Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (August 2015)
69 slides from Commonwealth Bank Of Australia's debt investor presentation, Aug 12, 2015
Slide 1: Debt Investor Update - Results Presentation FY June 2015
DEBT INVESTOR UPDATE - RESULTS PRESENTATION FOR THE FULL YEAR ENDED 30 JUNE 2015 Results Presentation For the half year ended 31 December 2009 10 February Commonwealth Bank of Australia ACN 123 123 124 2010 COMMONWEALTH BANK OF AUSTRALIA | ACN 123 123 124 | 12 AUGUST 2015
Slide 2: Notes: Disclaimer and Cash Profit
Notes Disclaimer The material that follows is a presentation of general background information about the Group’s activities current at the date of the presentation, 12 August 2015. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as ad
Slide 3: Results & strategy
Results & strategy
Slide 4: CBA Overview
Additional CBA Overview Snapshot FY15 1 information Our Vision Leading national franchise First in customer satisfaction – # To excel at securing and 1 “main financial institution”1 enhancing the financial # 1 in home lending2 wellbeing of people, businesses # 1 in household deposits3 and co
Slide 5: Cash Profit up 5%
Cash Profit up 5% Jun 15 vs $m Jun 15 Jun 14 Jun 14 Operating income 23,368 22,166 5% Operating expenses (9,993) (9,499) 5% Operating performance 13,375 12,667 6% Investment experience 210 235 (11%) Loan impairment expense (988) (953) 4% Tax and non-controlling interests (3,460) (3,269) 6% Cash NPAT
Slide 6: Operating Income and Expenses
Operating Income and Expenses Operating income Operating expenses $m +5% (underlying1 +6%) Compliance Underlying • Additional risk investment 2H15: (0.6%) Programs • Advice Reviews +5.2% (1%) 2,730 • Cyber security 2,752 Regulation 9,993 Underlying • AML (151) +2.9% 4,839 347 (63) 4,323 +12% 9,779 1
Slide 7: Business Unit Cash NPAT - FY
Business Unit Cash NPAT ($m) - FY Retail Banking Services Business & Private Banking Institutional Banking & Markets 35% Growth +5% 38% Growth +10% 36% Growth +1% 3,867 3,678 3,337 1,459 1,321 1,268 1,224 1,252 1,188 Jun 13 Jun 14 Jun 15 Jun 13 Jun 14 Jun 15 Jun 13 Jun 14 Jun 15 Wealth Management1 N
Slide 8: Volume growth
Volume growth Household Deposits Home Lending Credit Cards Balance Growth1 Balance Growth1 Balance Growth 1 Underweight in higher growth Not participating in zero segments – broker and balance transfer market investment lending 11.6% 8.1% 9.5% 7.4% 6.6% 2.0% 1.2% System CBA System CBA System RBS New
Slide 9: Group NIM
Additional information Group NIM bpts Group NIM (Six Months) bpts 12 Month Movement 214 209 204 204 204 201 Dec 13 Jun 14 Dec 14 Jun 15 12 month NIM 214 (8) (1) 4 (2) 6 (4) 209 ex Treasury 204 203 & Markets Group NIM 1bpt ex Treasury & Markets FY14 Asset Funding Basis Portfolio Other Treasury FY15
Slide 10: Credit quality
Credit quality Loan Impairment Expense (Cash) Group Consumer Arrears CBA Group 90+ days (basis points) 1 1.34% 1.23% 1.20% 2 73 1.05% 1.02% 1.01% 0.52% 0.62% 0.50% Personal Loans Credit Cards Home Loans4 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 3 41 Troublesome and Impaired Assets $bn 9.5 8.2 25 4.3 7.0 6
Slide 11: Provisions
Provisions Individual Provisions Collective Provisions $m $m 2,858 2,779 2,762 1,628 Overlay 823 Economic 762 755 overlay portion 659 increased 1,127 419 347 264 Bankwest 887 157 389 267 941 981 128 Consumer 909 128 812 610 492 Commercial 729 762 707 Jun 13 Jun 14 Jun 15 Jun 13 Jun 14 Jun 15 11
Slide 12: Investment spend
