Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (August 2018)
62 slides from Commonwealth Bank Of Australia's debt investor presentation, Aug 8, 2018
Slide 1: Debt Investor Discussion Pack
Debt Investor Discussion Pack For the full year ended 30 June 2018
Slide 2: FY18 Results Update, Capital, Funding & Liquidity, Credit Quality
FY18 Results Update Capital, Funding & Liquidity Credit Quality Strategy Economics
Slide 3: Transformation underway
Transformation underway Customer and community • Fixing mistakes and resolving complaints • Continued progress on financial wellbeing Culture and governance • New leadership team – 6 new appointments • Renewed purpose and values • Remuneration consequences for executives Regulatory engagement • AUST
Slide 4: Simplify our business
Simplify our business Core banking businesses Demerger and divestments • Retail and business banking • Wealth management - Australia and New Zealand • Mortgage broking • Institutional banking • Life insurance - clients with links to Australia • South Africa Strategic review 90+% • General Insurance
Slide 5: FY Result overview
FY 18 Result overview Cash NPAT1,2 ($m) NIM1 C:I ex one-offs1,2 Cash ROE1,2 +3.7% +5 bpts (10)bpts (30)bpts 215 41.2% 15.6% 778 ex one-offs 41.1% 15.3% 9,652 210 ex one-offs 9,233 14.1% FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 Cash EPS1,2 (cents) DPS (cents) CET1 (APRA) CET1 (International)3 +2.2% +
Slide 6: Cash NPAT
Cash NPAT Good contributions across the portfolio 1 90+% of Group NPAT Demerger / $m Strategic Reviews +5% FY18 vs FY17 5,193 CommInsure Life 160 Sovereign 96 TymeDigital (78) BoComm 15 PTCL 28 Other (14) VIB & Other 17 +4% 1,888 (14%) +12% +18% +25% +5% +6% +13% +65% 1,121 1,143 681 568 257 102 133
Slide 7: Net Interest Income
Net Interest Income1 NII growth driven by margin gains from asset repricing and volume growth Volume: +2.3% Margin: +5 bpts +4.5% +4 bpts (1)bpt +2 bpts Home Loans +3.7% 171 18,341 (85) Business Loans +1.7% 341 Bank levy and increased wholesale funding cost 371 offset by deposit repricing 17,543 Rep
Slide 8: Operating expenses
Operating expenses1 Elevated risk and compliance costs the largest contributor to expense growth Includes $35m2 Excludes $155m2 of FY17 risk and one-off regulatory Includes wage inflation partly offset by costs compliance costs lower incentives 2 +3.1% 199 65 58 30 (34) 10,229 10,547 Lower IT rebate
Slide 9: Group margin
Group margin1 Up 5 bpts over the year, but lower home loan margins and basis risk impacted 2H18 12 Months 6 Months Largely the benefit of last year’s HL discounting and switching (2) asset repricing Lower institutional lending +1 bpts Higher New 216 Zealand NIM 213 215 (1) 210 214 (2) 1 Higher basis
Slide 10: Credit risk - Loan Impairment Expense
Credit risk - Loan Impairment Expense Credit risk outcomes broadly stable this period – LIE at 15 basis points LIE/GLAA 73 Group Bpts FY17 FY18 Basis Points of GLAA1 Retail Banking Services 20 20 41 Consumer 18 Business & Priv Bank 5 11 Corporate 10 Inst Bank & Markets 6 8 25 21 20 Bankwest 14 7 16
Slide 11: Credit risk - consumer arrears
Credit risk - consumer arrears Higher home loan arrears and consumer collective provisions reflecting pockets of stress % Arrears1, 90+ Days $m Collective Provisions 1.46% 1.44% 2,772 2,763 Personal Loans 1.41% 2,747 1.34% Overlay 711 811 756 Credit Cards 1.03% 0.99% 1.03% 1.05% Consumer 1,195 1,158
Slide 12: Provisioning
Provisioning Higher consumer collective provisions $m AASB9 Impact on Collective Individual Collective Provision (from 1 July, 2018) +$1.06bn 2,747 2,772 2,763 $3.82bn Overlay 711 811 756 980 978 870 $2.76bn 257 254 256 Consumer 1,195 1,158 1,199 AASB 139 AASB 9 723 724 30 Jun 18 1 Jul 18 614 Corpor
Slide 13: Investment spend
