Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — H1 FY2009 Earnings Presentation
141 slides from Commonwealth Bank Of Australia's earnings presentation, Feb 11, 2009
Slide 1: Results Presentation – Half year ended 31 December 2008
Results Presentation For personal use only For the half year ended 31 December 2008 Ralph Norris CHIEF EXECUTIVE OFFICER David Craig CHIEF FINANCIAL OFFICER 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Slide 2: Disclaimer
Disclaimer For personal use only The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 11 February 2009. It is information given in summary form and does not purport to be complete. It is not intended to be
Slide 3: Agenda
Agenda For personal use only Ralph Norris, CEO – Company Update and Outlook David Craig, CFO – Financial Overview Questions and Answers 3
Slide 4: Determined to be different
Notes BERS Determined to be different
Slide 5: Strength in uncertain times
Strength in uncertain times For personal use only ■ A solid operating result in an increasingly difficult environment: ¾ Strong Banking income result ¾ Good volume and market share gains ¾ Cost discipline ■ Strong capital and funding positions ■ Increased provisions ■ Strategy on track and deliverin
Slide 6: Credit ratings of largest banks
Credit ratings of largest 100 banks For personal use only 180 80 60 40 CBA 20 0 Source : Bloomberg. As at 20 January 2009. 6
Slide 7: A solid operating result
A solid operating result For personal use only Dec 08 vs Dec 08 Dec 07 Operating Income ($m) 8,016 15% Statutory NPAT ($m) 2,573 9% Cash NPAT ($m) 2,013 (16%) Cash EPS (cents) 146.3 (19%) Return on Equity – Cash (%) 15.0 (580)bpts Dividend per Share – Fully Franked (cents) 113 - 7
Slide 8: For personal use only
Notes BERS Determined to be different
Slide 9: Managing in uncertain times
Managing in uncertain times For personal use only Co-ordinated risk management response: ¾ Overseen by CFO and CRO ¾ Daily management meetings during liquidity crunch ¾ Weekly Executive Risk Committee meetings ¾ Extensive and ongoing portfolio review – across sectors/industries/geographies ¾ Ongoi
Slide 10: For personal use only
For personal use only Notes 10
Slide 11: Strong customer satisfaction gains
Strong customer satisfaction gains For personal use only Closing the gap to top rated peer Strong gains in Business Customer Satisfaction Roy Morgan Research MFI Customer Satisfaction1 12 month movement2 10.3% 7.8% 5.4% Source : TNS Business Finance Monitor 3 FirstChoice ranked No. 1 for Service Con
Slide 12: Market shares
Market shares For personal use only Dec 08 Jun 08 Dec 07 CBA BankWest Combined CBA CBA Adjusting for restatements, Retail Banking Services Jun 08 Home loan market Home loans 20.3% 3.0% 23.3% 19.2% 18.8% share would be 19.4% and Credit cards 18.2% 2.7% 20.9% 18.3% 18.5% Dec 07 Home loan market Person
Slide 13: Strong growth in key markets
Strong growth in key markets For personal use only Balance Growth CBA + CBA Dec 08 vs Dec 07 BankWest Market Share Market Share % % % Dec 08 vs CBA System Dec 08 Dec 08 Dec 07 Home Lending* 15.8 7.9 20.3 1.35 23.3 Household Deposits* 21.7 19.0 29.1 0.64 32.6 Business Lending 8.8 11.9 13.5 (0.40) 18.
Slide 14: For personal use only
For personal use only Notes 14
Slide 15: Determined to be different
Determined to be different For personal use only X Only major to improve customer satisfaction year on year Customer Service X Gap to Number 1 peer reduced from 10.3% to 5.4% in 12 mths X Strongest customer satisfaction gains of the major banks Business Banking X Dedicated Group Executive appointed
Slide 16: Market shares
Market shares For personal use only Home Lending Household Deposits Credit Cards Personal Lending Business Lending Business Deposits Source: APRA / RBA 16
Slide 17: Profitable growth
Profitable growth For personal use only Low-risk strategic agenda Targeted investment and acquisition programme Focus on key growth opportunities / markets Earnings accretive investments Well positioned for medium to longer term 17
Slide 18: For personal use only
For personal use only Notes 18
Slide 19: Outlook
Outlook For personal use only Increasingly difficult global and domestic outlook Slowing domestic economy, with broad customer impacts Interest rate cuts and Government stimulatory actions to soften impact Group remains cautious about the short to medium term outlook Continued focus on man
Slide 20: For personal use only
For personal use only Notes 20
Slide 21: Results Presentation – David Craig, CFO
Results Presentation For personal use only For the half year ended 31 December 2008 David Craig CHIEF FINANCIAL OFFICER 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Slide 22: For personal use only
For personal use only Notes 22
Slide 23: A solid operating result
A solid operating result For personal use only Dec 08 Dec 07 Dec 08 vs $m $m Dec 07 Operating income 8,016 6,974 15% Operating expenses 3,551 3,378 5% Operating performance 4,465 3,596 24% Impairment expense 1,607 333 Large Net profit before tax and investment 2,858 3,263 (12%) experience Tax and Mi
