Commonwealth Bank of Australia · ASX:CBA
Commonwealth Bank of Australia — H1 2003 Earnings Presentation
53 slides from Commonwealth Bank of Australia's earnings presentation, Feb 12, 2003
Slide 1: Presentation of Half Year Results
Presentation of Half Year Results David Murray Stuart Grimshaw 12 February 2003 www.commbank.com.au
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 February 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
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.” Half Year Results 12 February 2003 3
Slide 4: Overview
Overview Conmonwealth Bank V4
Slide 5: Cash profit in line with AGM statement
Cash profit in line with AGM statement Dec 2002 Dec 2001 % Change Statutory Net Profit After Tax $622m $1,204m (48%) Net Profit After Tax (cash $1,208m $1,192m 1% basis)* * ie excluding appraisal value uplift/reduction and goodwill amortisation. Unless otherwise stated the numbers in this presentati
Slide 6: Dividend payout ratio remains high relative to peers
Dividend payout ratio remains high relative to peers Dec 2002 Dec 2001 Change Dividends per Share 69cps 68cps 1c 72.6% Dividend Payout Ratio 72.7% - …and EPS has improved 94cps 95cps 12.43% 1c Earnings per Share 54.2% (4bps) Return on Equity 12.39% 6.75% (3%) Banking Cost to Income Ratio* 52.6% 31bp
Slide 7: Sound growth in Banking Cash Profit
Sound growth in Banking Cash Profit 31 Dec 02 Vs 31 Dec 01 31 Dec 02 30 Jun 02 31 Dec 01 % Banking $1,079m $1,092m $975m 11% Funds Management $135m $186m $182m (26%) Life Insurance ($6m) $31m $35m (117%) $1,208m Half Year Results 12 February 2003 7
Slide 8: Banking performance offset by weaker wealth management
Banking performance offset by weaker wealth management... $m 1500 Underlying Growth +9.7% 1400 Banking First Time 162 Expenses* 1,308 (58) 1300 Life Insurance 1,208 1,192 1200 (1) Investment Funds Returns 1100 Management (42) (45) 1000 900 Cash Profit Dec-01 Banking Managed Life Underlying Underlyin
Slide 9: Contribution to EPS Growth
Contribution to EPS Growth Underlying Growth up 8 cents 7 cent decrease from first-time costs and investment returns 110 102 100 95 94 Life Cents per Share Insurance( First-time 90 Banking 1) costs 13 (4) 80 Funds Investment Management returns 70 (4) (3) 60 Dec-01 EP S cas h Banking Funds Management
Slide 10: Dividend continues to grow
Dividend continues to grow 150 82 • Interim Dividend of 69 cps 75 125 to be paid 28 March 2003, 72 up 1% on pcp. 66 100 58 57 52 Cents 75 46 68 69 • Payout ratio of 72.7% 36 58 61 50 remains highest among 45 46 49 22 major banks 25 36 38 24 20 0 1993 1995 1997 1999 2001 2003 First Half Second Half H
Slide 11: Segment Results: Banking
Segment Results: Banking Conmonwealth Bank V4
Slide 12: Banking result reflects the strong home loan market
Banking result reflects the strong home loan market $m 1,300 16.6% increase from underlying business 1,200 Interest Expenses 1,137 Income (11) 1,100 105 (100) 1,079 139 Taxation One off 28 BDD 1 expense 1,000 975 Other Bank Income Outside (58) Equity 900 Interest 800 Cash Interest Other Expenses BDD
Slide 13: Banking income driven by retail operations
Banking income driven by retail operations $m 3,900 Net 3,800 Interest Trading Income Income 3,760 105 (25) Other 3,700 Lending ($64) Fees 3,627 21 Commission & 3,600 Other Fees 96 3,500 Dec-01 Dec-02 Half Year Results 12 February 2003 13
Slide 14: Underlying Banking Cost to Income improving
Underlying Banking Cost to Income improving % ...resulting from strategic initiatives 60 58 58.1 57.4 56 54.2 54.0 54 52 52.6 50 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Half Year Results 12 February 2003 14