Investment spend Investment Spend Investment Spend % of total $m 1,286 1,237 1,246 1,179 1,182 Core Branches 16% 11% 12% 1,036 Banking & Other 639 12% 655 651 24% Risk & 638 593 30% Compliance 563 19% 65% Productivity 647 53% 58% & Growth 541 582 589 595 473 FY10 FY11 FY12 FY13 FY14 FY15 FY13 FY14 F
Slide 13: Funding, liquidity and capital
Funding, liquidity and capital
Slide 14: Liquidity
Liquidity ♦ Full Liquidity Coverage Ratio (LCR) Liquidity Coverage Ratio 1 compliance from 1 Jan 2015 $bn ♦ RBA Committed Liquidity Facility 116% 120% LCR (CLF) 139 136 – Available to meet AUD cash 132 outflows – 15bp commitment fee on approved 52 amount with additional cost if used 70 66 CLF2 – Col
Slide 15: Funding
Funding Funding Funding sources $bn $bn Jun 15 Jun 14 Source of funds Use of funds Transactions 91 77 63% Deposit Savings 176 155 31 (32) Funded Investments 195 193 Other 16 14 39 (38) Total customer deposits 478 439 Wholesale funding 280 250 16 Total funding 758 689 (35) 2 15 Equity 53 49 4 Total f
Slide 16: Funding
Additional information Funding Funding Australian Deposits Term Maturity Profile1 $bn Total Deposits $bn Weighted Average Maturity 3.8yrs (excl CD’s) 35 Billions 411 30 342 25 Other 288 20 deposits 200 231 15 10 Household 211 5 deposits CBA Peer 3 Peer 2 Peer 1 FY2016 2017 2018 2019 2020 >2020 Sourc
Slide 17: Funding – Portfolio
Funding – Portfolio Funding Composition Wholesale Funding by Product Customer Deposits 63% Vanilla MTN 26% ST Wholesale Funding Commercial Paper 14% 18% Certificates of deposit 14% LT Wholesale Funding ≥ 12 months 9% FI Deposits 14% LT Wholesale Funding ≤ 12 months 4% Covered Bonds 8% Covered Bonds
Slide 18: Strong Capital Position
Strong Capital Position CET1 CET1 Pro-forma CET13 bpts Aug 2015 - Entitlement offer of ordinary CBA shares to all shareholders 14.3% - fully underwritten to raise $5bn 12.7% 1.35% 10.4% 122 (17) (43) 9.3% 9.2% (72) 9.1% 9.1% 8.0% June 14 Dec 14 Dec 14 Cash Credit RWA Other 1 Jun 15 APRA Jun 15 Jun 1
Slide 19: Dividend
Additional information Dividend Payout ratio (cash) 75.0% 78.2% 73.9% 73.2% 75.8% 75.9% 75.1% 75.1% 81% 81% 90% 81% 70% 84% 70% 84% 71% 87% 62% 62% 63% 63% 84% 74% cents 113 153 113 115 120 170 132 188 137 197 164 200 183 218 198 222 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Interim Final 19
Slide 20: International Peer Basel III CET1
Not for distribution or release in the United States International Peer Basel III CET1 16.0 APRA top quartile 12.4%1 14.4 14.3 13.7 13.5 13.0 12.7 12.3 12.2 12.1 12.0 G-SIBs in dark grey 11.7 11.7 11.7 11.6 11.4 11.3 11.2 11.0 10.9 10.8 10.6 10.6 10.6 10.6 10.5 10.4 10.4 10.4 10.310.2 10.1 10.0 9.9
Slide 21: APRA & International Comparison
APRA & International Comparison The following table provides details on the differences, as at 30 June 2015, between the APRA Basel III capital requirements and internationally comparable capital ratios 1. APRA CET1 Study1 Basel III (APRA) 9.1% Equity investments 1.0% Deferred tax assets 0.2% IRRBB
Slide 22: Recent Australian regulatory developments
Recent Australian regulatory developments • On 7 December 2014, the Government released the final report of the FSI. • Covered areas of Common Equity Tier 1 (CET1), mortgage risk-weights, loss absorbency and leverage. Overview • No prescribed recommendations on amount or timing. APRA to determine an
Slide 23: UK and US Balance Sheet Comparison
UK and US Balance Sheet Comparison 1,2 United Kingdom USA Assets Liab + Equity Assets Liab + Equity Cash & 8% 8% Cash & equivalents Equity 14% 11% Equity equivalents Home Loans 17% Home Loans 12% 57% Deposits Deposits 57% 43% Other Lending 37% Other Lending 7% Long Term3 Other Fair Other Fair 16% 10