Investment spend Investment expense up 22% on higher financial crimes compliance costs Investment spend1 Investment spend1 $m % of total Expected to 1,336 remain above 1,183 50%2 Capitalised 38% 612 50% Risk & compliance +4% 591 10% 12% Branches & Other Expensed 724 +22% 52% 592 38% Productivity & G
Slide 14: Balance sheet strength
Balance sheet strength Strong funding and liquidity, pro-forma CET1 capital at 10.7% Deposit Funding LCR NSFR CET1 % of total funding APRA Post divestments1 131% 112% 129% 68% 10.7% 67% 107% 10.4% 10.1% bpts Transaction Liquid Strengthening Organic +32 Balances assets of the balance One-offs (52) +1
Slide 15: Group margin – key sensitivities
Group margin – key sensitivities Basis Risk and Replicating Portfolio % Basis Risk Replicating Portfolio Replicating Portfolio Every 5 bpts of elevated BBSW/OIS Bottoming of rate cycle = lower 1.0% spread costs ~1 bpts of Group NIM 7.0% benefits (~2 bpts of NIM drag in FY19) 5.0% Replicating Portfol
Slide 16: Dividend
Dividend Final dividend of $2.31 - full year $4.31, payout ratio of 75% ex AUSTRAC cents per share 420 429 431 Cash NPAT1 Payout Ratio 420 401 364 334 320 290 256 266 80% 75% 228 76% 76% 75% 75% 77% 75% 74% 73% 78% 74% 75%2 ex AUSTRAC FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1. Ca
Slide 17: Deposits, Funding and Liquidity
Deposits, Funding and Liquidity
Slide 18: Funding overview
Funding overview Over the last 12 months, the Group continued to strengthen its funding position $bn Source of funds Use of funds Portfolio 5.1 yrs 112% NSFR 68% Deposit Funded (24) 33 131% LCR Core Funding Gap $2bn 4 (21) 9 (11) 10 Equity Long Term Issuances Long Term Maturities1 Short Term Funding
Slide 19: Funding and Liquidity Metrics
Funding and Liquidity Metrics1 The Group continues to maintain strong funding and liquidity positions NSFR NSFR (%) FY17 vs FY18 112% % Jun 18 112 635 0.7 1.6 (0.5) (1.6) 569 Wholesale 3.3 Liquids and Other Assets2 Funding & Other Other Loans 107 1.5 Retail/SME Deposits Residential Mortgages ≤ 35% $
Slide 20: Deposit funding
Deposit funding The Group maintains the highest share of stable, household deposits in Australia Deposits vs Peers1 Deposits in LCR calculation CBA Peer 1 Jun 18 ($bn) As at 30 June 2018 ($bn) Peer 2 160 Peers as at 31 March 20182 Peer 3 140 CBA overweight 487 more stable deposits 424 120 Other depo
Slide 21: Deposit funding – transactions
Deposit funding – transactions Over one million new personal transaction accounts were opened in FY18 Group Transaction Balances1 Transaction Balance Growth1 $m FY18 vs FY17 +24.6% +10.6% 13.9% 14.3% 12.8% Group 10.6% 142,916 158,012 126,780 6.8% 6.9% 2 3 FY16 FY17 FY18 RBS BPB IB&M BW NZ Retail Ban
Slide 22: Wholesale funding
Wholesale funding Lengthened at favourable rates, reducing refinancing risk – cost pressures emerging Wholesale Funding Indicative Funding Costs2 Weighted Average Maturity1 Average Annual Maturity Average Annual Issuance 3.00% 10yr market Portfolio (yrs) funding cost 34 28 28 New Issuance (yrs) 2.50
Slide 23: Wholesale funding – issuance and maturity
Wholesale funding – issuance and maturity $33bn wholesale issuance completed FY18 FY18 benchmark issuance Date Type Tenor (yr) Volume (m) Spread at Issue (bps) Securitisation Jul-17 USD Senior 30 1,500 T+103 Jul-17 AUD Senior 5, 10.5 1,850 3m BBSW +88 / 105 Covered Bond Sep-17 USD Senior 3, 5, 10 3,
Slide 24: Wholesale funding – composition
Wholesale funding – composition Diversified wholesale funding across product, currency and tenor Funding composition Term Wholesale Funding by Currency2 Customer Deposits 68% Jun-18 ST Wholesale Funding 1 10% AUD Jun-17 LT Wholesale Funding > 12 months 10% USD LT Wholesale Funding ≤ 12 months 4% Jun
Slide 25: Capital
