Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Debt Investor Presentation (February 2023)
63 slides from Commonwealth Bank Of Australia's debt investor presentation, Feb 15, 2023
Slide 1: Fixed Income Investor Discussion Pack
Fixed Income Investor Discussion Pack For the half year ended 31 December 2022
Slide 2: Important notice and forward-looking statements
The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 15 February 2023. 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: Retail trade above pre-covid, but weak in December
Retail trade above pre-covid, but weak in December1 Large difference between values and volumes1 Signs discretionary spend is moderating after mix shift2 Retail trade (Total) Retail trade (Index, 2018=100) CBA card spend - discretionary $bn Index Weekly, annual & change Clothing & footwear 140 75 35
Slide 4: RBA has materially lifted the cash rate
RBA has materially lifted the cash rate1 Interest payments rising significantly2 Fiscal settings helping control inflation3 RBA cash rate (with CBA Economist forecasts) Household debt interest (% of household disposable income) Underlying budget deficit ($Abn and % GDP) % $Abn % 5.0 % CBA (f) 60 Und
Slide 5: Delay between rate hikes and higher repayments
Due to the delay between rate hikes and higher And mix shift to fixed rate home loans in recent years, Combined with a lift in savings since 20203 repayments1 Household savings (rate and deviation from average $bn) although lower vs global levels2 Interest charged and scheduled repayments. Q2 2021 =
Slide 6: Wages growth above 3% for first time since 2013
Wages growth above 3% for first time since 20131 Inflation showing signs of peaking%2 Elevated inflation driven essential items2 Wages (annual % change) Price signals % Inflation (annual % change) 4 2.0 10 Non- 61.0 discretionary 1.5 8 3 Wage Price Index 57.0 6 Composite PMI 1.0 output price (lhs) 2
Slide 7: Australian economic forecasts: GDP, CPI, unemployment, cash rate
GDP % Headline CPI % Unemployment rate % Calendar year average Calendar year average Calendar year average GDP Nominal GDP 11.1 11.3 6.6 5.2 6.5 5.2 5.2 5.1 3.6 5.2 3.9 1.9 1.6 2.8 2.9 3.7 1.6 0.8 -1.8 -1.1 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 202
Slide 8: New Zealand: dairy prices, GDP, OCR, house prices
USD Dairy prices have eased on softer demand Growth is softening as the global economy slows Worker shortages are keeping the labour market tight Global dairy trade auction results1 (USD/tonne) NZ GDP growth (annual average)2 NZ unemployment rate3 (f) (f) 6,000 % 8 5 7 5,000 GDT overall price 3 6 4,
Slide 9: New Zealand economic forecasts
GDP % CPI % Unemployment rate % Financial year average Financial year average Financial year average GDP Nominal GDP 7.0 4.7 4.4 6.0 8.0 6.3 4.2 4.1 8.0 4.2 3.3 3.4 3.2 5.9 4.4 4.9 4.1 1.1 1.7 1.8 1.9 2.4 -0.7 -0.7 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023
Slide 10: Operating income, expenses, pre-provision profit, cash NPAT