Slide 15: 9% growth in lending assets
9% growth in lending assets 200 169 155 161 13 150 12 12 54 $ billion 55 55 100 9 8 8 50 86 94 80 0 Dec 2001 Jun 2002 Dec 2002 Lending Assets**: Housing Personal Business & Corporate Bank Acceptances ** Excludes securitised housing loan balances $5.9b (Dec 02), $7.0b (Jun 02), $5.7b (Dec 01). Half Y
Slide 16: Continuing sound asset quality
Continuing sound asset quality Dec 2001 Jun 2002 Dec 2002 Charge for Bad & Doubtful $290m $159m $151m Debts (6 months) Charge for Bad & Doubtful 0.42% 0.23% 0.21% Debts to RWA (annualised) Gross Impaired Assets (net $983m $884m $863m of interest reserved) Specific Provisions $309m $270m $264m Genera
Slide 17: The Bank remains well provisioned
The Bank remains well provisioned 2,100 300 1,800 250 1,500 200 $millions 1,200 150 % 900 100 600 300 50 0 0 Dec Dec Dec Dec Dec Dec Dec Dec Dec 94 95 96 97 98 99 00* 01 02 General Provision Specific Provision Total Provisions/Gross Impaired Assets (axis on right) * Includes Colonial Half Year Resul
Slide 18: 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 90 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 19: The Bank has a high quality commercial portfolio
The Bank has a high quality commercial portfolio 100% 80% 36 39 40 60% 15 15 14 40% 60% 20 19 17 investment grade 20% 29 27 29 0% Dec 01 Jun 02 Dec 02 AAA/AA* A BBB Other *CBA Equivalent Ratings Half Year Results 12 February 2003 19
Slide 20: Large exposures are mostly investment grade
Large exposures are mostly investment grade Top 20 Exposures to Top 20 exposures as a % of Total Corporates (Committed) Committed Exposure A+ A+ A+ 4.0% BBB- BBB BBB 3.5% BBB- S&P Rating or Equivalent A- A- 3.0% A- A+ A+ 2.5% A- A- A- AA- 2.0% A- A- BBB 1.5% AAA AAA BBB 1.0% A A BBB A+ A+ 0.5% A+ BB
Slide 21: Segment Results: Funds Management
Segment Results: Funds Management
Slide 22: Fund flows impacted by a weak equity market
Fund flows impacted by a weak equity market Equity Markets Total Net Retail Fund Flows (for quarter ended) Index (Base 100) $m 105 7000 6000 -6.3% -80% 5000 95 4000 3000 85 2000 1000 -11.7% 75 0 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jun-02 Sep-02 Dec-02* MSCI World All Ordinaries Jun-02 Sep-02 D
Slide 23: A number of one offs impacted funds under management
A number of one offs impacted funds under management Underlying reduction of $8bn 108 106 (2) 106 One off reduction (5) of net $3bn 104 102 100 2 (4) (1) $bn 98 98 96 (1) 95 94 92 90 Dec-01 Net Flows Investment Other Underlying Gandel W interthur CFS UK Dec-02 FUM returns Private FUM Business Half Y
Slide 24: Lower Funds Management profit
Lower Funds Management profit $m 230 24% decrease from underlying business 182 (14)^ 170 (27) (3) (3) 138 135 110 50 Cash Profit Operating Operating OEI Underlying S'holder Cash Profit Dec 2001 Income Expense Profit Dec Invest Dec 2002 2002 Returns ^ Excluding policyholder tax and Shareholder invest
Slide 25: FirstChoice has been further enhanced... and other initiatives are underway
FirstChoice has been further enhanced... and other initiatives are underway FirstChoice Other Initiatives $m 1800 • Integration of CIM and CFS 1500 • Identifying systems and 1200 process improvements 900 associated with legacy 600 systems 300 0 2 02 02 02 02 2 02 2 l-0 -0 -0 v- n- g- p- c- ay ct Ju
Slide 26: Segment Results: Life Insurance
Segment Results: Life Insurance
Slide 27: Steady operating margins offset by poor investment returns