Capital Op. risk add-on absorbed – clear path to “unquestionably strong” (pro-forma 10.7%) bpts Organic CET1 CET1 +32 Pro-forma 38 18 10.7% 10.4% 106 1 (7) (52) (67) (10) 10.1% 10.1% (21) 27 One-off items Operational RWA Adjustment2 (33) AUSTRAC (7) Colonial debt3 (7) BoComm4 (5) Dec 17 Dec 17 Cash
Slide 26: Total capital levels - APRA
Total capital levels - APRA Well positioned on regulatory requirements .. > 10.5% 1 Jan, 2020 14.2% 14.8% 15.0% 2.1% 2.4% 2.7% 11.5% 2.0% 1.9% 1.9% 2.0% 1.5% 10.1% 10.4% 10.1% 8.0% Jun 17 Dec 17 Jun 18 Current Regulatory Minimum CET1 Tier 1 Tier 2
Slide 27: CET1 – Internationally comparable
CET1 – Internationally comparable One-off items have driven the internationally comparable ratio lower this half Internationally Comparable1 CET1 bpts 2 137 (16) (89) (16) (3) (9) 2 3 16.3% (67) (4) (3) (10) 15.5% Dec 17 Dec 17 Cash Credit Market Underlying AUSTRAC Operational Colonial BoComm Other
Slide 28: International CET1 ratios
International CET1 ratios The Group is one of the best capitalised banks in the world 21.1 G-SIBs in dark grey 16.4 16.3 16.1 15.5 14.7 14.7 14.6 14.6 14.5 14.3 13.9 13.7 13.4 13.1 13.1 12.9 12.8 12.6 12.5 12.1 12.0 12.0 12.0 12.0 11.9 11.8 11.8 11.7 11.4 11.3 11.2 11.1 10.9 10.9 10.7 10.5 Sumitomo
Slide 29: APRA and International comparison
APRA and International comparison The Group’s CET1 ratio of 10.1% translates to 15.5% on an international basis The following table provides details on the differences, as at 30 June 2018, between the APRA Basel III capital requirements and internationally comparable capital ratio1. CET1 APRA 10.1%
Slide 30: Leverage ratio
Leverage ratio CBA leverage ratio is well above prescribed Basel Committee minimum Leverage ratio introduced to constrain the build-up of leverage in $m Jun 18 the banking system. Tier 1 Capital 56,432 Leverage ratio = Tier 1 Capital Total Exposures 1,018,622 Total Exposures Leverage Ratio (APRA) 5.
Slide 31: Regulatory change timetable
Regulatory change timetable 2018 2019 2020 2021 2022 ADIs to target unquestionably strong capital ratios, Capital to exceed APRA’s unquestionably which will also cover Basel Committee’s finalised Basel unquestionably strong Implementation strong III reforms benchmark by 1 Jan 2020 APRA commenced con
Slide 32: Key economic indicators (June FY)
Key economic indicators (June FY) 2013 2014 2015 2016 2017 2018 2019 World GDP 3.5 3.6 3.5 3.2 3.8 3.9 3.9 Australia Credit Growth % – Total 3.1 5.0 5.9 6.2 5.4 4.5 3½-5½ Credit Growth % – Housing 4.6 6.4 7.3 6.7 6.6 5.6 3½-5½ Credit Growth % – Business 1.2 3.4 4.4 6.5 4.3 3.2 4-6 Credit Growth % –
Slide 33: Home and Consumer Lending
Home and Consumer Lending CommonwealthBank y
Slide 34: Regulatory exposure mix
Regulatory exposure mix1 CBA’s portfolio is heavily weighted to home lending Regulatory Credit Exposure Mix Portfolio CBA Peer 1 Peer 2 Peer 3 Residential Mortgages 57% 41% 46% 57% Corporate, SME, Specialised Lending 26% 31% 38% 29% Bank 4% 5% 5% 2% Sovereign 9% 16% 9% 8% Qualifying Revolving 3% 2%
Slide 35: System overview – housing credit
System overview – housing credit Population growth continues to underpin overall system growth Population1 System Housing Credit Growth2 Annual % change Annual % change 2.4 7.3 6.7 6.6 6.4 Long run 1.6 5.6 5.5 average CBA Economist Forecast Range 3.5 0.8 0.0 1973/74 1981/82 1989/90 1997/98 2005/06 2
Slide 36: System overview - housing credit
System overview - housing credit Regulatory changes have contributed to a cooling in housing and investment lending Owner-Occupied vs Investor Housing Price Growth3 System, 12 Month Rolling Growth1 Period Movements to June 2018 % APRA 30% cap on new IO loans 3 1 6 (31 Mar 17)2 Owner Occupied Years Y
Slide 37: CBA home lending
