Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Non-Deal Roadshow (March 2004)
40 slides from Commonwealth Bank Of Australia's roadshow presentation, Mar 12, 2004
Slide 1: Roadshow Presentation
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, 12 March 2004. It is information given in summary form and does not purport to be complete. it is not intended fo be relied upon as advice to
Slide 3: Agenda
Agenda Environment Performance Which bank. Outlook Good morning. This morning my presentation will consist of four parts: Firstly, | will provide you with an overview of the environment the Bank is operating in. Then we will briefly take a look at the Bank’s half year result announced in February. T
Slide 4: Environment
Environment Whiels Bante Starting off with the Bank’s environment. Conmonwealihtiank
Slide 5: Environment: Australia comparison and official interest rates
Environment AUSTRALIA: HOW WE COMPARE « OFFICIAL INTEREST RATES 6 (the last 10 years) 8 po Average Average Reduution Increase in Reduction Average Jul-G2 dul-94 Jul-96 IDR Isl FelOF Fok gronth fate inflation == in cumesin udget productadty rate unemploy- aocowt deficit geoth ment raty deficit United
Slide 6: Credit growth expected to moderate
Credit growth expected to moderate credit Growth Shomartheended annualised raie af A Ji J Businvesa su Tae eur Esliiy aos If we look at credit demand. Economic growth and low interest rates have underpinned strong credit growth, particularly in housing. Household credit increased at an annual rate o
Slide 7: Ageing population driving productivity challenge
Ageing population driving productivity challenge % GDP per capita growth 25 2 18 1 Cry 0 Past Future Source: Intergenerational Report Which Bank, ConmonwealthGer: a The Government's Intergenerational Report released almost two years ago, brought home to us that growth in living standards will slow u
Slide 8: We will grow through service transformation
We will grow through service transformation Strong business mix Extensive distribution footprint Large customer base Leading brand » Competitive Superior EPS superiority growth Service transformation Which Bank Comnonweatth ai: Given the environment I’ve just described, our strategy is to use the in
Slide 9: Performance
Performance Half Year Results Overview Except where otherwise stated, all figures relate to the half year ended 31 December 2003 and comparatives for the profit and loss are for the half year ended 31 December 2002. Comparisons on balance sheet are to 30 June 2003, unless otherwise stated. Whiels Ba
Slide 10: A good result: 17% growth in underlying cash profit
A good result: 17% growth in underlying cash profit 31/12/03 = 31/12/02 Change $m $m 622 Goodwill amortisation 162 160 Appraisal value movement {165} 426 Which new Bank 346 - Strategic initiatives - 2002 - 39 ESAP - 2002 19 Shareholder investment returns (99) 8 Underlying Cash NP Which Bank ‘Commamw
Slide 11: Banking and Insurance strong, Funds Management rebound
Banking and Insurance strong, Funds Management rebound $m 1800 4 j y Underlying Growth of 17% Investment 1700 + f . \ Returns 4600 4 insurance 93 Banking 54 1,487 1500 4 158 so sew he é ann 4 + 1400 4 J 1,274 : Funds 1300 ~ 4 Management . 1200 4 1 4 17100 4 Incremental 1006 4 Which new Bank 900 (346
Slide 12: Key shareholder ratios
Key shareholder ratios 31/42/03: 3442/02 Shareholder Ratios* Earnings Per Share 96 cents 95 cenis Return on Equity 123% 12.4% Dividends Per Share 79 cents: 69 cents Payout Ratio B2.0% 72.7% * Based on Cash NPAT Whieh Bank Commomnoalthiank <p "3 2 Even after taking into account the cost of Which new
Slide 13: Another Record Dividend
Another Record Dividend Listy 450 Interim dividend of 79 cps, up 14% on pep *Payout ratio of 82.9% reflecting Which new Bank expenditure impact in 2004 Which Bank We committed to looking through the costs of transformation when determining the dividend for the year to June 2004. As a result of this
Slide 14: Banking
Banking Performance driven by growth in home lending and sound asset quality In summary: 14% underlying profit growth « 8% growth in banking income » 4.6% annualised productivity improvement since June 2003 » 89% growth in lending assets since June 2003 Witch Sank Commonwealth Bark The banking segme
