandef Winterthur CFSUK Des-02 Private FUM Business Gommeamaealtfiiizi |p 38 38
Slide 39: Shareholder Funds in Life Insurance Companies
Shareholder Funds in Life Insurance Companies: investment reflect underlying nature of the business Risk* Unit Linked Group $2.1 billion $0.5 billion $2.6 billion Income Ml Growth Bll “Risk includes traditional, investment account, annuities, personal risk and group risk. Commenweatity Sic op 38 39
Slide 40: Continuing sound asset quality
Continuing sound asset quality Dec 2001 Jun2002 Dec 2002 Cee te eu | $2g0m} $159] $151m DebistoRWAennvatsea)| 042%] 0.23%] 0.21% Gross avec asotsret| secon] san] __S666n Specific Provisions $309m $270m $264m General Provision $1,334m $1,356m $1,327m General Provision to RWA 0.96% 0.96% 0.92% Rammiam
Slide 41: The Bank remains well provisioned
d isione The Bank remains well prov Saas Se eS EERSTE Ecnead suonias Dec Dec Dec Dec Dec Dec Dec Dec 98 9g 02 95 Dec 94 01 00* 97 96 £AGeneral Provision -2Specific Provision “Total Provisions/Gross Impaired Assets (axis on right} * Includes Colonial 41
Slide 42: Arrears in consumer book remain at low levels
Arrears in consumer book remain at low levels Loans Accruing past 90 days or more 30/06/01 31/12/01 30/06/02 31/12/02 $m $m $m $m Housing Loans 218 168 176 136 Other Loans 80 79 73 75 Total 308 247 249 211 Housing loans arrears rate 30/06/01 31/12/01 30/06/02 31/12/02 Housing Loans accruing but past
Slide 43: Commercial Portfolio: large exposures are mostly investment grade
S&P Rating or Equivalent Commercial Portfolio: large exposures are mostly investment grade Top 20 Exposures to Top 20 Exposures as a % of Corporates (Committed) Totai Committed Exposure Ae hy 4.0% 7 BBB. 888 3.5% 7 BBB. Ae 3.0% 4 A a 2.5% 4 A Lo 2.0% 4 Ae 888 1.5% 4 DAS 886 1.0% 4 A 888 ve 0.5% 4 A
Slide 44: Credit Exposure - Energy Sector
Credit Exposure - Energy Sector 10% T% IAA to A- Dess+ to ase. Bs+ to BB- jO<s Australia (73% investment grade} Asia (84% investment grade) North America (58% investment grade) Other (97% investment grade) 5oOmaoO $3,441 Commanaeaithitzn op 44 44
Slide 45: Credit Exposure - Telcos Sector
Credit Exposure - Telcos Sector 11% AAA to A- ORRB+ ta BBB. es+ to BB- \O<s Australia (72% investment grade} Asia (100% investment grade} North America (400% investment grade) Other (64% investment grade) 5oOso $1,509 Commeanaeaithiizn op» 45 45
Slide 46: Credit Exposure - Technology Sector
Credit Exposure - Technology Sector $m 1206 - TEA 1c0c - goo + AAA to A- soc 4 BBB+ to BRB. mee+ to BB- jo<s 400 4 6 200 4 35 o J O Australia {68% investment grade} North America (00% investment grade) $1,144 ‘Other (99% investment grade) Commeanaeaithiizn: i » 46 46
Slide 47: Credit Exposure - Agriculture Sector
Credit Exposure - Agriculture Sector $7,673m 340 AAA to A- ORRB+ ta BBB. es+ to BB- \O<s O Australia (10% investment grade} Bl New Zealand (3% investment grade} Commamaeaithiiiz: op 47 47
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