Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (February 2022)
65 slides from Commonwealth Bank Of Australia's debt investor presentation, Feb 9, 2022
Slide 1: Fixed Income Investor Discussion Pack
Commonwealth f Bank Fixed Income Investor Discussion Pack For the half year ended 31 December 2021
Slide 2: Disclaimer
The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 09 February 2022. It is information given in summary form and does not purport to be complete. Information in this presentation is not intended to be rel
Slide 3: Overview & Strategy
Overview & Strategy
Slide 4: GDP fell less than expected; labour market recovered swiftly
GDP fell less than expected in Q3 211 Labour market recovered swiftly2 Including participation rate and unemployment rate3 Real GDP Employment $bn Labour market CBA (f) '000 mil % 580 % 400 10.8 Underemployment rate Participation rate 540 200 Monthly change (LHS) 10.6 12 66 0 10.4 500 9 63 -200 10.2
Slide 5: High frequency card spend data holding up
High frequency CBA card spend data holding up1 Household Spending Intentions strong in December2 CBA card spend recovering for services during late January3 Total spending - CBA Tracker (January 2020 = 100) CBA-Google HSI: Index (weighted index = 100 July 2017) CBA card spend tracker (January 2020 =
Slide 6: Inflation to rise faster than RBA expects
Inflation to rise faster than RBA expects1 Further evidence that wages growth is accelerating2 Household savings are elevated3 Inflation (annual % change) Wages (annual % change) Saving (rate & deviation from average) $bn % 5 % CBA(f) 24 70 5 4 Trimmed Mean CPI 4 WPI 3 CBA(f) 12 35 Savings ratio (LH
Slide 7: Trade surplus remains large but has peaked
Trade surplus remains large but has peaked1 Fiscal settings remain expansionary for longer2 RBA to stop asset purchases, first rate hike August 20223 Trade balance ($bn) Taxes & spending (% of GDP) Central Bank balance sheet (% GDP) % 15 Record trade surplus 80 35 70 ECB MYEFO 10 estimates 60 30 50
Slide 8: Half year results: income, expenses, impairment, NPAT
Operating Income Operating Expenses Loan Impairment Expense Cash NPAT • Continued core volume growth • Volume & investment driven growth • Improved economic outlook • Margin pressures • Lower remediation costs • Cautious provisioning +2.0% -0.1% -2bpts +23% +2.7% Ex Remediation 22bpts $m 11,961 12,1
Slide 9: Home loan fundings and transaction balances
Home Loan Fundings2 Transaction Balances3 Dec 21 vs Dec 20 Funding $bn Balances $bn 3 yrs 45% 68% 1.7x 94 317 76 286 1.4x 65 189 1.2x 1.1x 1H21 2H21 1H22 1H19 2H21 1H22 system Consumer Finance CommSec Credit Card StepPay Active Accounts (‘000) Approvals #4 New Accounts5 CBA Growth +8.5% +12.2% +12.5
Slide 10: Funding, Provisioning, Capital
Funding Provisioning Capital 73% deposit funded Improved portfolio credit quality (TIA lower) $6bn buy-back completed, CFS divestment Transaction balances +22% Improved economic outlook $2bn on-market buy-back announced Deposit funding Troublesome & Total Credit CET1 % % of total funding
Slide 11: Strong capital position and $2bn buy-back
Surplus1 • CBA’s strong capital position creates flexibility to continue to support our ($bn) 11.5 ~6 ~4 customers and manage ongoing uncertainties, while returning a portion of surplus capital to shareholders. • Capital management in 2021 included a $6 billion off-market share buy-back 13.1% (133)