Slide 24: Other key information
Other key information For personal use only Gain on BankWest acquisition: ■ Provisional estimates included in 1H09 result. Fair value procedures to be completed by Jun 09 Treasury shares valuation adjustment: CBA shares held within life insurance statutory funds (on behalf of policyholders) result
Slide 25: Statutory Profit up 9%
Statutory Profit up 9% For personal use only Dec 08 Dec 07 Dec 08 vs $m $m Dec 07 Cash NPAT 2,013 2,385 (16%) Gain on BankWest acquisition 547 - Defined Benefits superannuation plan (13) (4) Treasury shares valuation adjustment 34 (13) Hedging AIFRS volatility (8) 3 Statutory NPAT 2,573 2,371 9% P
Slide 26: Other key information
Other key information For personal use only 6 months % of total group operating income Dec 08 Jun 08 Dec 07 Net interest income 57% 54% 56% Other banking income 25% 24% 22% Funds management income 13% 16% 16% Insurance income 5% 6% 6% Total 100% 100% 100% Dec 08 vs Dec 07 Av interest earning assets
Slide 27: Strong "Jaws" at Group level
Strong “Jaws” at Group level For personal use only Dec 08 vs Dec 07 RBS PBS WM* IFS* Group* * Excludes Investment Experience. 27
Slide 28: Investing for the future
Investing for the future For personal use only Investment spend ($m) Expensed Capitalised Total Core Banking Modernisation Growth Finest online 82 229 311 projects Scheme debit card First Choice Plus Straight through process (WM) Productivity Home loan simplification 108 102 210 projects
Slide 29: Expenses down 3% on prior half
Expenses down 3% on prior half For personal use only Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs $m $m $m Jun 08 Dec 07 Staff expenses 1,881 1,881 1,780 - 6% Occupancy and equipment 409 394 373 4% 10% IT Services 380 410 416 (7%) (9%) Postage and stationery 108 109 108 (1%) - Fees and commissions 390 4
Slide 30: NIM - movement
NIM - 12 month movement For personal use only Group NIM 5 (1) (7) 206 (1) 2 204 bpts Dec 07 Asset Deposit Funding Liquids Other Dec 08 pricing and pricing and Mix / Other mix mix 30
Slide 31: Underlying NIM up 5bpts since Jun
Underlying NIM up 5bpts since Jun 08 For personal use only Ç 5bpts 9 (2) 206 (5) 1 204 3 203 bpts 198 Product margins È 1 bpt over 12 months Dec 07 Jun 08 Asset Deposit Liquids Other Underlying AIFRS Dec 08 pricing and pricing and Dec 08 Volatility mix mix 31
Slide 32: For personal use only
For personal use only Notes 32
Slide 33: Impairment expense
Impairment expense For personal use only 6 months annualised (basis points) 6 months ($m) 81 1,607 Overlay Overlay Loans Loans Single Names Single Names (x5) (x5) ABC ABC 32 Notes 597 Notes 19 333 Base Base * Dec 07 Jun 08 Dec 08 Dec 07 Jun 08 Dec 08 Overlay Single Names / ABC Notes Base * Mark to m
Slide 34: For personal use only
For personal use only Notes 34
Slide 35: Increased provisions
Increased provisions For personal use only Individual provisions ($m) Collective provisions ($m) 1,134 2,474 BankWest Single Names Granularity Overlay Economic 1,466 Model and data BankWest BankWest Consumer Consumer 279 Commercial Commercial Jun 08 Dec 08 Jun 08 Dec 08 Overlay Single Names Commerci
Slide 36: For personal use only
For personal use only Notes 36
Slide 37: Exposure Mix
Exposure Mix For personal use only Regulatory Exposure Mix CBA Expected Loss CBA Peer 1 Peer 2 Peer 3 (bpts) Residential Mortgages 49% 36% 36% 42% 8 Corporate, SME & 31% 43% 44% 41% 39 Spec Lending Bank 12% 10% 18% 9% 3 Sovereign 5% 2% - 3% 1 Qualifying Revolving 2% 4% 2% 4% 192 Other Retail 1% 5% 1
Slide 38: For personal use only
For personal use only Notes 38
Slide 39: Improved provision coverage
Improved provision coverage For personal use only Collective provisions to non housing GLAs* Total provisions to GLAs* Total provisions to GLAs Total provision to GLAs ex Housing Individual provisions to impaired assets Total provisions to Credit RWA * Gross Loans and Acceptances. CBA includes BankW
Slide 40: Other key information
Other key information For personal use only New mortgagee in possession cases “Low doc” home loan arrears # 45 30 15 0 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 30+ days 90+ days Impairment expense to average GLAs* Personal loan arrears Consumer 30+ Days % bpts 26 24 23 2
Slide 41: Sound consumer credit quality
Sound consumer credit quality For personal use only Home loan arrears Home lending: 30+ Days % ¾ Portfolio quality remains sound ¾ Uptick in arrears off low base ¾ 70% paid in advance – avg 7 mths ¾ Avg LVR 37% on current values ¾ Loans > 80% LVR mortgage insured Personal lending remains sound C
Slide 42: Other key information – Margin Lending
Other key information Notes For personal use only Margin Lending 6 months Dec 08 Jun 08 Portfolio size ~$5.5bn ~$8bn Aggregated Gearing 45% 42% Margin calls 64,245 18,548 Forced sales <4.6% <3.5% Losses / Write-Offs $15.4m $5.7m Loss % of Book 0.27% 0.06% Expected loss by Business Unit * Dec 08 Jun