Slide 15: Continued improvement in portfolio quality
quality Continued improvement in portfolio Top 20 Exposures to Corporates (Committed) {Top 26 exposures are 3.5% of total committed exposures of $245 billion) S&P Rating or Equivalent ? Sha20e 400 500 600 700 Weil Diversified Portfolio by Industry Energ Telcos Leasing Technology Construction \ Zo Av
Slide 16: Underlying Banking Cost to Income ratio has improved
Underlying Banking Cost to Income ratio has improved by over 4% annualised % 607 58 4 56 4 Jo ° 4.6% annualised productivity 54 m improvement 50 4 §4.2 54.0 “o é 52.2 2° 504 518 50.7 487 2 June 2006 46 7 Target-Under 44 T T ‘ ‘ T T T T T 1 Dec- Jun- Dec- Jun- Dec- 01 02 02 03 03 Which Bank Comnonwea
Slide 17: Funds Management
Funds Management » Since June 2003, underlying profit rebound of 17% to December 2002 levels » Income to average FUM steady at 119 basis points « 9.0% annualised productivity improvement since June 2003 » FirstChoice continues to grow rapidly Witch Sank Commorwealthiiark <p The funds management busi
Slide 18: Underlying profit rebounds to December 2002 levels
Underlying profit rebounds to December 2002 levels $m $m 200 7 Net Incremental 200 4 After Tax Profit: 17% Operating Which new underlying growth income Bank in six months g (49) A 150 4 a] s| 160 4 425 425 126 = 196 BN oe, 6326, Eo 147 108 (1) } 1 400 4 100 Operating S'holder Expense Tax Invest 2 8)
Slide 19: Since June, FUM has grown by 7% and productivity improved
Since June, FUM has grown by 7% and productivity has improved by 9% annualised % 9.0% annualised productivity improvement $bn Underlying Expenses/Average FUM (%) (ugg) wns eBeieny Dec-02 Jun-03 Dec-03 3 Average FUM - Underlying Expenses/Average FUM Since June, FUM has grown by 7% and productivity ha
Slide 20: Insurance
Insurance Fourfold increase in underlying net profit after tax to $67m Strong improvement in shareholder investment returns 9.2% annualised productivity improvement since June 2003 Continued growth in anriual premiums Positive experierice profit for two consecutive halves Whieh Bank 20 The main poin
Slide 21: Insurance result reflects improved operating margins and investment returns
Insurance result reflects improved operating margins and strong investment returns $m 1809 89 (3) 153 160 7 oo >400% increase from underlying business 146-4 A. 120 4 100 4 4 8 87 80 35 7 - Ea 60 [ 1~ 40 1t | | ow ad 204 8 Ea 6 Underlying Asia Australia NZ Underlying S'holder = Which new Cash Profit
Slide 22: Since June, productivity has improved by 9.2% annualised
Since June, productivity has improved by 9.2% annualised % 9.2% lised ductivity i it $m 60 7 Pr .27 annualised productivity improvemen' r 4200 g 477 > = 50 ee 2 Ee ee ee a [tt & ge 405 | FYO6 2 5 2 Target g Be 307 Under + 4900 2 25 42 8 Ba 3 58 204 3 Og p90 10 4 = Of T T T T T T T 800 Dec-62 Jun-03
Slide 23: Capital Management strategy
Capital Management strategy Creating capital flexibility Executed initiatives Tier 1 Hybrid US$550m (A$832m) PERLS | $750m Proposed initiatives Off-market share buy-back $450m - $550m Share Purchase Pian and Share Sale Facility (executed following the share buy-back) Let me make some brief comments
Slide 24: Which bank
Which bank Whieh Bank Conmonwealthins y You are no doubt interested in how Which new Bank is progressing. 24 24
Slide 25: Service transformation
Service transformation To excel in customer service’ Through « Service/Sates (4) « Performance Culture (1) « Support (1) Effectiveness : Process/product (3) « IT Enablers (2) « IT Efficiency (2) « Distribution Efficiency (3} « Purchasing (2) « Product (2) (} = Number of workstreams Which Bank Comnom
Slide 26: Expected financial impact and outcomes of the program
In September 2003, we set out the expected financial impact and outcomes of the program Subject to current market conditions continuing Over the next three years we will: Over the next three years this will result in: Cash EPS growth exceeding 10% CAGR Redirect the normal project spend of $600m 4-6%
Slide 27: Which new Bank Expenditure to Date