Slide 12: CET1 movements
Expected uplift Expected uplift Movements in bpts (divestment) 5 (divestment & APS111) 5,6 +9bpts +26bpts 18.4% international 13.1% (133) (54) 11.8% 12.0% 32 (79) 98 11.8% 6 Regulatory prudential 8.0% Credit Risk4 (21) minimum IRRBB (27) Market Risk (6) Op Risk flat Jun 21 Off-market Divestment - 2H
Slide 13: Loan impairment expense, arrears and TIA
Loan Impairment Expense Arrears 2 TIA Loan loss rate (bpts)1 90+ days $bn bpts 1H21 2H21 1H22 Personal Loans Credit Cards Home Loans3 % of TCE: 0.70% 0.61% 0.53% Consumer 14 -6 0 Corporate 44 -13 -7 1.51% 8.2 Total 22 -8 -2 1.48% 7.5 6.8 1.38% 1.23% Gross impaired 3.1 1.09% 3.4 0.97% 3.5 0.80% 0.66%
Slide 14: Our purpose and priorities
Our purpose Building a brighter future for all Our priorities Leadership in Australia’s Reimagined products Global best digital Simpler, better recovery and transition and services experiences and technology foundations Build Australia’s leading Anticipate changing Deliver the best integrated Delive
Slide 15: Supporting our customers and communities
Supporting our customers and communities1 • 7m visits to COVID support page (1.8m personalised reminders) • 6 vaccination hubs across Australia • 250k loan repayment deferrals concluded • 1.8m claims initiated in Benefits Finder (15k Business) • $186bn in new home lending2 • 1.8m customers contacted
Slide 16: Reimagining products and services
CommSec CommSec Pocket * Trading Crypto Simple investing AdvancePay Conveyancing Income smoothing Property management StepPay and Neo Expense smoothing Broadband Invest Benefits Finder Entitlements * Digital mortgages Bill Sense Home Everyday Bill management Rent to own Reimagining products Deals Gr
Slide 17: Leading customer experience and mobile banking
Leading customer experience Strong customer engagement Mobile banking leader Mobile app CommBank app users1 Digital transactions #1 Net Promoter Score5 % of total - by value2 71.5% 6.6m Online banking #1 (Canstar - 12 years in a row)6 5.9 63.9 4.7 55.8 Mobile banking Dec 17 Dec 19 Dec 21 Dec 17 Dec
Slide 18: Simpler, Better: divestments and remediation
Divestments Simpler Financial Wisdom and PT Expected completion of Commonwealth Life CommInsure Life General Insurance TymeDigital Count Financial CFP BoCommLife Commonwealth Financial Planning (CFP) Pathways Aussie Home Loans Sovereign CFSGAM Colonial First State and AUSIEX 2018 2019 2020 2021 2022
Slide 19: Market share and peer comparison
MFI share1 (%) Home Lending share2 (%) Household Deposits share3 (%) Business Banking share Change in 1H22 (bpts) Deposit Funding Peers as at Sep 21 20 15 73% 71% 68% 65% Lending share (%)2 Deposits share (%)3 -37 -61 34.4% CBA Peer 2 Peer 3 Peer 1 CBA Peer 3 Peer 1 Peer 2 25.5% 21.8% 22.1% 21.1% 27
Slide 20: Funding, Liquidity and Capital
Funding, Liquidity and Capital
Slide 21: Funding composition, liquidity and wholesale funding
Funding composition Wholesale funding Funding profile Deposit growth supporting 73% of funding Weighted to long term TFF refinance to be managed across FY23-FY25 period % of total funding Long term % 1H22 Maturity5 8% 8% 9% issuance Short term 26% 74% 67% wholesale1 17% 19% 18% 66 62 Long term 19% 4
Slide 22: Deposit funding and deposits vs peers