Slide 43: Commercial Credit Quality
Commercial Credit Quality For personal use only Risk-Rated Exposures Known single names covered Other Book quality remains sound: BBB+ to BBB- ¾ No systemic issues 68% ¾ 68% investment grade investment A+ to A- grade ¾ No exposure to foreign sub-prime AAA to AA- ¾ Net CDO/CLO exposure ~$50m Dec
Slide 44: For personal use only
For personal use only Notes 44
Slide 45: Solid operating performance
Solid operating performance For personal use only Dec 08 Dec 07 Dec 08 vs $m $m Dec 07 Retail Banking Services 1,833 1,531 20% Premium Business Services 1,499 1,130 33% Wealth Management 450 543 (17%) International Financial Services 380 347 10% Corporate Centre 358 66 Large Eliminations/Unallocated
Slide 46: Other key information – movements
Other key information – 6 month movements For personal use only Dec 08 vs Dec 08 Jun 08 Dec 07 Dec 07 Net interest income Home loans 719 527 651 10% Consumer finance 447 403 376 19% Retail deposits 1,246 1,258 1,123 11% 2,412 2,188 2,150 12% Other banking income Home loans 82 70 71 15% Consumer fina
Slide 47: Retail Banking Services
Retail Banking Services For personal use only Strong volume growth: Dec 08 Dec 08 vs $m Dec 07 ¾ Home loans Ç 16% Home loans 801 11% ¾ Deposits Ç 22% Consumer finance 665 23% Retail deposits 1,602 10% Continuing market share gains: Distribution 116 33% ¾ Home loans Ç 1.35% Total banking income 3
Slide 48: For personal use only
For personal use only Notes 48
Slide 49: Retail Banking Services
Retail Banking Services For personal use only Home Loan Margin Branch channel growing above system 6 month averages Home Loan Balance Growth bpts 13.4% 6 Months to Dec 08 7.4% 6.2% 2.7% 1.5% Broker Branch Premium Total CBA Total Market Jun 07 1H08 2H08 1H09 Dec 08 Note : Width of channel columns ref
Slide 50: Other key information – movements
Other key information – 6 month movements For personal use only Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 07 Net interest income Institutional Banking 678 531 499 36% Private Client Services 157 119 121 30% Corporate Financial Services 311 267 243 28% Agribusiness 101 97 81 25% Local Business Banking 191 1
Slide 51: Premium Business Services
Premium Business Services For personal use only Dec 08 Dec 08 vs Strong income growth: $m Dec 07 Institutional Banking 1,180 34% ¾ Good volume growth Private Client Services 335 5% Business Banking ¾ Improved margins Corporate Financial Services 499 14% Agribusiness 151 12% Business Banking Ç 16
Slide 52: For personal use only
For personal use only Notes 52
Slide 53: Premium Business Services
Premium Business Services For personal use only Business lending growth Business deposit growth Balance Growth Balance Growth 12 Months to Dec 08 12 Months to Dec 08 CBA Peer 1 Peer 2 Peer 3 Source: APRA NFC Market Source: APRA NFC Market Expense to income ratio Strong customer satisfaction gains 1
Slide 54: Other key information – movements
Other key information – 6 month movements For personal use only Dec 08 vs Dec 08 Jun 08 Dec 07 Dec 07 Net operating income CFS GAM 368 484 431 (15%) Colonial First State 287 313 379 (24%) CommInsure 376 358 315 19% Other (1) 6 (4) 75% 1,030 1,161 1,121 (8%) Operating expenses CFS GAM 180 178 191 (6%
Slide 55: Wealth Management
Wealth Management For personal use only CFS GAM: Dec 08 Dec 08 vs ¾ FUM È 22% to $129bn $m Dec 07 ¾ Expenses È 6% CFS GAM 368 (15%) Colonial First State: Colonial First State 287 (24%) ¾ FUA È 21% to $158bn CommInsure 376 19% ¾ FirstChoice remains 2nd largest Other (1) 75% platform Net operating
Slide 56: For personal use only
For personal use only Notes 56
Slide 57: Wealth Management
Wealth Management For personal use only Funds under Administration down 21% FirstChoice & Avanteos net flows remain positive -21% FirstChoice & Avanteos $1,239m $950m $763m $647m Mar 08 Jun 08 Sep 08 Dec 08 Dec 07 Net Flows Investment Returns Dec 08 Good investment performance Inforce premiums up 26
Slide 58: Other key information – movements
Other key information – 6 month movements For personal use only Dec 08 vs Dec 08 Jun 08 Dec 07 Dec 07 Net interest income ASB 376 402 382 (2%) Other 55 69 51 8% 431 471 433 (0%) Other banking income ASB 212 160 157 35% Other 35 40 26 35% 247 200 183 35% Total banking income ASB 588 562 539 9% Other
Slide 59: International Financial Services
International Financial Services For personal use only Dec 08 Dec 08 vs $m Dec 07 ASB Cash NPAT Ç 6% in NZD ASB 616 8% Sovereign 96 (11%) Growing Asian contribution Other 111 35% Total operating income 823 9% Sovereign NPAT Ç 12%: Operating expenses 443 8% Operating performance 380 10% ¾ Incom
Slide 60: Other key information – Wholesale funding
Other key information For personal use only Wholesale Funding - Geographic Distribution Wholesale Funding by Product Structured MTN 6% 3% 3% 3% Australia 10% Vanilla MTN 10% Commercial Paper 9% Other Asia 43% Europe Structured Finance Deals 6% Debt Capital United States 22% 5% 16% CDs Japan Securiti