Slide 24: Australian Banks
Australian Banks Commonwealth Bank Balance Sheet Comparisons Assets – CBA has a safe, conservative asset profile: Assets Liab + Equity 51% of balance sheet is home loans, which are stable/long Cash & equivalents 4% 6% term. Equity Trading securities and other fair value assets comprise just 12%
Slide 25: Strategy
Strategy
Slide 26: Our strategy
Our strategy Customer Focus People Productivity Technology Strength Capabilities “One CommBank” Growth Continued growth in business and institutional banking Opportunities Disciplined capability-led growth outside Australia TSR Outperformance 26
Slide 27: MFI share
MFI share 3 MFI share CBA MFI share by age 3 % Overall 34.2% 46.3% 34.2 41.9% 33.1 44.9% Key Drivers 42.0% Customer Satisfaction 42.2% Transaction Banking 40.6% Technology & Innovation 20.2 19.4 MFI Share 30.1% 29.7% 28.2% 13.5 13.5 11.4 11.6 29.2% 28.6% 27.0% Jun 15 Jun 14 Jun Jun Jun Jun Jun Jun J
Slide 28: Continuous Innovation
Continuous Innovation 2011 2013 2015 “Albert” Eftpos tablet NetBank for mobile MyWealth; Kaching for Facebook; CommBiz Android; Everyday mobile; Union Pay; Video Conferencing in Apps for Tablets & Smartwatches settlement branches; Essential Super; CommBiz Markets Portfolio View on mobile; Tap&
Slide 29: Key technology metrics
Additional information Key technology Keymetrics Technology Metrics Cardless Cash Lock, Block & Limit Temporary Lock1 Total number of transactions Number of accounts enrolled Number of accounts enrolled 363K 2.7m 215K 57K 1.2m 16K 0.1m 26K Jun 14 Dec 14 Jun 15 Jun 14 Dec 14 Jun 15 Jun 14 Dec 14 Jun
Slide 30: Innovating in Transaction Banking
Innovating in Transaction Banking Transaction Accounts Continuous Innovation Balance Growth FY15 • Cardless Cash 38% • Tap & Pay • Intelligent Deposit Machines • Real Time Alerts • Foreign Current Accounts 25% 24% Easy Account Opening • Real time online origination in 16% less than 5 minutes 1 17% •
Slide 31: Productivity metrics
Productivity metrics 3 Customer Service Personal Loans Asset Finance Telling transactions per CSR per week % funded same day Credit approval time (minutes) +13% +12% (71%) +5% +7% (22%) 1 Jun 13 Jun 14 Jun 15 Jun 13 Jun 14 Jun 15 Jun 13 Jun 14 Jun 15 Home Insurance Bankwest Transaction Accounts Tran
Slide 32: Branch of the future
Branch of the future 11 Concierge service Express branches Video conferencing % of total by transaction number % of total by transaction $ value 62% 64% 51% 47% 39% 35% 21% 22% 13% 11% 10% 10% 4% 3% 4% 4% Jun 14 Jun 15 Jun 14 Jun 15 Jun 14 Jun 15 Jun 14 Jun 15 Jun 14 Jun 15 Jun 14 Jun 15 Jun 14 Jun
Slide 33: CFSGAM – Global Reach
CFSGAM – Global Reach Australia and New Zealand AUM $113.2 billion1 UK, Europe and Middle East AUM $61.3 billion Asia (incl. Japan) AUM $21.7 billion Joint venture North America AUM $6 billion2 Spot 1. Assets under management indicated above includes Realindex Investments which is a wholly owned inv
Slide 34: CBA in Asia and South Africa
CBA in Asia and South Africa China ♦ Bank of Hangzhou (20%): 171 branches ♦ Qilu Bank (20%): 105 branches ♦ County Banking - Henan: 7 Banks and 5 branches (5 Banks and 5 branches @ 80% and 2 Banks @ 100% holding) - Hebei: 8 Banks (5 Banks @ 80% and 3 Banks @ 100% shareholding). ♦ CBA Beijing, Shangh
Slide 35: Outlook
Outlook Result shows good economic foundations in savings, credit growth and credit quality, though near-term global risks remain Need for businesses and all sides of politics to work together towards diversified, sustainable growth Continued investment for CBA in same long-term priorities, wi