CBA home lending1 CBA took early measures to manage regulatory requirements, ceding some share Home Lending Home Lending Growth Market share 12 months to Jun 18 CBA 12.5% 26% 24.4% 23.1% Owner-Occupied +6.2% Investor (1.2)% 21% FY18 Mvt by Qtr (RBS, bpts) Q1 Q2 Q3 Q4 5.6% -5 -9 -8 16% -16 3.7% 14.7%
Slide 38: CBA home lending
CBA home lending CBA remains focused on its core market – owner-occupied, proprietary lending Owner-Occupied vs Investor Proprietary Home Loans3 12 Month Rolling Growth1 Proprietary % of Total Home Loan Flows ($) CBA APRA 30% cap System on new IO loans (31 Mar 17)2 62% 64% 63% 7.7% 6.2% 47% 45% 45%
Slide 39: Home loan portfolio – Australia
Home loan portfolio – Australia A balanced approach to portfolio quality, growth and returns Portfolio1 Jun 17 Dec 17 Jun 18 New Business1 Jun 17 Dec 17 Jun 18 Total Balances - Spot ($bn) 436 444 451 Total Funding ($bn) 49 49 45 Total Balances - Average ($bn) 423 440 443 Average Funding Size ($’000)
Slide 40: Home lending
Home lending Portfolio growth remains strongest in NSW State Profile1 Balance Growth1 FY18 Balance Growth $bn 39 (100) NSW/ACT VIC/TAS QLD WA SA/NT 94 5.2% % of Portfolio (18) 6% 436 451 4.5% 16% 34% 18% 26% 2.5% 0.1% Jun 17 New Redraw & Repayments External Jun 18 Fundings Interest / Other Refinance
Slide 41: Home lending
Home lending The Group has continued to tighten its serviceability and underwriting standards FY16 FY17 FY18 Increased serviceability buffers Limited periods of interest-only (IO) to Further buffers on existing debts 5 years maximum Reduced reliance on less stable Increased verification of
Slide 42: Home lending
Home lending Portfolio dynamic LVR at 50% and well insured Home loan dynamic LVR1 Portfolio Insurance Profile2 % of Australian Home Loan portfolio 70% Average Dynamic LVR Excess of Loss 60% Re-insurance Jun 17 50% Dec 17 50% % of Total Portfolio Accounts 50% 5% Jun 18 50% 40% 69% 21% Insurance with
Slide 43: Home lending
Home lending Significant repayment buffers reduce portfolio risk Repayment buffers (Payments in advance1, % of accounts) 6% Residual: have less than 1 month repayment buffer 9% Structural: loans that structurally restrict payments in advance e.g. fixed rate loans etc 5% New Accounts: loans that are
Slide 44: Home lending
Home lending CBA home lending supported by strong income profile Applicant Gross Income Band1 Investor Home Loans Owner Occupied Fundings $ Fundings # 6 months to Jun 18 6 months to Jun 18 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 0-75k 75k-100k 100k-125k 125k-150k 150k-200k 200k-500k 500k+ 0-75
Slide 45: Interest only – switching
Interest only – switching Switching activity peaked in Sep 17, with significant buffers in place Balance Movement ($m)1 Scheduled IO term expiry1 Interest Only (IO) to Principal and Interest (P&I) (% of total IO Loans) Quarterly Payments in advance > 6 27% months2: accounts with a financial buffer t
Slide 46: Home loan arrears
Home loan arrears Largest increases have been in WA and NT Arrears by State 2.00% Portfolio Balance % Australia1 90+ days ACT, 2% WA, 16% NSW, 33% WA VIC, 1.50% 25% QLD, NT, 1% NT 18% TAS, SA, 5% 1% QLD SA 1.00% Australia TAS VIC 0.50% NSW ACT 0.00% Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 1. Includes CBA
Slide 47: Home loan arrears
Home loan arrears Current year arrears elevated but recent vintage performance remain strong Arrears by Year Arrears by Vintage 1.8% Group 90+ days 2.0% Australia1 90+ days 1.5% 1.2% FY07-FY10 2014 2015 2016 2017 2018 FY13 FY12 1.0% FY14 FY15 0.6% FY11 0.5% FY16 FY18 FY17 0.0% 0.0% Jul Aug Sep Oct N
Slide 48: Consumer arrears
Consumer arrears1 Arrears rates remained broadly stable across unsecured retail portfolios Credit Cards Personal Loans 1.8% Group 90+ days Group 90+ days 1.8% Group 1.2% Bankwest 1.2% CBA 0.6% ASB 0.6% 0.0% 0.0% Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec
Slide 49: Home lending
Home lending Losses remain low and remain manageable under a stressed scenario 1 Losses to average gross loans Stress test Stress scenario 2.5% 3 year scenario of cumulative 31% house price decline, peak 11% unemployment and a reduction in the cash rate to 0.5% 2.0% CBA Home Loans Outcomes ($m) Tota
Slide 50: Business and Corporate Lending
Business and Corporate Lending
Slide 51: System overview – business credit
System overview – business credit Business credit growth remained relatively subdued through FY18 Business Credit Growth1 Market Shares2 System, Year-to-June % June 2018 APRA NFC RBA System 6.5 (includes Bills) 4-6 CBA Economist 21.3% 4.4 4.3 Forecast 18.1% 17.8% Range 15.9% 3.4 3.2 14.4% 2014 2015
Slide 52: Credit exposure summary
Credit exposure summary Group TCE TIA $m TIA % of TCE Dec 17 Jun 18 Dec 17 Jun 18 Dec 17 Jun 18 Consumer1 56.6% 57.4% 1,511 1,659 0.25% 0.27% Sovereign 9.7% 9.3% - - - - Property 6.3% 6.2% 586 632 0.86% 0.94% Banks 5.2% 5.5% 9 9 0.02% 0.01% Finance – Other 5.1% 5.2% 35 31 0.06% 0.05% Retail, Wholesa
Slide 53: Business and Corporate Lending
Business and Corporate Lending For CBA, focus is on portfolio optimisation and targeted growth in priority segments Business and Corporate Lending Group Priority sectors: Growth reflects Health +14% long term strategic Growth in Portfolio Agri +5% focus on this corporate (2%) optimisation Property i
Slide 54: Sectors of Interest
Sectors of Interest Broadly stable outcomes across most sectors 70.2 67.8 67.2 Commercial Property Mining, Oil and Gas Jun 17 70 71 72 Dec 17 Jun 18 33 33 34 14.713.8 13.8 6.5 6.3 6.2 1.0 0.9 0.9 111 90 83 0.16 0.13 0.12 1.4 1.3 1.3 3.2 3.0 2.6 252 378 304 1.7 2.8 2.2 TCE ($bn) % of Group % of portf
Slide 55: Residential apartments – weighted to Sydney
Residential apartments – weighted to Sydney Improved qualifying pre-sales, lower LVR Profile Apartment Development1 exposure reduced Total Residential Apartment Development1 $10.7bn (16% of CP) $3.7bn (0.3% of TCE) $0.3bn for the half. Perth Other Facilities being repaid on time from pre-sale $0
Slide 56: Management & Strategy
Management & Strategy CommonwealthBank y
Slide 57: Our strategy
Our strategy 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 capabilities accountable sust
Slide 58: Franchise strength
Franchise strength The Group maintains Australia’s largest share of MFI customers1 Jun 13 Jun 18 47.6% Overall MFI share1 41.7% 45.2% CBA MFI Share Others CBA 31.1% 22.6% 34.4% 27.3% 27.1% 11.5% Peer 2 13.1% 18.4% Aged 14-17 Aged 18-24 Aged 25-34 Aged 35-49 Aged 50-64 Aged 65+ Peer 3 Peer 1 Customer
Slide 59: Leading in digital
Leading in digital Committed to remaining a leader in technology and innovation Mobile App Net Promoter Score6 #1 Online Banking – 9 years in a row Customer’s likelihood to recommend main financial institution based on use of Internet Banking services via Mobile App +37.8 (CANSTAR)1 +35 #1 Mobile +2
Slide 60: Real time digital banking
Real time digital banking Customer take-up of digital options Digital transactions CommBank app users CommBank app % of total transactions - by value1 Monthly unique customers (m)2 Logons per day (m)3 59% 5.0 5.1 4.8 4.9 56 4.4 4.3 4.1 3.9 54 3.7 3.4 3.4 53 3.0 3.1 52 52 2.7 2.7 51 2.3 50 Dec 14 Jun
Slide 61: Glossary
Glossary Capital & Other Funding & Risk 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 according to various APRA (L
Slide 62: Notes
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, 8 August 2018. It is information given in summary form and does not purport to be complete. Information in this presentation is not inte
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