Slide 61: Strong funding and liquidity positions
Strong funding and liquidity positions For personal use only Source of Funding * AA credit rating, stable outlook Well advanced with FY09 funding task – 88% completed Strong funding profile: Retail Funding Long Term Wholesale maturing in FY09 Short Term Wholesale Long Term Wholesale maturing a
Slide 62: For personal use only
For personal use only Notes 62
Slide 63: A strong capital position
A strong capital position For personal use only $4.2bn buffer Tier 1 Minimum Dec 07 1 Jun 08 1 1 Jul 08 Dec 08 2 Tier 1 Capital Total Capital 1 Ratios exclude interest rate risk in the banking book (IRRBB). 2 December 2008 ratios treat BankWest as a non-consolidated subsidiary in accordance with APR
Slide 64: Tier 1 movement in half year to Dec
Tier 1 movement in half year to Dec 08 For personal use only Tier 1 Cash Ord. DRP 1 Share BankWest 2 Growth Currency 3 Innovative 4 Capitalised Other Tier 1 Jun 08 NPAT Dividends $548m issues investment in RWA Movements capacity costs and $36m Dec 08 (include $2,013m ($1,662m) $4,000m ($1,828m) ($17
Slide 65: Capital ratios compare favourably to peers
Capital ratios compare favourably to peers For personal use only Domestic Peer Comparison Tier 1 ratio of 8.75% as at Dec 08 Tier 1 Capital Ratios 1 $2bn of capital raised in Oct 08 to ensure BankWest acquisition capital neutral CBA Peer 1 Peer 2 Peer 3 Dec 08 Sep 08 Sep 08 (proforma) $2bn of
Slide 66: For personal use only
For personal use only Notes 66
Slide 67: Key Messages
Key Messages For personal use only A solid operating result: ¾ Core business performing well ¾ Income up 15%, underpinned by strong Banking volumes ¾ Disciplined cost management - expenses down 3% on prior half ¾ Considered approach to strategic opportunities Well placed in challenging times: ¾
Slide 68: For personal use only
For personal use only Notes 68
Slide 69: Agenda
Agenda For personal use only Ralph Norris, CEO – Company Update and Outlook David Craig, CFO – Financial Overview Questions and Answers 69
Slide 70: Supplementary Materials
Supplementary Materials For personal use only For the half year ended 31 December 2008 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Slide 71: Index
Index For personal use only Contents Page Group and Banking Overview 72 Wealth Management 85 International Financial Services 92 BankWest 96 Credit Quality and Risk Management 101 Capital, Funding and Liquidity 117 Sustainability 128 Economic Indicators 132 71
Slide 72: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 72
Slide 73: Summary
Summary For personal use only 9 AA Credit Rating 9 Capital position further strengthened - Tier 1 ratio of 8.75% (FSA 11.7%) 9 Increased provisions – improved coverage ratios 9 Disciplined cost management underpins strong, positive “jaws” 9 Holding $82bn in liquid assets (post BankWest funding) 9 FY
Slide 74: Cost Growth
Cost Growth For personal use only Cost-to-income targets by Expense Growth Business Unit (on prior half) Underlying growth of 5% ex GST credits Highly focused investment spend – and IWL/ANK emphasis on strategic priorities investments (e.g Core Banking) Expenses down 3% on prior half Critical
Slide 75: Dividends
Dividends For personal use only Dividend (cents per share) Payout Ratio Cash Basis 75.9% 73.9%* 74.9% 70.5% 74.2% 75.0% * Which new Bank costs added back. 75
Slide 76: Other Banking Income
Other Banking Income For personal use only 6 months Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs $m $m $m Jun 08 Dec 07 Commissions 977 919 908 6% 8% Lending Fees 617 507 469 22% 32% Trading Income 448 346 200 29% Large Other 141 100 128 41% 10% 2,183 1,872 1,705 17% 28% AIFRS reclassification of (147)
Slide 77: Segment Revenue
Segment Proportions of total banking income Revenue For personal use only Dec 08 vs Proportion of Total Banking Income Dec 08 Dec 07 Dec 07 Home Loans 801 722 11% Consumer Finance 665 541 23% Retail Deposits 1,602 1,451 10% Institutional Banking 1,180 882 34% Private Client Services 335 319 5% Corpo
Slide 78: System Housing approvals
System Banks accounting for an increasing share of Housing system approvals For personal use only Share of approvals – Number Share of approvals – Value Banks (LHS) Non Banks (RHS) Banks (LHS) Non Banks (RHS) \ Source : ABS 78
Slide 79: Volume Growth
Volume Strong volumes underpin revenue position Growth For personal use only 12 Months 6 Months 3 Months to to Dec 08 to Dec 08 Dec 08 Annualised Annualised % % % CBA System CBA System CBA System Home Lending 15.8 7.9 15.0 5.4 17.5 5.3 Household Deposits 21.7 19.0 23.8 25.8 24.0 28.9 Business Lendin
Slide 80: CBA Growth vs Market – Twelve months
CBA Growth vs Market Twelve months to December 2008 For personal use only Home lending Personal lending 12.7% -9.5% -11.7% 7.9% CBA Peer 1 Peer 2 Peer 3 Peer 4 Credit cards Household deposits 19.8% 19.0% 7.4% 4.7% Market Top 5 Figures adjusted for restatements where appropriate. Source : APRA / RBA.