Slide 36: Credit and housing
Credit and housing
Slide 37: CBA Market share
Additional CBA Market shareMarket Share 1 information % Jun 15 Home Loan Market Share Home loans 25.1 Credit cards – RBA2 24.5 Other household lending3 19.8 28% Household deposits4 29.5 26% Business lending – RBA 25.1% 17.2 Business lending - APRA 24% 18.9 22.9% Business deposits – APRA 20.3 22% Ass
Slide 38: Credit Exposures by Industry
Credit Exposures by Industry 1 Jun 14 Jun 14 Jun 15 Jun 15 Consumer 55.8% 54.2% Agriculture 2.0% 1.8% Mining 1.5% 1.9% Manufacturing 1.8% 1.7% Energy 1.0% 0.9% Construction 0.8% 0.9% Retail & Wholesale 2.2% 2.3% Transport 1.5% 1.5% Banks 9.0% 8.6% Finance – other 3.4% 4.6% Business Services 1.2% 1.2
Slide 39: Sector Exposures
Sector Exposures Commercial Exposures by Industry 1,2 Top 20 Commercial Exposures2 A+ AA- AAA to to BBB+ to TCE $bn1 AA- A- BBB- Other Jun 15 A- BBB+ Banks 36.7 42.4 4.7 1.9 85.7 AA- Finance Other 22.8 13.9 5.5 3.1 45.3 BBB+ AA Property 1.7 5.8 13.3 41.7 62.5 A- A Sovereign 72.7 9.9 0.2 0.4 83.2 BBB
Slide 40: Australian Home Loan Portfolio
Australian Home Loan Portfolio1 Portfolio losses low at < 2bpts 77% of customers paying in advance2 by 27 months on average, including offset facilities Mortgage offset balances up 40% in FY15 to $22 billion Overview Regular stress testing undertaken to identify areas of sensitivity RBS Portfolio dy
Slide 41: Australian Home Loan Portfolio
Australian Home Loan Portfolio1 Jun Dec Jun Jun Dec Jun Portfolio1 New Business1 14 14 15 14 14 15 Total Balances - Spot ($bn) 360 370 383 Total Funding ($bn) 87 46 94 Total Balances - Average ($bn) 349 365 371 Average Funding Size ($’000) 256 269 274 Total Accounts (m) 1.7 1.7 1.7 Serviceability Bu
Slide 42: Australian Home Loans
Australian Home Loans1 Australian Home Loan Balances State Profile2 $bn FY15 Balance Growth % of Portfolio 32 (91) 94 18% 32% (12) 26% 18% 6% 360 383 7.6% 7.2% 6.9% 6.0% 6.2% Jun 14 New Redraw Repayments External Jun 15 fundings & / Other refinance interest NSW/ACT SA/NT QLD VIC/TAS WA Arrears2 Arre
Slide 43: Australian Investment Home Loans
Australian Investment Home Loans1 Overview Modest balance growth FY15 Balance Growth2 Investment Home Loans Modest balance growth – sub-system, sub- peers and <10% 11.4% 11.5% Arrears lower than overall portfolio 9.7% Strong borrower profile – skewed to higher income bands Credit policy rest
Slide 44: RBS Home Loan Growth Profile
RBS Home Loan Growth Profile Home Loan Balances Broker Growth Profile2 $bn 29 (81) 80 10.8% (9) 7.7% 302 321 Jun 14 New Redraw Repayments External Jun 15 fundings & / Other refinance CBA Majors interest Home Loan Dynamic LVR1 Profile Home Loan Arrears Rates by Vintage3 70% Average 2.0% 90+ days Prop
Slide 45: RBS Home Loans – Stress Test
RBS Home Loans – Stress Test 1 Key Assumptions 3 Cash Rate Unemployment Hours under-employed Cumulative reduction (%) (%) (%) in house prices (%) (32) (32) 18.4 15.8 (15) 10.5 11.5 10.9 11.4 6.1 7.0 2.50 2.75 1.00 1.00 0 Base Yr 1 Yr 2 Yr 3 Base Yr 1 Yr 2 Yr 3 Base Yr 1 Yr 2 Yr 3 Base Yr 1 Yr 2 Yr 3
Slide 46: Resources Exposure
Resources Exposure Resources Industries - June 2015 Mining, Oil and Gas - June 2015 100% Commercial Exposure1 80% Other Mining % of Sector $bn Group Mining Services TCE 60% Metals Mining Mining 7.1 0.7 Black Coal Mining 40% Gold Ore mining Oil and Gas Extraction 11.6 1.2 Iron Ore Mining 20% Energy2