Operating income2 Operating expenses2 Pre-provision profit2 Cash NPAT • Organic volume growth • Wage and supplier inflation Strong underlying Includes higher loan • Recovery in margin • Higher IT costs performance impairment expense 12% 5% 18% 9% 13,593 12,107 12,066 7,820 5,773 6,617 6,517 5,153 5,
Slide 11: Growth vs system and customer account growth
vs PCP ‘000 1H23 716 New retail transaction 2H22 643 +50% Balance growth vs system1 accounts2 1H22 477 Dec 22 vs Dec 21 ‘000 1.0x Dec22 1,088 Six months to Business Dec 22 transaction Jun 22 1,042 +9% accounts Dec 21 1,003 0.8x 0.7x 1.3x 1.5x ‘000 Dec 22 315 StepPay Jun 22 232 +122% accounts3 Dec 21
Slide 12: CBA digitally active customers
Digitally active Digital transactions Consumer mobile app Net Promoter Score5 customers1 % of total - by value3 8.3m 73% CBA 28.5 7.7 72 7.4 70 Peer 20.6 Dec 20 Dec 21 Dec 22 Dec 20 Dec 21 Dec 22 Peer 16.1 Peer 15.3 CommBank App Average monthly logins Dec 21 Dec 22 active customers2 per active custo
Slide 13: Digital adoption: consumer and business
Consumer1 New credit card Home loan accounts via digital4 digital doc utilisation5 of property transactions settled digitally of eligible customers choosing Digital Documents and Signing 84% 87% 78% 83% 72% 60% of all proprietary applications auto-decisioned decisions per day via CEE Dec 20 Dec 21 D
Slide 14: Deposit funding, long-term funding, liquid assets, capital
Deposit funding Long-term funding Liquid assets Capital % of total funding Weighted average maturity, yrs Average, $bn CET1 ratio, % Level 2 1 Jan 23 5.8yrs $193bn pro-forma 75% ex. TFF 12.1% CET1 ratio2 11.7% 11.4% 71% 5.4 140 3.5 55% 5.0%1 50 Pre- Pre- Pre- Pre- GFC COVID GFC COVID GFC COVID GFC C
Slide 15: Loan impairment expense, arrears, TIA
Loan impairment expense Arrears2 TIA Loan loss rate (bpts)1 90+ days $bn 1H22 2H22 1H23 Consumer 0 (15) 11 Personal Loans Credit Cards Home Loans3 % of TCE: 0.53% 0.48% 0.46% Corporate (7) 16 13 Total (2) (7) 11 1.48% 6.8 6.4 6.3 11bpts 0.97% Gross 0.95% 3.5 3.0 3.0 impaired 511 0.66% 0.52% $m 0.49%
Slide 16: CET1 movements
Level 17: Level 17,9: Movements in bpts 11.7% 12.4% Pro-forma Excludes the expected impact of the completion 103 (71) 12.1% (25) 11.4% of announced 9 15 (27) (14) buy-back; -25bpts 11.5% 10.25% Credit Risk3 (15) Regulatory Market Risk (7) prudential 8.00% minimum8 Operational Risk (2) Regulatory IRR
Slide 17: Required capital broadly unchanged
APRA Basel 3 requirements effective 31 Dec 22 1 Jan 23 RWA ($bn) • Required capital broadly unchanged • Greater risk discrimination in home loans RWA Owner-occupied home loans Commercial property 262 (17%) 218 reduction • Closer alignment of non-retail commercial Other corporate + institutional prop
Slide 18: Market shares and peer comparison
MFI share1 (%) Home lending share2 (%) Household deposits share3 (%) Business banking share Deposit funding Including institutional Peers as at Sep 22 75% 70% 67% 65% Lending share (%)2 Deposits share (%)3 CBA Peer 3 Peer 1 Peer 2 34.7% 22.4% 25% 22.1% 20% 27% 15.7% 15.7% 16.4% 14% 20% 13% 12.2% 11.