Slide 81: CBA Growth vs Market – Six months
CBA Growth vs Market Six months to December 2008 For personal use only Home lending Personal lending -9.8% 5.7% -11.1% 2.7% CBA Peer 1 Peer 2 Peer 3 Peer 4 Credit cards Household deposits 13.6% 12.9% 3.8% 3.0% Market Top 5 Figures adjusted for restatements where appropriate. Source : APRA / RBA. 81
Slide 82: Home Loan Growth
Home Loan Branch channel performance continues Growth to improve For personal use only Balance Growth by Channel - 6 months 15.8% 13.5% 13.4% 7.7% 6.8% 6.2% 7.4% 5.9% 5.2% 5.2% 4.6% 3.5% 2.7% 1.5% -0.5% Dec 07 Jun 08 Dec 08 Broker Branch Premium Total CBA Total Market Note : Width of channel columns
Slide 83: Replicating Portfolio
Replicating Portfolio For personal use only No change Easing Scenario Replicating Portfolio Yield Target Cash Target Cash Rate Rate 2001 Current 2011 2001 Current 2011 83
Slide 84: Core Banking Modernisation
Core Banking For personal use only Core Banking Our Journey so far Modernisation Improving the Front-End Addressing the Back-End Sales & service training A step change in customer service Over 1,000 new frontline staff Faster systems and processes New design branches Productivity and eff
Slide 85: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 85
Slide 86: Global Asset Management
Global Asset Management For personal use only Globally: $129bn FUM*, 986 people North America Japan $1.3bn FUM $3.2bn FUM 4 People Asia ex China & Japan Middle East $9.8bn FUM $4.6bn FUM 111 People UK & Europe Australia & New Zealand $12.6bn FUM $97.1bn FUM 189 People 682 People 25% FUM raised from
Slide 87: Funds under Administration
Funds under Administration For personal use only Half Year to Dec 08 Investment Funds Under Administration Opening Income & Closing Balance Inflows Outflows Netflows Other5 Balance FirstChoice 38,707 5,548 (4,805) 743 (6,278) 33,172 Avanteos 6,257 1,231 (564) 667 (1,197) 5,727 Cash management 2,576
Slide 88: Funds under Management
Funds under Management * For personal use only Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs $m $m $m Jun 08 Dec 07 Australian equities 16,725 23,502 29,618 (29%) (44%) Global equities 29,679 35,589 40,945 (17%) (28%) Cash and fixed interest 56,813 66,729 66,694 (15%) (15%) Property and alternative 25,37
Slide 89: Product Mix
Product Well diversified mix For personal use only Funds Under Administration 31 December 2008 Total FUA = $158 bn Internationally sourced FirstChoice/Avanteos 19% (19% as at Dec 07) 25% (25% as at Dec 07) Other 2% (2% as at Dec 07) Cash management Property 1% 13% (1% as at Dec 07) (9% as at Dec 07)
Slide 90: Investment experience mix
Investment experience mix For personal use only Investment experience profile Australia New Zealand Asia Total Local equities 1% - - - International equities - - 12% 1% Property 17% - 29% 14% Growth 18% - 41% 15% Fixed Interest 33% 60% 58% 40% Cash 49% 40% 1% 45% Income 82% 100% 59% 85% Total 100% 1
Slide 91: Insurance Analysis - CommInsure
Insurance Analysis - CommInsure For personal use only As At Dec 08 Jun 08 Dec 07 Dec 08 vs Dec 08 vs Sources of Profit from CommInsure $m $m $m Jun 08 Dec 07 The Margin on Services profit from ordinary activities after income tax is represented by: Planned profit margins 75 74 71 1% 6% Experience va
Slide 92: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 92
Slide 93: ASB
ASB ASB well-placed to navigate tougher market conditions For personal use only Credit growth slowing, particularly housing ASB growth remains ahead of system 12 months to Dec 08 Agriculture Household Business Source: RB, NZ, ASB Source: ASB and RBNZ Arrears rates trending higher off a low base Prop
Slide 94: Asia Growing Asian footprint
Asia Growing Asian footprint For personal use only China Indonesia Staff numbers 4,288 101 – CBA 1,433 PT Bank Commonwealth 2,448 - Bank of Hangzhou 317 PT Commonwealth Life 1,739 - Jinan City Commercial Bank 94 China Life CMG (includes staff & sales 18 First State Investments agents) 65 First State
Slide 95: Asia Targeted growth strategy
Asia Targeted growth strategy For personal use only China 20% Jinan City Commercial Bank (Increased from 11% in Dec 2008) 19.9% Bank of Hangzhou Beijing and Shanghai – Representative offices China Life CMG – JV life insurance First State Cinda Fund Management Company Japan Branch India Bank license
Slide 96: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 96
Slide 97: BankWest Reporting