Slide 47: Commercial Property Exposure
Commercial Property Exposure Overview Group Sector Profile % of Group TCE1 % of Portfolio graded troublesome or impaired 6.4 6.2 8% Other Commercial 23% 17% REIT Retail 13% Office 1.2 16% 0.8 Residential 23% Industrial Jun 14 Jun 15 FY14 Jun 14 Jun 15 FY15 Australian Exposure by State CBD Vacancy Ra
Slide 48: Australian Basel III Tier 2
Australian Basel III Tier 2
Slide 49: Basel III Tier 2 in Australia
Basel III Tier 2 in Australia Terms broadly consistent with European tier 2 APRA requires contractual point of non-viability (PONV) – but no CET1 trigger (not a ‘co-co’ instrument) Contractual PONV provides clarity: Loss absorbency mechanics known and contractually agreed at the outset Cap
Slide 50: Potential loss absorption
Actions & CCB key to prevent conversion Basel 3 CET1 Capital & Actions Available to Strengthen Resources to strengthen capital Indicative Buffers Capital Conservation Capital Management Maximum Potential management actions FY15 Buffer Distribution Reduce dividend NPAT 8.0% DRP discount and under
Slide 51: Global Tier 2 Structure Comparison
Global Tier 2 Structure Comparison Australia US Canada UK France Netherlands Scandinavia Issue rating 2 notches (Moody's) 1 notch (Moody's) 2 notches (Moody's) 1 notch (Moody's) 1 notch (Moody's) 1 notch (Moody's) 1 notch (Moody's) (vs Issuer 2 notches (S&P) 1 notch (S&P) 2 notches (S&P) 2 or 3 notc
Slide 52: Key terms and conditions
Key terms and conditions The Issuer Commonwealth Bank of Australia (“CBA”) Securities being offered Xx% Tier 2 Subordinated Notes (the “Subordinated Notes”), due [ ] Issuer Rating Standard & Poor’s: AA- Stable Moody’s: Aa2 Stable Fitch: AA- Stable Expected Rating Standard & Poor’s: [BBB+
Slide 53: Key terms and conditions
Key terms and conditions Share Sale Mechanism ■ Where the holder of Subordinated Notes is an Ineligible Subordinated Holder or notifies us that it does not wish to receive Ordinary Shares in connection with an Exchange, we will issue Ordinary Shares to a nominee which will endeavor to sell the Ordin
Slide 54: Point Of Non-Viability (PONV) Declared
Point Of Non-Viability (PONV) Declared PONV has been declared by APRA : what then happens ? Basel III AT1 instruments convert into CET1 – unless already converted due to 5.125% mandatory conversion Is additional CET1 required? No Basel III Tier 2 unaffected Yes Exchange mechanics Can shares be issue
Slide 55: Regulatory capital securities outstanding
Additional Snapshot Regulatory capital securities 1H15 outstanding 1 information Tier 2 Securities on Issue 2 Issue CCY Volume A$m 1 Maturity Call Date PONV Basel II Tier 2 outstandings at FY end (A$m) 2 JPY30bn 320 Oct-15 Oct-15 No JPY9bn 96 Perpetual May-16 No 2,867 USD350m 455 Jun-18 Jun-18 No 2,
Slide 56: Economic indicators
Economic indicators
Slide 57: Economic indicators
Economic indicators 2011 2012 2013 2014 2015 2016 2017 World GDP 4.2 3.4 3.4 3.4 3.5 3.7 3.2 Australia Credit Growth % – Total 2.7 4.4 3.0 5.1 6.2 4¾-6¾ 4¼-6¼ Credit Growth % – Housing 6.0 5.0 4.6 6.5 7.4 6-8 5-7 Credit Growth % – Business -2.2 4.4 0.9 3.5 4.1 3-5 3-5 Credit Growth % – Other Persona
Slide 58: China growth slowing but remains solid
China growth slowing but remains solid China/Asia is a major export market for other countries as well as Australia. Whilst the Chinese economy has slowed, outcomes in line with the growth target (of 7%pa) are still likely in 2015 and 2016. Growth near the target will be enough to generate substanti
Slide 59: Australia remains well placed