Which new Bank Expenditure to Date Actual half yearto |Full Year Estimated 34/12/03 Financial Impact” $m $m Incremental Which new Bank expense after tax: Investment Spend for the period (grass) 179 866 ~ Investment Capitalised {45} (186) + Provision for Future Costs 200 210 + Expensing of previously
Slide 28: Investment spend is in line with expectations
Investment spend is in line with expectations Themes 1H04 Actual| 2HO4Estimate| FY04 Estimate ($m) ($m) ($m) Customers 60 210 270 Processes 100 180 280 People 5 5 10 165 395 560 Branch Refurbishment 14 86 100 Total 179 431 660 Which Bank Comnomweatth zi: At December 2003, 20 branches had been refurb
Slide 29: Benefits are emerging
Benefits are emerging Themes 1H04 Actual] 2H04 Estimate} FY04 Estimate ($m) ($m) ($m) Customers 58 87 145 Processes 5 50 55 People - - Total 63 137 200 Early benefits are emerging as set out on this slide. From the work we have underway we expect to achieve the committed benefits of Which new Bank,
Slide 30: Service and Sales management
Service and Sales management « Transforming the way we serve customers x Realising full potential of customer serving staff « Improving service & sales skills and effectiveness « Applicable to everyone Whink Banik Commanwealthfsr: ? 30 The Service and Sales processes have already demonstrated succes
Slide 31: Service and Sales - early results
Service and Sales - early results Product sales per FTE « Benchmark: 100 Week 1 Week2 Week3 Week 4 WeekS Week6 Week 7 Week 8 Benchmark: 100 Week 1 Week 2 Week 3. Week 4 Week 5 Week 6 Week 7 Week 8 Whick Bank 7" Natinal bonchenark Commoanwealttisri: MM 120 branches in Southern Metro NSW are already a
Slide 32: CommSee - Service Excellence Everyday
CommSee - Service Excellence Everyday Bank-wide customer management system Provides single view of customer Starting in Tasmania Improving service for 250,000 customers CommSee is our in-house developed system that provides a single view of customer data and their interactions with the Bank. It is c
Slide 33: Conditional home loan approvals on the spot
Conditional home loan approvals on the spot Home loans - on the spot decisioning Applications % 30 Oct-03 Nov-03 Bec-03 Time Which Bank Comnomweatth zi: a 4 33 The increasing ability to provide on the spot conditional approval gives customers certainty. There has been a significant improvement in on
Slide 34: Performance culture
Performance culture Cultural diagnostic completed Program implementation next half Leading from the front Staff involvement In the last four months we have completed all the diagnostic work necessary to implement our performance culture program. This will enable us to improve our: * performance mana
Slide 35: Which new Bank summary
Which new Bank summary Early days, but confident we are on right track Evidence of earnings and productivity impact emerging Bank’s leadership is fully committed to successful implementation Early adoption of cultural change by staff Next progress update mid-year Which Bank Comnomweaitiniiric ( y As
Slide 36: Outlook
Outlook Whiels Bante Conmenwra ality lari 36 36
Slide 37: Outlook - Economy
Outlook - Economy » Global « Continued strong growth short term « Medium-term structural issues remain » Domestic = Influence factors to remain positive on balance for 1HO4 » Subsequent period open to number of potential influences » Credit growth expected to slow down due to home loan contraction W
Slide 38: Outlook - Bank
Outlook - Bank Earnings « Economic momentum to support solid growth for full year » Growth in cash EPS exceeding 10% CAGR over three years till 30 June 2006 Productivity « Productivity improvement of 4-6% CAGR over a three years till 30 June 2006 Dividend « Which new Bank initiative expenses added b
Slide 39: Summary
Summary Good result: underlying profit growth of 17% Another record dividend Productivity improvements in all businesses Capital strengthening, buy-back, share purchase plan in place Which new Bank underway and meeting expectations Full year outlook positive Confidence in longer term growth objectiv
Slide 40: Roadshow Presentation
Commonwealth Bank of Australia — Non-Deal Roadshow (March 2004) on 6ix