BankWest Reporting For personal use only No earnings included with 1H09 results Provisional estimates made as at 31 December 2008 of: ¾ Assets and liabilities acquired ¾ Purchase consideration; and ¾ Gain on acquisition Fair value procedures to be completed during 2H09 Non cash items to incl
Slide 98: BankWest Overview
BankWest Snapshot of merged operations Overview For personal use only BankWest & CBA Combined St. Andrew’s Australia Branches (Domestic) 1,011 131 1,142 Market Share – Home Loans 1 20.3% 3.0% 23.3% Market Share – Household Deposits 1 29.1% 3.5% 32.6% Market Share - Business Lending 13.5% 4.7% 18.2%
Slide 99: BankWest Growth
BankWest Six months to December 2008 Growth For personal use only Home Lending Personal Lending -9.8% 2.7% CBA Peer 1 Peer 2 Peer 3 BankWest Credit cards Household deposits 12.9% 3.8% Market Figures adjusted for restatements where appropriate. Source : APRA / RBA. 99
Slide 100: BankWest Comparable banking transactions
BankWest Comparable banking transactions Overview (as at time of BankWest acquisition announcement) For personal use only Comparable price-to-book values Comparable price-to-earnings multiples (LTM) (Acquiror / Target) (Acquiror / Target) Westpac / St. George 2.7x Bank of Queensland / Bendigo 21.1x
Slide 101: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 101
Slide 102: Key Indicators
Key Indicators Summary For personal use only CBA ex CBA + BankWest BankWest Gross loans and acceptances (GLA) ($m) 408,174 466,868 Gross impaired assets ($m) 1,944 2,714 Gross impaired assets as % of GLA 0.48 0.58 Collective provision as a % of Credit RWA – Basel II 0.86 0.95 Individually assessed p
Slide 103: Home Lending
Home Modest increase in arrears consistent with cycle – Lending portfolio quality remains sound For personal use only Home loan portfolio mix Home loan arrears by State % 90+ Days % Dec 08 Jun 08 Owner-Occupied 56% 55% Investment 33% 34% Line-of-Credit 11% 11% Variable 73% 66% Ex-BankWest Fixed 26%
Slide 104: Home Loans LVR
Home Strong LVR profile Loans LVR For personal use only Original LVR of Portfolio Strong average LVR profile: 100% ¾ 51% based on original value 75% 80%+ 50% 60-80% ¾ 37% based on current values 0-60% 25% ¾ 51% on new loans 0% Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 % of loans at <60% L
Slide 105: Home Loan Stress Test
Home Loan Even under highly stressed conditions, portfolio Stress Test losses would remain modest and manageable For personal use only Stress test scenarios modelled, based on experience of UK recession of the late 1980s / early 1990s, which saw ¾ Up to 6 fold increase in PD ¾ Unemployment of 10%
Slide 106: Consumer Arrears
Consumer Modest uptick in longer-dated arrears Arrears 90+ days consistent with economic conditions For personal use only Home loans Credit cards One-off change in minimum repayment requirement – adjusted position also shown Personal loans Ex-BankWest 106
Slide 107: Sector Exposures
Sector Portfolio remains well diversified across Exposures industry sectors For personal use only Dec 08 Jun 08 Dec 08 Jun 08 Consumer 47.8% 46.9% Agriculture 2.4% 2.3% Mining 1.4% 1.2% Manufacturing 3.3% 2.9% Energy 1.8% 1.8% Construction 0.8% 0.8% Retail & Wholesale 2.6% 2.7% Transport 1.8% 1.7% B
Slide 108: Sector Exposures
Sector Exposures * For personal use only Dec 08 Jun 08 AAA to A+ to BBB+ Other Total AAA A+ to BBB+ Other Total AA- A- to to AA- A- to $bn BBB- BBB- Banks 42.8 18.8 2.2 0.7 64.5 41.7 14.7 1.8 0.4 58.6 Finance Other 15.1 11.2 5.7 6.7 38.7 17.0 11.0 5.4 5.7 39.1 Property 0.3 5.7 10.5 24.5 41.0 0.3 6.3
Slide 109: Large Exposures
Large Exposures For personal use only Top 20 Commercial Exposures * Large Exposures % 20 largest exposures as a % $m as at Dec 08 of Total Committed Exposures Note 1 * Note 2 Ex-BankWest Note 3 Notes: The ratings reflect the bulk of the aggregated entities exposure. Within these aggregated exposures
Slide 110: Troublesome Exposures
Troublesome* Increasing vigilance in uncertain times Exposures For personal use only Troublesome Exposures as a % of Total Commercial Exposures Volatility of financial markets and uncertain economic conditions requiring increased vigilance across sectors Approximately 43% of troublesome Sector P
Slide 111: Property
Well diversified portfolio with strong security cover Property and conservative LVR’s For personal use only Represents 7.1% of total exposures Up from 6.9% as at Jun 08 due to: ¾ Exchange rate movements ¾ Existing client lending ¾ Partially offset by reduced lending to new clients Secured Averag