Australia remains well placed Australia is now well into its 24th year of uninterrupted economic growth. Australian policy makers retain some firepower – the RBA could cut interest rates if necessary. GDP1 Unemployment Rate2 Global Interest Rates1 (annual % change) (%) (%) % % % 8 12 8 6 10 4 6 2 8
Slide 60: The growth transition continues
The growth transition continues The transition from mining to non-mining led growth is proceeding. The addition to economic activity from resource exports and non-mining activity has more than offset the decline in mining capex and construction job gains have more than offset mining job losses. Grow
Slide 61: Confidence remains weak, but signs of improved consumer spending
Confidence remains weak, but there are signs of improved consumer spending Businesses remain cautious but AUD depreciation is boosting the competitiveness of exporters and import-competing industries. Consumer spending growth is lifting, despite the weakness in wages growth and confidence. Consumer
Slide 62: Strong population growth underpins housing demand
Strong population growth underpins housing demand Strong population growth underpins a strong pick up in dwelling construction. The surge in dwelling construction will allow housing demand and supply to better align. Population Growth1 Housing Demand & Supply1 Dwelling Commencements1 (moving annual
Slide 63: Low interest rates a key driver of housing growth
Low interest rates a key driver of housing growth The low interest rate environment has encouraged a search for yield, driving the pick up in investor lending and credit growth. Dwelling price growth varies widely by region – Sydney is not representative of Australia. Population Growth1 Dwelling Pri
Slide 64: Household balance sheets remain strong
Household balance sheets remain strong The upward trend in household credit (or debt) was a multi-decade event driven by structural factors. But household balance sheets are strong. Households have cut back their use of consumer debt (credit cards, margin loans). The savings ratio remains at the hig
Slide 65: House price bubble factors not evident in Australia
Factors that typically characterise a house price bubble are not evident in Australia Housing “Bubble” – Current position in Australia typical characteristics Unsustainable asset prices Prices supported by the excess of demand over supply Australia’s population continues to grow at above average
Slide 66: New Zealand
New Zealand Dairy prices have weakened over 2014 and 2015. Global supply growth has been strong; Chinese import demand affected by high Chinese inventories. Sharp drop in NZ dollar will boost dairy earnings in the following season (year-ending May 2017). Global Dairy Trade Auction Results1 NZD/USD (
Slide 67: New Zealand
New Zealand Inflation environment subdued, even with impact of NZ dollar depreciation over 2015-16. RBNZ has cut the Official Cash Rate from 3.5% to 3%. Expected to further cut the OCR to 2.5% in coming months. Headroom to cut further if needed. NZ CPI Inflation1 Official Cash Rate Forecasts2 Annual
Slide 68: New Zealand
New Zealand Housing market underpinned by strong inbound migration and falling interest rates. Construction to maintain a high level, with further growth in Auckland in particular. Moderate household credit growth being supported by housing activity and interest rates. NZ Household Lending Growth1 N
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Commonwealth Bank of Australia — Debt Investor Presentation (August 2015) on 6ix