Slide 19: Funding, liquidity and capital
Funding, liquidity and capital
Slide 20: Funding composition, wholesale funding and funding profile
Funding composition Wholesale funding Funding profile Deposit growth supporting 75% of funding Weighted to long term TFF refinance to be managed across FY23-FY25 period % of total funding FY23 Maturity3 issuance Short term 9% 8% 7% 77 wholesale1 26% 69% 71% 18% 18% 18% 66 Long term 19% 44% 4.7 4.8 w
Slide 21: Deposit funding and deposits vs peers
Deposit funding Deposits vs peers1 Deposits in NSFR2 $bn As at December 2022 ($bn) 700 Peers as at September 20223 75% Other 537 74% 337 477 73% deposits 264 356 291 300 CBA 195 Thousands Household Peer 3 363 deposits 273 186 161 Peer 2 250 Dec 21 Jun 22 Dec 22 CBA Peer 3 Peer 2 Peer 1 Peer 1 200 Gr
Slide 22: Short-term and long-term funding by product
Portfolio mix Short-term funding by product $bn Certificates of deposits 57% Long-term funding1 136 51% Commercial paper 19% Short-term funding2 78 30% Central Bank deposits 18% MTN 4% Term Funding Facility (TFF) 51 19% Other 2% Long-term funding by currency Long-term funding by product TFF 27% Dec
Slide 23: CET1 and dividend per share
CET1 CET1 Dividend per share (cents) Impact of share CET1 APRA buy-backs +539% Level 2 Level 1 International Payout Ratio (cash NPAT basis)1 Assets 210 200 18.5% 200 200 200 175 +180% 150 11.7% 69% 11.4% 62% 74% 79% 0 72% 67% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Slide 24: T2 capital profile
At 5% by At 6.5% by • Based on 1 Jan 20231 RWA, CBA requires an additional $0.8bn and $7.9bn of $bn 1 Jan 2024 1 Jan 2026 LAC qualifying issuance (excluding maturities) by 1 Jan 2024 and 1 Jan 2026 respectively Risk Weighted Assets at 1 January 2023 474.3 474.3 Tier 2 Requirement 23.7 30.8 Existing
Slide 25: Financial overview
Financial overview
Slide 26: Financial, balance sheet, capital and funding
Financial Balance sheet, capital & funding Statutory NPAT ($m) 5,216 +10% Capital – CET12,5 (Int’l) 18.5% +10bpts Cash NPAT ($m) 5,153 +9% Capital – CET12 (APRA) 11.4% (40bpts) ROE % (cash) 14.1% +180bpts Total assets ($bn) 1,232 +7% EPS cents (cash) 304 +31c Total liabilities ($bn) 1,160 +8% 2 DPS
Slide 27: Volume growth, margin recovery, impact of divestments
• Impact of divestments (General Insurance and Bank of Hangzhou) • Lower equity accounted profits • Volume growth2 • Reduced CommSec equities trading income, partly offset by +9% • Margin recovery • Increased volume driven deposit, FX and business lending fee income +18bpts 1,889 (403) +12.3% 13,593
Slide 28: 2H23 considerations
2H23 consideratons • Intensity of home loan and deposit price competition • Rate of customer deposit switching • Higher wholesale funding costs and BRP • Terminal cash rate, replicating portfolio & equity hedge Higher earnings on replicated Recovery in margin products and capital Continued competiti
Slide 29: Cost to income
Cost to 45.3% +4.4% excl. remediation 42.5% Income2: Contribution to mvt: +0.8% +4.3% +1.7% (1.6%) +5.2% 238 91 (90) 44 5,773 5,490 Cumulative cost savings • Wage inflation3 realised: • Inflation related to software and IT • 1H23 $597m vendors • 1H22 $507m • Additional investment and financial crime
Slide 30: Remediation and program costs; customer refunds