Deposit funding Deposits vs peers1 Deposits in NSFR2 $bn As at December 2021 ($bn) 644 Peers as at September 20213 75% Other 509 73% 73% 304 431 deposits 352 255 267 300 CBA Household 198 340 Peer 3 deposits 254 164 154 250 Peer 1 Dec 20 Jun 21 Dec 21 CBA Peer 3 Peer 2 Peer 1 Peer 2 200 Group transa
Slide 23: Short and long term funding portfolio mix
Portfolio mix Short term funding by product $bn Certificates of Deposits 56% Long term funding1 127 48% Commercial Paper 26% Short term funding2 33% FI Deposits 15% 87 MTN 2% Term Funding Facility 51 19% Other 1% Long term funding by currency Long term funding by product TFF 29% Dec 21 3 Senior Bond
Slide 24: T2 capital profile
• Based on the Dec 2021 RWA, CBA requires an additional $4.7bn and $11.8bn of @ 5% by @ 6.5% by LAC qualifying issuance (excluding maturities) by 1 Jan 2024 and 1 Jan 2026 $bn 1 Jan 2024 1 Jan 2026 respectively. Risk Weighted Assets at Dec 2021 471.9 471.9 • The amount of required LAC qualifying iss
Slide 25: Revised APRA capital framework
10.50% Revised APRA Minimum (incl. of Capital Buffers) 10.25% • Revisions to capital framework finalised in November 2021. Countercyclical Capital Buffer 1.00% Unquestionably (CCyB) Strong Buffer Domestic Systematically Important • Implementation on 1 January 2023. 1.00% Banks (D-SIBs) Current APRA
Slide 26: Financials
Financials
Slide 27: Financial, balance sheet, capital and funding summary
Financial Balance sheet, capital & funding Statutory NPAT2 ($m) 4,741 +26.1% Capital – CET13,6 (Int’l) 18.4% (30bpts) Cash NPAT2 ($m) 4,746 +22.7% Capital – CET13 (APRA) 11.8% (80bpts) ROE2 % (cash) 12.3 +180bpts Total assets ($bn) 1,150 +8.6% 2 EPS cents (cash) 273 +54c Total liabilities ($bn) 1,07
Slide 28: Operating income
• Improved volume related lending and deposit fees • Non-recurrence of aircraft impairments in 1H21 & higher profits from minority investments • Partly offset by lower Global Market & equities trading and merchant income +2.0% • Core volume growth • Margin decline 169 (73) 12,205 148 11,961 • Lower
Slide 29: Net interest margin: half on half
This Half -9bpts 209 (2) 3 -17bpts (4) (3) (3) 200 Swap rates (8) 192 increased faster Customer than fixed rate switching to Replicating portfolio (1) repricing in 1H22 lower margin Equity hedge (1) +$38bn increase in liquid fixed rate loans Other (1) assets with minimal impact on NII. Key drivers:
Slide 30: Net interest margin: 1H19 to 1H22
-15bpts NIM compression on low-rate deposits (net of hedging) from 140bpts in cash rate cuts Deposits mix +7 -9bpts Lower consumer finance balances (2) 214 Lower credit card revolve rate (2) -22bpts (19) AASB 16 (1) 205 (13) 4 (8) (2) 26 192 (12) Impact of falling +$61bn increase swap rates in liqui
Slide 31: Operating expenses and cumulative cost savings
+2.7% ex remediation Contribution to Mvt3: -2.8% +0.5% +1.4% +0.8% -0.1% 137 (92) (149) 24 77 5,591 5,588 • Support for increased lending processing & Cumulative cost savings financial crime assessment volumes realised: • Additional frontline resources • 1H22 $507m • Higher IT processing & storage v
Slide 32: Cost reduction and investment spend
Cost Reduction Investment Spend1,2 $m $m Cumulative savings Cost approach Shift to Productivity & Growth • Simpler, more efficient business for our customers and 953 945 953 945 people 856 856 507 • Continue to invest in the Productivity & 35% 39% 454 business 27% Growth 415 537 513 Expensed • Stren
Slide 33: Group lending, assets and deposits
