Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — H1 2018 Earnings Presentation
135 slides from Commonwealth Bank Of Australia's earnings presentation, Feb 7, 2018
Slide 1: Results Presentation
For personal use only Results Presentation For the half year ended 31 December 2017 Ian Narev, Chief Executive Officer Rob Jesudason, Chief Financial Officer Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 2: Overview
Overview For personal use only ► Period of effort to fix our mistakes ► Pride and dedication led to continuing operating momentum: − Customer satisfaction driving customer activity − Margin, productivity and credit discipline − Innovation investments paying off ► Continuing to prepare for the future
Slide 3: This result
This result1 Dec 17 vs For personal use only Dec 16 Statutory Profit ($m) 4,895 1.2% Cash NPAT ($m) 4,735 (1.9%) Cash Earnings per Share ($) 2.72 (3.2%) ROE – Cash 14.5% (120)bpts Dividend per Share ($) 2.00 +1 cent 1. Presented on a continuing operations basis. 3
Slide 4: This result
This result For personal use only ► Usual adjustments between Statutory and Cash NPAT ► Cash NPAT not as clear a view of underlying performance this period: − $375m AUSTRAC penalty provision1 – “above the line” − $200m provision for expected program costs – “above the line” − Accounting for Life Ins
Slide 5: Long term strategy continued
Long term strategy continued Productivity Investment Customers Strength Returns For personal use only Cost to Income % Gross Spend, HY $m % Satisfied3 CET1 (APRA) DPS Growth TSR (%) (avg, pa) 5 141% 48.4 10.4 #1 627 81.7 #1 6% Peer Avg6 438 #1 83% 4.8 40.8 70.5 Peer Avg6 #4 3% Dec 07 Dec 17 1,2 Dec
Slide 6: Operating momentum continues
Operating momentum continues 1 Operating Performance Strength Returns For personal use only 1H18 vs 1H17 Underlying2 International +1 cent 3 131% 16.3% 15.7% 2.00 ex AUSTRAC 5.1% 68% penalty 4.9% 4.7% provision 10.4% Expected compliance APRA 14.5% program spend +$200m Benefit from accelerated amorti
Slide 7: Our profits
Our profits Profit before tax For personal use only $6.8bn approximates Tax Expense Australia’s second largest tax payer 2.0 30% Dividends Returned to ~800,000 shareholders 3.5 50% (+ millions more via Super) Reinvested 20% Retained for lending, investment 1.3 & growth 1 Dec 17 1. Presented on a con
Slide 8: Customers
Customers Customer Satisfaction1 Net Promoter Score2 For personal use only 10 Retail 5 +4.4 +1.8 Rank 0.0 0 -0.7 Retail #1 -5 -10 Business = #1 -15 31.5% 27.1% -20 Wealth #1 -25 Internet #1 -30 CBA Peers +4.4 -35 Promoters Detractors2 NPS Dec 08 Dec 17 1. Refer notes slide at the back of this presen
Slide 9: Customers: Better Customer Outcomes
Customers Better Customer Outcomes For personal use only ATM Service Australian Assistance fee free not sales Call Centres Package No ATM withdrawal Tellers rewarded You’ll talk to Accessed by over fees no matter who for service, not CommBank people 2,700 customers you bank with sales on the phone s
Slide 10: Technology
Technology For personal use only Ceba Chatbot Tyme Coach 2018 ► Cloud core banking platform in South Africa ► Commercialised blockchain solution in South Africa ► Digital, real time, end-to-end personal loan in Indonesia ► Technology transfer into ASB - Chat to an automated A financial wellbeing 130
Slide 11: Strength
Strength Deposit Long term CET1 Portfolio Management For personal use only funding funding APRA Businesses exited/under review (%) (%) (%) ► GAM strategic review (ongoing) 68% 63% 10.4% ► Life insurance (2017 announced) 54% ► Vietnam branch (2017) 40% 4.8%1 ► Mumbai branch (2017) ► County banks (201
Slide 12: Regulatory update