Remediation & program costs Customer refunds Cumulative spend and provisions ($m)1 Cumulative customer refunds ($m)1 • $1,943m returned to customers • $518m remaining 3,855 3,535 3,210 Salaried Aligned Advice Wealth (Aligned Advice)2 1,133 Period FY09 – FY18 FY09 – FY19 2,653 1,943 Refunds made Esti
Slide 31: Cost reduction and investment spend
Cost reduction Investment spend1 Cumulative savings Cost approach Shift to productivity & growth 945 933 963 • Simpler, more efficient 945 933 963 484 513 474 Expensed business for our customers and people 597 559 • Continue to invest in the 39% Productivity & 45% growth 432 459 479 Capitalised busi
Slide 32: Group lending and deposits
Dec 22 vs Dec 22 vs Group lending $bn Dec 21 Jun 22 Dec 22 Jun 22 Dec 21 +7.3% Home loans 605.9 622.0 639.3 2.8% 5.5% Consumer finance 16.7 16.5 17.0 3.0% 1.8% +3.1% Business loans2 141.2 148.9 156.5 5.1% 10.8% 910.5 Institutional loans 84.8 95.5 97.7 2.3% 15.2% 882.9 848.6 Total Group lending 848.6
Slide 33: Loan loss rate by business unit
Loan loss rate1 Loan loss rate by business unit1,2 bpts 16 bpts (7) (15) Consumer Corporate (2) 1H22 1H23 (7) 41 1H22 2H22 33 23 25 76 21 20 19 50 43 16 16 15 15 16 10 11 24 23 20 7 11 9 13 11 8 10 14 3 26 26 16 13 0 17 19 17 18 18 18 18 18 17 4 4 11 (7) (2) (4) (3) (8) FY10 FY11 FY12 FY13 FY14 FY15
Slide 34: Total credit provisions and scenarios
Total credit provisions Provisions and scenarios $bn Dec 22 TP/CRWA: 1.29% 1.36% 1.38% $5.54bn 6.87 5.54 5.35 4.80 3.50 Pre COVID-19 $bn 2,3 2,4 Jun 19 Jun 22 Dec 22 Central Recognised Downside provisions 1. The Group uses four alternative macro-economic scenarios to reflect a range of possible futu
Slide 35: Provision coverage and provisions by stage
Provision coverage2/CRWA Provisions by stage Stage 2 exposures Performing Non-performing by credit grade3 Credit Credit Total Dec 21 Dec 22 exposures provisions $150bn Retail secured 1.04% 0.96% 1.39 1.38 $140bn $m Dec 21 Dec 22 Dec 21 Dec 22 8 Retail unsecured 7.75% 6.97% 1.28 9 Weak 1.16 Non-Retai
Slide 36: Asset quality
Asset quality
Slide 37: Group total committed exposure by sector
Provisions to total Group TCE ($bn) TIA ($bn) TIA % of TCE committed exposure % Jun 22 Dec 22 Jun 22 Dec 22 Jun 22 Dec 22 Jun 22 Dec 22 Consumer 748.5 765.6 1.9 1.9 0.3% 0.2% 0.3% 0.4% Government administration & defence 227.6 233.6 0.0 0.0 0.0% 0.0% 0.0% 0.0% Finance & insurance 91.1 93.1 0.1 0.1 0
Slide 38: Commercial property exposure
• Exposure diversified across sectors and by counterparty, with the top Group exposure Dec 21 20 counterparties representing 14% of the portfolio Jun 22 84.4 87.3 89.9 Dec 22 • Net movement in investment grade was predominantly driven by 36.8 35.3 43.4 internal property model recalibration • Impaire
Slide 39: Airlines and aircraft lessors exposure
Group exposure1 Dec 21 Airlines & aircraft lessors Jun 22 • Strengthening demand following the opening up of domestic and international 25.6 54.6 55.8 60.2 25.4 Dec 22 travel is supporting recovery of airlines across the industry. Portfolio 24.5 amortisation has been partially offset by select trans
Slide 40: Entertainment, leisure and tourism exposure
Group exposure Dec 21 • Diverse industry with many sub-sectors with distinct challenges 14.8 Jun 22 14.0 14.0 • Pubs, clubs and restaurants are experiencing positive trends in Dec 22 performance nearing pre-Omicron impacted levels • Accommodation benefitted from heightened domestic travel and 6.7 6.