Dec 21 vs Dec 21 vs Group Lending $bn Dec 20 Jun 21 Dec 21 Jun 21 Dec 20 +7.1% Home loans 559.3 579.8 605.9 4.5% 8.3% Consumer finance 17.4 17.0 16.7 (1.8%) (4.0%) +3.9% 1 Business loans 128.0 135.2 141.5 4.7% 10.5% 849 816 Institutional loans 87.4 84.4 84.5 0.1% (3.3%) 792 Total Group Lending 792.1
Slide 34: Loan loss rate
Loan Loss Rate1 Loan Loss Rate by business unit1 bpts bpts 22 73 44 -6 Consumer Corporate 14 -8 -13 41 1H21 2H21 142 33 38 25 31 76 21 20 19 50 16 16 15 16 22 43 24 15 7 14 23 20 13 11 8 10 14 0 4 6 29 26 26 16 0 -3 -2 17 19 17 18 18 18 18 18 17 4 FY092 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 F
Slide 35: Total provisions and central scenario
Total Provisions ($m) Provisions vs Central Economic Scenario ($m) Provision Coverage1 1.81% 1.63% 1.50% Total Provisions Central Scenario ECL2,3 Dec 21 6,815 vs Jun 21 Individually 6,211 6,815 Assessed 872 5,854 -6% 6,211 900 5,854 792 -12% 5,022 4,119 3,771 Collective provisions 5,943 5,311 5,062
Slide 36: CET1, dividends and international CET1 comparison
CET1 CET1 CET1 Impact of $6bn off-market 511% Dividend per Share share buyback APRA International (cents) Level 2 Level 1 Level 2 Payout Ratio (cash NPAT basis) Payout Ratio (Normalised cash NPAT basis) Assets 12.8% 18.7% 200 12.6% 18.4% 161% 199 200 200 175 150 12.0% 11.8% 70% 74% 79% 70% 72% 67% 6
Slide 37: Internationally comparable CET1
CET1 APRA 11.8% Internationally comparable1 CET1 Balances below prescribed threshold risk weighted, bpts Equity investments compared to 100% CET1 deduction under APRA 0.8% Balances are risk weighted, compared to a 100% CET1 Capitalised expenses deduction under APRA 0.1% Balances below prescribed thr
Slide 38: Capital framework change implementation details
Change Implementation Details • Higher regulatory capital buffers, with the CCyB default level set at 100 basis points for all ADIs and the CCB increasing by an additional 125 basis points for IRB ADIs such as CBA; • Implementing more risk sensitive risk weights, particularly for residential mortgag
Slide 39: Sustainable Outcomes
Sustainable Outcomes
Slide 40: Supporting customers, community, people and good practices
Supporting our Supporting our Good business Engaging our people customers community practices • Continued to supported small and • Partnered with industry and • Refreshed our purpose ‘Building a • Final Remedial Action Plan report medium businesses with ~$2.8bn in community organisations to launch b
Slide 41: Climate: emissions, portfolio alignment and transition
Reduce our operational Align our portfolio to Help our customers Manage our exposures Contribute to national emissions Paris Agreement transition to climate risk capability • As part of our ongoing • Lifted temperature • Announced new • Engaged 82 corporate • CBA and CSIRO commitment to carbon ambit
Slide 42: Asset Quality
Asset Quality
Slide 43: Group TCE by sector
Provisions to total Group TCE ($bn) TIA ($bn) TIA % of TCE committed exposure % Jun 21 Dec 21 Jun 21 Dec 21 Jun 21 Dec 21 Jun 21 Dec 21 Consumer 710.5 737.3 2.0 2.1 0.3% 0.3% 0.4% 0.4% Government Administration & Defence 189.2 205.9 0.0 0.0 0.0% 0.0% 0.0% 0.0% Finance & Insurance 79.7 87.1 0.0 0.0 0
Slide 44: Commercial property exposure profile
• Exposure diversified across sectors and by counterparty, with the top Group exposure Dec 20 20 counterparties representing 15% of the portfolio and having a Jun 21 weighted average rating of BBB equivalent. 77.5 80.0 84.4 Dec 21 • Stable credit quality with investment grade concentration steady an