Steady operating margins offset by poor investment returns $m 90 3% decrease from underlying business 70 6 (31) 24 50 35 34 (40) 30 (6) 10 -10 Cash Profit Asia NZ Australia Underlying S'holder Cash Profit Dec-01 Dec 02 Invest Dec -02 Returns * Net Profit after tax and outside equity interest - cash
Slide 28: Recent improvements in Asian operating margins
Recent improvements in Asian operating margins Underlying Asia Life Performance 15 10 5 0 -5 $m -10 -15 -20 -25 -30 -35 Dec-01 Jun-02 Dec-02 Life operating margins China / Vietnam / PRT start up One-offs/Investment Returns/Other Profit after tax Half Year Results 12 February 2003 28
Slide 29: Weaker investment earnings
Weaker investment earnings 31 Dec 02 31 Dec 01 Change Funds Management 4 6 (2) Life Insurance - Australia (7) 7 (14) - New Zealand 1 3 (2) - Asia (6)* 18 (24) (12) 28 (40) Net Profit After Tax (8) 34 (42) * includes loss on sale of Philippines life company $10 million after tax. Half Year Results 12
Slide 30: Appraisal Value
Appraisal Value Conmonwealth Bank V4
Slide 31: Appraisal Value
Appraisal Value $m Increase in appraisal value since acquisition of 24% 9,000 625 (48) (222) 8,500 8,358 818 8,000 7,500 449 7,000 6,736 6,500 6,000 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 31 Dec 2000 2000 2001 2001 2002 2002 2002 Half Year Results 12 February 2003 31
Slide 32: Appraisal Value - Movement Analysis
Appraisal Value - Movement Analysis Net appraisal value reduction of $222m $m 9000 8,580 8,358 Profit 8000 Reduction 129 in Value (426) 7000 Other Capital 6000 Movements 75 5000 Directors’ Directors’ Valuation Valuation June 2002 December 2002 Half Year Results 12 February 2003 32
Slide 33: The carrying value is $780m less than the independent valuation
The carrying value is $780m less than the independent valuation $m 9500 9,328 9,138 748 Reduction Independent of $222m 780 valuation 8500 Directors’ carrying value 7500 8,580 8,358 6500 Jun 2002 Dec 2002 Half Year Results 12 February 2003 33
Slide 34: Cost Management
Cost Management Conmonwealth Bank V4
Slide 35: 1% increase in operating costs excluding first time expenses
1% increase in operating costs excluding first time expenses 2800 Increase of $33m or 1% $83m of first time costs 2,710 2700 2,627 2,594 ESAP 2600 27 Strategic Underlying Initiatives 2500 Costs 56 33 $m 2400 2300 2200 2100 2000 Underlying Underlying 31 Dec 2002 31 Dec 2001 31 Dec 2002 Half Year Resu
Slide 36: Strategic Initiatives being implemented
Strategic Initiatives being implemented Costs Benefits Net Cost Annualised Future Benefits $m $m $m $m Half Year to 31 December 2002 56 26 30 52 Full Year to 30 June 2003 227 84 143 159 Half Year Results 12 February 2003 36
Slide 37: Funding and Capital
Funding and Capital Conmonwealth Bank V4
Slide 38: Continued strength in retail deposits
Continued strength in retail deposits % 70 65% 62% 60 50 40 Jun 2002 Dec 2002 CBA Retail Deposit Ratio* * Calculated as: Total Deposits - CD’s / Total Liabilities - Foreign Currency Assets Half Year Results 12 February 2003 38
Slide 39: Capital ratios are strong
Capital ratios are strong 11.00% 9.80% 9.81% 10.00% 9.31% 9.00% 8.00% 7.00% 6.00% 6.75% 6.78% 7.06% 5.00% 4.00% Dec 2001 Jun 2002 Dec 2002 Tier 1 Capital Tier 2 Capital Half Year Results 12 February 2003 39
Slide 40: Tier 1 increased from 6.78% to 7.06%
Tier 1 increased from 6.78% to 7.06% 7.80% 0.84 (0.61) 7.60% 7.40% 0.05 (0.04) (0.13) 0.13 7.20% 0.04 7.06 7.00% 6.78 6.80% 6.60% 6.40% 6.20% 6.00% Tier 1 Cash Dividend Currency ASB Other Life & FM Increase Tier 1 earnings Prefs in RWA Half Year Results 12 February 2003 40