Slide 41: Retail trade exposure
Group exposure Dec 21 Jun 22 • CBA’s data shows household spending remains elevated, though 13.4 13.6 14.7 Dec 22 32.0 29.6 29.2 trajectory is expected to ease with softening consumer sentiment as interest rates rise and inflation take effect 1.0 1.0 1.1 1.9 1.7 1.8 1.0 1.1 1.1 • Household Spending
Slide 42: Building and construction exposure
Group exposure Dec 21 • Pressures relating to supply chains and materials cost inflation have Jun 22 eased, however site productivity continues to be hindered by labour 13.3 Dec 22 10.8 11.2 11.8 constraints and adverse weather. This has caused instances of larger than expected losses for FY22 and d
Slide 43: Mining exposure by sector
Group exposure Dec 21 Jun 22 Dec 22 67.0 67.3 68.0 7.7 7.8 • Exposures of $7.5bn (0.5% of Group TCE); overall exposure remained 7.5 largely unchanged with further reductions in oil & gas facilities 0.6 0.6 0.5 1.4 1.2 0.7 1.1 1.1 0.7 • Stable performance over the past 6 months: TCE ($bn) % of Group
Slide 44: Credit cards and personal loans arrears
Credit cards1 Personal loans1 Group 90+ days Group 90+ days 0.49% 0.52% 0.46% 0.97% 1.02% 0.95% 9,267 9,191 9,648 4,782 4,810 4,987 45 48 44 46 49 48 $m $m Arrears Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio Arrears Portfolio balance balance balance balance bala
Slide 45: Credit cards and personal loans arrears by portfolio
4.0% Credit cards1 6.0% Personal loans1 ASB Group 30+ days Group 30+ days CBA Group 4.0% Bankwest 2.0% 2.0% 0.0% 0.0% Dec 20 Jun 21 Dec 21 Jun 22 Dec 22 Dec 20 Jun 21 Dec 21 Jun 22 Dec 22 Credit cards1 Personal loans1 Group 90+ days 2.0% Group 90+ days 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0% Dec 20
Slide 46: Home lending
Home lending
Slide 47: Monthly home prices now falling quickly
Monthly home prices now falling quickly1 Divergence between capital cities still evident1 Home lending has fallen2 Dwelling prices (8 capital cities) CoreLogic Dwelling Prices (3mth change) Housing loan approvals (excluding refinancing) % $bn % % 12 20 Sydney Brisbane Owner-occupier 6 20 9 16 (ex FH
Slide 48: Consistent market share performance
Consistent market share performance1 Net growth driven by new fundings2 New fundings remain strong3 25% 25% 77 (6) (18) 23% 21% Internal Refinance 6 (39) 94 21% 20% 76 76 77 71 65 15% 14% 556 570 15% 13% $bn $bn Dec 17 Dec 22 Jun 22 New Internal Repayments Property Dec 22 1H21 2H21 1H22 2H22 1H23 Fu
Slide 49: Borrowing capacity reducing
Borrowing capacity reducing Driven by increase in serviceability buffer and interest rates Change in maximum borrowing capacity2 – Indexed Dec 16 (Loans assessed based on the higher of the customer rate3 + buffer, or minimum floor rate) 120% 10.55% 7.55% 8.30% 3.00% 100% 7.30% 7.05% 7.05% 7.05% 2.50
Slide 50: Repayment buffers
Repayment buffers – 34% more than 2 years in advance1 Savings buffers1 (Payments in advance 2, % of accounts) Offset account balances ($bn) 70 Residual 66 4% 57 34% New loans < 12mths 5% 45 49 4% Structural e.g. fixed 15% Investment loans 12% 9% 6% 6% (negative gearing/tax 5% benefits) > 2 years 1-2
Slide 51: Key serviceability changes by year
Key serviceability changes by year2 New loan assessment (from FY16)3 • Increased serviceability buffer & buffers on existing debts • Removed Low doc and EQFS products • All income used in application to assess serviceability is verified FY16-19 • Tightened lending requirements for non-residents and
Slide 52: Approximately 83% of the book exposed to rate increases
Approximately 83% of the book is exposed to rate Increases in minimum monthly repayments reflect the net impact of a increases by December 2023 higher interest component and lower principal payments (with more of the principal paid off in outer years) $483bn % of variable loans with a direct debit a