Slide 45: Airlines and aircraft lessors exposure
Airlines & Aircraft Lessors 1 Group exposure Dec 20 • Exposure reduced by ~$700m over the last year largely due to active Jun 21 portfolio management and amortisation. 26.8 26.5 58 58 55 Dec 21 • Over 70% of our airline portfolio exposure is to strong counterparties; 25.6 state-owned, flag carriers,
Slide 46: Entertainment, leisure and tourism exposure
Group exposure Dec 20 • Diverse industry with many sub-sectors impacted by government Jun 21 restrictions, including border closures, shutdowns and social distancing 14.0 Dec 21 12.9 13.0 12 initiatives. 9 • International border controls remain, having a direct impact on inbound 7 8.3 7.1 5.0 touris
Slide 47: Retail trade exposure
Group exposure Dec 20 • Despite a further period of lockdowns in NSW and Vic through to Jun 21 November 2021, the sector has remained resilient due to a 13.4 30 28 Dec 21 strong housing market and redirection of discretionary spend 11.9 12.4 22 away from travel towards homewares and personal service
Slide 48: Construction exposure
• Designated an essential industry up until the NSW lockdown in July, Group exposure Dec 20 the sector was able to operate through COVID-19 with some level of Jun 21 disruption and productivity loss due to lockdowns and social 13 Dec 21 10.8 12 12 9.9 10.3 distancing while also benefitting from JobK
Slide 49: Energy exposure
Group exposure Dec 20 • Exposures of $7.7bn (0.6% of Group TCE), reduced by $1.0bn over Jun 21 the past 6 months mainly from reduced Oil & Gas facilities. Dec 21 69 68 67 9.1 8.7 7.7 • Stable performance over the past 6 months: • Investment grade stable at 67% of portfolio; 0.8 0.7 0.6 1.4 0.8 1.4 1
Slide 50: Credit cards and personal loans arrears
Credit Cards1 Personal Loans1 Group 90+ days Group 90+ days 0.66% 0.61% 0.49% 1.48% 1.09% 0.97% 9,615 9,237 9,267 5,284 5,091 4,782 $m $m 64 56 45 78 55 46 Arrears Portfolio Dec 20 Arrears Portfolio Jun 21 Arrears Dec 21 Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio Balance Balance
Slide 51: Credit cards and personal loans by brand
Credit Cards 1 Personal Loans 1 ASB 6.0% Group 30+ days 6.0% Group 30+ days CBA Group 4.0% 4.0% Bankwest 2.0% 2.0% 0.0% 0.0% Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 Credit Cards 1 Personal Loans1 Group 90+ days Group 90+ days 1.5% 2.0% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0%
Slide 52: Home Lending
Home Lending
Slide 53: Housing prices, new lending and fixed rate preference
Pace of monthly price gains are moderating1 New lending remains elevated2 Strong preference for fixed rate lending3 Dwelling prices (8 capital cities) CBA: Fixed rate lending (% of total) % Housing loan approvals (excluding refinancing) 60 % % $bn Owner- 20 occupier 50 6 20 Investor Owner-occupier 1
Slide 54: Home loan portfolio and new business metrics
Portfolio1 Dec 20 Jun 21 Dec 21 New Business1 Dec 20 Jun 21 Dec 21 Total Balances - Spot ($bn) 498 516 539 Total Funding ($bn) 65 76 94 Total Balances - Average ($bn) 492 507 528 Average Funding Size ($’000) 7 344 374 382 8 Total Accounts (m) 1.9 2.0 2.0 Serviceability Buffer (%) 2.5 2.5 3.0 Variabl
Slide 55: Market share gains and fundings mix