Slide 41: Capital Management Initiatives
Capital Management Initiatives Hybrid Capital Issue & Share Buyback: Regulatory approvals in place Uncertain market conditions Deferral of hybrid issue & associated share buyback Half Year Results 12 February 2003 41
Slide 42: Summary
Summary Conmonwealth Bank V4
Slide 43: Summary
Summary Retail banking business strong, business and corporate subdued Difficult global investment markets, impacting wealth management businesses Expect the extensive work being undertaken this year (rationalisation, integration and development) to provide the platform for focussed growth in
Slide 44: Presentation of Half Year Results
Presentation of Half Year Results David Murray Stuart Grimshaw 12 February 2003 www.commbank.com.au
Slide 45: Supplementary Slides
Supplementary Slides Conmonwealth Bank V4
Slide 46: Credit ratios are in line with peers
Credit ratios are in line with peers B adDebtExpe n setoR W A G ene ralP rov isio ntoRWA 0.01 0.012 0 .008 0.011 0 .006 0.01 % RWA % RWA 0 .004 0.009 0 .002 0.008 0 0.007 CBA ANZ NAB WBC Half Year Results 12 February 2003 46
Slide 47: Consumer Portfolio: secured and unsecured lending
Consumer Portfolio: secured and unsecured lending Secured Lending Unsecured Lending 100 80 80 Composition of 60 Bad Debt $bn 60 Housing Portfolio $m Charge 40 40 20 20 Owner Occupied 0 Investment 0 Dec 01 Jun 02 Dec 02 Dec 01 Jun 02 Dec 02 0.10% 3.00% 0.08% Bad Debt Charge Bad Debt Charge as Annuali
Slide 48: Credit Exposure - Energy Sector
Credit Exposure - Energy Sector $m 40 00 10% 35 00 3% 30 00 643 7% 25 00 AAAtoA - 1,981 BBB+toBBB- 20 00 BB+toBB- 15 00 < B 80% 10 00 5 00 509 Australia (73% investment grade) 0 278 Asia (94% investment grade) North America (58% investment grade) $3,411m Other (97% investment grade) Half Year Result
Slide 49: Credit Exposure - Telcos Sector
Credit Exposure - Telcos Sector $m 16 00 11% 14 00 4% 12 00 410 13% 10 00 AAAtoA- 738 8 00 BBB+toB BB- BB+toBB- 6 00 < B 72% 4 00 2 00 186 Australia (72% investment grade) 175 Asia (100% investment grade) 0 North America (100% investment grade) $1,509m Other (64% investment grade) Half Year Results
Slide 50: Credit Exposure - Technology Sector
Credit Exposure - Technology Sector $m 12 00 4% 10 00 9% 8 00 AAAtoA- 798 6 00 BBB+toBB B- BB+toBB- < B 86% 4 00 6 2 00 35 275 0 Australia (68% investment grade) North America (100% investment grade) $1,114m Other (99% investment grade) Half Year Results 12 February 2003 50
Slide 51: Credit Exposure - Agriculture Sector
Credit Exposure - Agriculture Sector $m 90 00 80 00 310 70 00 254 60 00 1,540 26% AAAtoA- 50 00 5,569 BBB + toBB B- 40 00 BB+toBB- < B 74% 30 00 20 00 10 00 0 Australia (10% investment grade) $7,673m New Zealand (3% investment grade) Half Year Results 12 February 2003 51
Slide 52: Funds Under Management
Funds Under Management 100 6 6 22 5 80 21 16 $billions 60 33 32 29 $95bn 40 20 45 44 45 0 Dec 2001 Jun 2002 Dec 2002 Australian Retail Funds Australian Wholesale Funds International Funds Cash Management Trusts Average FUM Half Year Results 12 February 2003 52
Slide 53: Movement of Funds by Product Category
Movement of Funds by Product Category Opening Inflows Outflows Investment Other Closing Balance Income Movements Balance 31/12/01 & Transfers 31/12/02 $m $m $m $m $m $m Retail* 52,358 14,551 (13,824) (3,217) 2,547 52,415 Wholesale 47,611 15,659 (21,958) (2,435) (1,270) 37,607 CMTs^ 6,333 2,869 (4,20
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