Slide 53: Risk profile at portfolio
Risk profile at Portfolio RBA OCR 3.85% $483bn $23.5bn4 5% $1.1bn (0.2%)5 DLVR > 90%, no LMI Exposures with the $2.1bn (0.4%)5 DLVR 80-90%, no LMI capacity to deleverage 6% Higher $2.3bn (0.5%)5 LMI or reduce expenditure3 risk Exposures largely consisting of loans that originated prior to July 2019,
Slide 54: Home loan portfolio and new business metrics
Portfolio1,2 Dec 21 Jun 22 Dec 22 New Business1,2 Dec 21 Jun 22 Dec 22 3 Total Balances - Spot ($bn)3 539 556 570 Total Funding ($bn) 94 76 77 3 9 Total Balances - Average ($bn) 528 548 563 Average Funding Size ($’000) 382 394 424 10 Total Accounts (m) 2.0 2.0 2.0 Serviceability Buffer (%) 3.0 3.0 3
Slide 55: Fixed vs variable rate stock and flow
Fixed vs variable rate stock and flow2 Fixed rate expiry schedule Variable 54 Fixed 42 62% 62% 53% 28 67% 66% 27 24 93% 38% 38% 47% 7 33% 34% $206B $209B $45B 7% 1 5 $168B $192B $bn 1 0 $6B Jun 21 Dec 21 Jun 22 Dec 22 1H22 1H23 6 mths to 6 mths to 6 mths to 6 mths to 6 mths to 6 mths to 6 mths to 6
Slide 56: Negative equity and dynamic LVR bands
Negative equity2 Dynamic LVR bands3 Proportion of balances in negative equity % of total portfolio accounts • 54% of negative equity is from NSW and VIC 70% Dec 21 • 56% of customers ahead of repayments 60% Jun 22 • 35% of home loans in negative equity have Lenders Mortgage Insurance 50% Dec 22 Ne
Slide 57: Arrears by portfolio, product and repayment type
Arrears by portfolio Arrears by product Arrears by repayment type Group 90+ days Bankwest 90+ days1 90+ days1 1.0% 1.0% Interest Only CBA Principal & Interest 0.8% Group 0.8% 0.8% ASB 0.6% 0.6% 0.6% 0.4% 0.4% 0.4% Owner Occupied 0.2% 0.2% 0.2% Investment Loans 0.0% 0.0% 0.0% Dec 20 Jun 21 Dec 21 Jun
Slide 58: Impaired home loans
Impaired home loans 1.90 Overview 1.71 1.72 ASB 0.66 • Relatively stable impaired home loans year to date with small increase in ASB 0.52 0.56 impairments (+$46m) offset by improvement in Australian home loan impairments (-$39m) CBA 1.24 1.19 1.16 $bn Process for identification of impairments1 Dec 2
Slide 59: Losses to average gross loans and acceptances
Losses to average gross loans and acceptances (GLAA)2 Portfolio insurance profile3 % of home loan portfolio 2.5% Group total loans CBA home loans 18% Insurance with Genworth 2.0% or QBE for higher risk loans above 80% LVR 1.5% 5% Low deposit premium segment 1.0% 77% 0.5% Insurance not required – Low
Slide 60: Source, glossary & notes
Source, glossary & notes
Slide 61: Sources and notes
Slide 11 1. Home lending source: RBA Lending and Credit Aggregates. Household deposits source: APRA Monthly Authorised Deposit-taking Institution Statistics (MADIS). CBA Business Lending multiple is based on Business Banking growth rate (excluding Institutional Banking and Markets) over published AP
Slide 62: Notes
Slide 20 1. Includes other short term liabilities. 2. Represents the Weighted Average Maturity of outstanding long term wholesale debt with a residual maturity greater than 12 months as at reporting date. As at 31 December 2022, WAM and Long term % includes Term Funding Facility (TFF) drawdowns. 3.
Slide 63: Cash profit, capital and other customer metrics glossary
Cash Profit, Capital & Other Customer Metrics Funding & Risk Cash Profit The Profit Announcement (PA) discloses the net profit after tax on Main Financial MFI Share measures the proportion of Banking and Finance MFI Customers that nominated each bank as their Committed The RBA provided the CLF to pa
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