Slide 112: Impairment Expense - Historical
Impairment Expense - Historical For personal use only bpts 350 300 250 200 150 100 50 0 CBA Peers 112
Slide 113: Impairment Costs - Historical
Impairment Costs - Historical For personal use only Early 1990’s Recession Dec 89 Current Economy GDP 4.25% 1.9% Unemployment 5.7% 4.5% (peaking at 10.8% in Dec 92) CPI 7.83% 3.7% Cash Rate 17.0%* 3.25% Vacancy Rates 4% 3-4% (peaking at 22% in Dec 92) CBA Commercial Lending % of GLA 67% 46% Consumer
Slide 114: Counterparty & Other Exposures
Counterparty & Other Exposures For personal use only No exposures to foreign sub-prime. US Debt/Agency No exposure to Fannie Mae, Freddie Mac or Federal Home Loan Bank. Net exposure to Sallie Mae ~ $150m. Non-Conforming $48m of investment grade Australian RMBS (~$30m rated AAA). Mortgage-Bac
Slide 115: Counterparty & Other Exposures
Counterparty & Other Exposures For personal use only Lenders Mortgage Mortgage insurance outsourced to Genworth (98%) and PMI (2%). Insurance “Extreme stress” scenario* - expected loss demand on LMI of ~$598m. CDOs Total exposure of ~$60m, with $7m collateralised by cash and AAA Australian RMB
Slide 116: Risk Weighted Assets
Risk Weighted Six months to December 2008 Assets For personal use only RWA Movement (%) ■ Strong Credit RWA growth (18%) driven by: Tier 1 ratio ¾ ‘Flight to quality’ volume growth Total impact (bpt) ¾ Additional liquidity holdings Credit Risk 18% (116) ¾ Currency depreciation Traded Market Risk -8%
Slide 117: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 117
Slide 118: Capital Considerations
Capital Considerations For personal use only Target Range Tier One Capital target range amended to in excess of 7%. PERLS II $750m to be redeemed in March 2009. Pre-funded by share issue PERLS II in December 2008 Offer period from 16th February to 11th March Share Purchase Plan Pricing is th
Slide 119: UK Comparison
UK Comparison For personal use only PricewaterhouseCoopers has worked with the Bank in identifying, in principle, the key differences between the APRA and FSA method of calculating regulatory capital. Summarised below are details of the major differences: Impact on Bank’s Item Items impacting pu
Slide 120: UK Comparison
UK Comparison For personal use only The following table estimates the impact on CBA capital, as at December 2008, of the differences between the APRA Basel II guidelines and those of the UK regulator, Financial Services Authority (FSA) Net Tier 1 Total Fundamental Capital Capital Capital1 December 0
Slide 121: European Comparison
European The Bank’s Tier 1 Capital Ratio compares favourably to Comparison domestic and international peers For personal use only P Basel II Tier 1 Capital P P P P P P Europe P P Average Tier 1 : 9.6% Europe Average Core Tier 1: 7.4% 1 Core Tier 1 Hybrids P Proforma Top 14 European banks by market c
Slide 122: Total Capital Movement
Total Capital Half year to December 2008 Movement For personal use only Total Capital Cash Ord. DRP 1 Share BankWest 2 Growth Currency 3 Debt issue Capitalised Other Total Capital Jun 08 NPAT Dividends $548m issues investment in RWA Movements $500m costs and ($97m) Dec 08 (include $2,013m ($1,662m)
Slide 123: Regulatory Expected Loss
Regulatory Expected Loss For personal use only Jun 08 Dec 08 $m $m Regulatory Expected Loss (EL) – before tax 2,372 3,382 Eligible Provision 1 Collective provision 1,346 1,879 Individually assessed provisions 367 896 Other credit provisions 32 30 Fair value credit adjustments 22 4 Subtotal 1,767 2,8
Slide 124: Hybrid Instruments
Hybrid Instruments For personal use only Hybrid dividends paid Franked/ Dec 08 Jun 08 Dec 07 Jun 07 Imputed PERLS II 22 23 20 19 F PERLS III 34 35 31 31 F PERLS IV 1 46 42 23 F Trust Preferred Securities 2003 16 17 18 17 N/A Trust Preferred Securities 2006 26 23 25 27 N/A ASB Capital prefs 6 6 5 5 I
Slide 125: Capital Treatment
Capital Treatment For personal use only AIFRS APRA Accounting Tier 1 Tier 2 Total Shareholders' Equity Ordinary Share Capital 3 3 3 Other Equity Instruments 3 3 3 Reserves General Reserve & Capital Reserve 3 3 3 Asset Revaluation Reserve 3 3 3 Other reserve accounts 3 Retained Earnings 3 3 3 Minorit
Slide 126: Interest Rate Risk in Banking Book
Interest Capital Assigned to Interest Rate Risk in Rate Risk Banking Book - APS117 For personal use only 3yr swap rate reduced by almost 4.00% during period Optionality (retail) Basis Risk Repricing and Yield Curve Risk Embedded Loss Jun 08 Sep 08 Dec 08 126