Consistent market share gains1 Net growth driven by new fundings2 New fundings up 45%3 $bn 94 $bn 24.6% 25.5% +45% 23.0% 21.6% Internal Refinance 11 (11) (20) 94 (40) 76 20.7% 21.1% 83 65 539 49 45 49 43 53 53 14.9% 516 13.9% 14.6% 12.9% Dec 17 Dec 21 Jun 21 New Fundings Internal Repayments Property
Slide 56: Mortgage portfolio by origination and loan assessment
~80% of the book originated under tightened standards since FY16 New Loan Assessment • All income used in application to assess serviceability is verified • 80% or lower cap on less stable income sources (e.g. rent, bonus, overtime) Mortgage portfolio by year of origination • Applicants reliant on l
Slide 57: Borrowing capacity reducing
Borrowing capacity reducing Driven by increase in serviceability assessment buffer rate to 3% (Loans assessed based on the higher of the customer rate3 + buffer, or minimum floor rate) 140% Change in maximum borrowing capacity2 - Indexed Dec 16 7.62 7.30 7.55 7.05 7.05 7.05 120% 7.25% 2.25 2.50 2.50
Slide 58: Repayment buffers
Repayment buffers Those with less than 1 month buffer include investors and (Payments in advance 2, % of accounts) new borrowers 37% 36% <1 month 35% 34% 35% 35% Dec 20 Jun 21 Dec 21 9% 8% 10% 7% 7% 6% Residual 6% 8% 9% Structural: e.g. fixed rate loans 11% 11% 11% 13% 13% New Accounts: <1 year on b
Slide 59: Negative equity and dynamic LVR bands
Negative Equity2 Dynamic LVR Bands3 Proportion of balances in negative equity % of total Portfolio Accounts Dec 20 Jun 21 • 44% of negative equity is from WA. 64% of customers ahead of repayments. 80% Dec 21 • 51% of home loans in negative equity have Lenders Mortgage Insurance. 60% 40% 2.5% Negativ
Slide 60: Home loan arrears by portfolio and product
Arrears by portfolio Arrears by product Arrears by repayment type Group 90+ days Group 90+ days1 Group 90+ days1 1.0% 1.0% 0.8% Bankwest 0.8% 0.8% 0.6% CBA 0.6% 0.6% Group 0.4% 0.4% 0.4% ASB 0.2% 0.2% Owner Occupied Interest Only 0.2% Investment Loans Principal & Interest 0.0% 0.0% 0.0% Dec 19 Jun 2
Slide 61: Impaired home loans
Impaired home loans Overview 1.90 1.75 • Relatively stable Australian Home Loan impairments (HoH +$29m), offset by 1.45 0.66 0.54 increase in ASB impairments reflecting a conservative treatment of ASB ASB 0.22 restructured home loans (COVID-19). CBA 1.23 1.21 1.24 $bn Process for identification of i
Slide 62: Losses to average gross loans and insurance profile
Losses to average gross loans 2 Portfolio Insurance Profile4 % of Home Loan portfolio 2.5% Current Historical Avg.3 Group Total Loans 0.08% 0.30% 2% 20% CBA Home Loans 0.01% 0.02% Excess of loss Insurance with Genworth 2.0% re-insurance or QBE for higher risk loans above 80% LVR 1.5% 4% Low deposit
Slide 63: Sources, glossary & notes
Sources, glossary & notes
Slide 64: Source notes
Slide 9 1. Home lending source: RBA Lending and Credit Aggregates. Household deposits source: APRA Monthly Authorised Deposit-taking Institution Statistics (MADIS). CBA Business Lending multiple estimate is based on Business Banking growth rate (excluding Institutional Banking and Markets) over publ
Slide 65: Glossary: cash profit, capital and other metrics
Cash Profit, Capital & Other Customer Metrics Funding & Risk Cash Profit The Profit Announcement (PA) discloses the net profit after tax on both Net For the major banks, NPS is reported for main brand only. Liquidity The LCR is the first quantitative liquidity measure that is part a statutory and ca
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