Slide 127: Funding Costs
Funding Costs For personal use only Long Term Funding Costs bpts Guaranteed Offshore Current Margin to BBSW Unguaranteed Domestic Guaranteed Domestic 30 Jun 08 1 Jun 07 Term 127
Slide 128: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 128
Slide 129: Sustainability Metrics
Sustainability Metrics For personal use only 1H09 2008 2007 2006 2005 2004 Customers Customer satisfaction rating – Main Financial Institution (MFI) Retail1 72.5% 70.1 % 70. 5% 64. 9% 65. 4% 63. 2% Customer satisfaction rating – Business2 76.8% 73.9% 60. 7% 56. 5% 55. 5% 54. 0% Customer satisfaction
Slide 130: Sustainability Progress
Sustainability Progress For personal use only Environmental Updated Environment Policy endorsed by Board in October 2008 Greener property portfolio with occupation of two new buildings at Sydney Olympic Park targeting 5 star NABERS environmental rating, and the development of environmentally-fri
Slide 131: Sustainability Focus
Sustainability Focus For personal use only Further embedding sustainability into our business processes Enhanced reporting and disclosure Supporting diversity and financial wellbeing in the community Helping our customers to meet their sustainability goals Creating greener workplaces Cre
Slide 132: Supplementary Information
Supplementary Information For personal use only Group and Banking Overview Wealth Management International Financial Services BankWest Credit Quality and Risk Management Capital, Funding and Liquidity Sustainability Economic Indicators 132
Slide 133: Economic Summary
Economic CBA Economists summary of key indicators Summary For personal use only Year ended 30 Jun 1 1 2005 2006 2007 2008 2009 (f) 2010 (f) Credit Growth % – Total 13.5 14.4 15.5 11.8 5½ to 7½ 9-11 Credit Growth % – Housing 14.7 13.7 13.0 9.9 6-8 9½ to11½ Credit Growth % – Business 11.8 16.6 19.1 16
Slide 134: Global Backdrop
Global Backdrop For personal use only Global Recession in 2009 Commodity prices have fallen WORLD GROWTH CBA COMMODITY PRICE INDEX Index Index % (annual % change) % (1997=100) 8 8 400 400 Source: IMF USD 6 6 Long-run 300 300 average 4 4 200 200 2 2 SDR Global recessions 0 0 100 100 1960 1966 1972 19
Slide 135: Domestic Protection
Domestic Protection For personal use only Lower AUD helps offset external shocks Demographics are supporting housing THE AUSTRALIAN DOLLAR POPULATION USD USD '000 '000 (rolling annual increase) 1.00 1.00 350 350 0.80 0.80 300 300 250 250 0.60 0.60 200 200 0.40 0.40 150 150 Jan-95 Jan-99 Jan-03 Jan-0
Slide 136: Domestic Risks
Domestic Risks For personal use only The pace of activity has slowed sharply Unemployment is edging higher GDP UNEMPLOYMENT RATE % % % % (% change) 5.5 5.5 6 6 Annual 5.0 5.0 3 3 4.5 4.5 0 0 4.0 4.0 Quarterly -3 -3 3.5 3.5 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08 Jul-05 Jul-06 Jul-07 Jul-08 Some ca
Slide 137: Credit Drivers
Credit Drivers For personal use only Credit Growth Housing CREDIT HOUSING CREDIT & DEMAND %pa '000 (annual % change) 27 60 40 % 40 % Housing 30 30 credit (lhs) Housing 19 20 20 20 10 10 11 -20 Pent up 0 0 demand Other Business (adv 6 qtrs, personal rhs) -10 -10 3 -60 Sep-82 Sep-87 Sep-92 Sep-97 Sep-
Slide 138: Housing Indicators
Housing Indicators For personal use only Housing loan approvals Housing affordability improving DEBT & HOUSE SALES Ann %pa ch 60 -7.0 H/hold interest payments 3¼% (% of income, inverted) cash (adv 5 qtrs, rhs) 27 -3.0 -7 1.0 House sales (lhs) -40 5.0 Sep-79 Sep-85 Sep-91 Sep-97 Sep-03 Sep-09 Establi
Slide 139: Housing Indicators
Housing Indicators For personal use only 55% customers paying in advance Easing financial pressures % % Index % 100 5.0 225 15 Household M o rtgage debt servicing 83 rate 6.3 188 (% of income, rhs) 12 (inverse, rhs) 65 7.5 150 9 113 6 48 Custo mers repaying 8.8 Housing 3¼% affordability cash abo ve
Slide 140: System Credit Quality
System Credit Quality For personal use only Sub-prime housing market Housing loan arrears Arrears by State Arrears by region 140
Slide 141: Results Presentation
Results Presentation For personal use only For the half year ended 31 December 2008 Ralph Norris CHIEF EXECUTIVE OFFICER David Craig CHIEF FINANCIAL OFFICER 11 February 2009 Commonwealth Bank of Australia ACN 123 123 124
Commonwealth Bank of Australia — H1 FY2009 Earnings Presentation on 6ix