Regulatory update Committed to investment in For personal use only AUSTRAC strengthening compliance ► Progress over recent years, including Program of Action ► Strengthened policies, systems and processes ($m) ► No evidence of misconduct or unethical behaviour 3,978 CAGR1 33% 3,370 APRA Inquiry ► Pr
Slide 13: Financial Update
For personal use only Financial Update Rob Jesudason, Chief Financial Officer Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 14: Key themes
Key themes For personal use only Strong ► Positive jaws on an underlying basis underlying ► Volume/margin management performance Adjusting ► Selective growth for the ► Strong capital and leverage ratios environment ► Funding further strengthened ► Costs and efficiency Areas ► Portfolio optimisation
Slide 15: Reported vs underlying result
Reported vs underlying result Insurance Operating Income ($m) 1H17 1H18 % For personal use only ► Presented on a “continuing operations” basis Reported (continuing ops.) 12,833 13,122 2.3% ► Life insurance excluded from reported results ► Comparatives re-stated Visa share sale (397) Aussie Home Loan
Slide 16: Strong underlying result
Strong underlying result1 For personal use only Dec 17 vs $m Dec 16 Underlying 2 Volume ↑ 3.5% Operating Income 13,122 2.3% 4.9% Margin ↑ 6 bpts Operating Expense 5,764 5.3% 4.7% Compliance projects +$200m Acceleration benefit ($64m) BAU costs ↑ 2.0% Operating Perform. 7,358 flat 5.1% Invest
Slide 17: Underlying operating income up 4.9%
Underlying operating income up 4.9% $m +4.9%2 For personal use only +6.2% 0.2% +6.3% 13,028 4 70 Volumes +3.5% Margins +6 bpts Funds 96 FUA +9.4% Insurance (26) weather events 540 12,414 Lending/other 85 higher SAF income, lending fees Trading (44) reduced market volatility Commissions (37) lower in
Slide 18: Selective volume growth
Selective volume growth Home Loan Growth 1 Apartment Development 3 For personal use only Interest Only 12 months to Dec 17 % of total home loan flows Total exposures $bn Owner-Occupied +7.5% (23%) Investor +0.5% 11.3% 38% APRA benchmark 5.24 (30%) 4.51 6.3% 4.06 5.2% 23% 21% Group CBA System 2 Syste
Slide 19: Margin up bpts this half
Margin1 up 6 bpts this half bpts 214 216 210 For personal use only Home loan repricing partly offset by business 1H16 1H17 1H18 lending competition Favourable 216 deposit mix 3 (3) 5 1 210 Lower basis risk +1 Bank levy2 and wholesale New Zealand +1 funding impact Decreased liquids +1 2H17 Asset Fund
Slide 20: BAU costs +2.0%, continuing to invest
BAU costs +2.0%, continuing to invest $m Total Operating Expenses1 For personal use only Frontline and compliance Investment spend3 1H18 benefit from staff, partly offset by +19% 1H17 accelerated productivity amortisation +4.7% +2.0% 5,318 200 53 5,182 (64) 48 5,081 1H17 Staff Other 1H18 Benefit fro
Slide 21: Retail Banking Services (RBS)
Retail Banking Services (RBS) Volume growth1 Margins3 Cost-to-income3 NPAT3 For personal use only Home Loan repricing Positive Jaws 1H18 vs 1H17 Balancing growth (IO, IHL) partly offset driving C:I to and returns by mix shift4 historical lows 12 months 7.7% 301 31.0% 31.0% System2 6.3% 5.6% 290 291
Slide 22: Business & Private Banking (B&PB)
Business & Private Banking (B&PB) Volume growth Margins Revenue NPAT For personal use only 12 months 1H18 vs 1H17 1H18 vs 1H17 Agri. +7% Favourable home loan Largely home lending Health +8% margins – business lending and deposits offset by Property (-2%) margins stable this half 18.3% 303 9.3% 5.6%
Slide 23: Institutional Banking and Markets (IB&M)
Institutional Banking and Markets (IB&M) Volumes Margins Revenue NPAT For personal use only Active portfolio Subdued volumes Higher funding Includes higher management – lower (returns focus) and lower costs provisions RWAs markets volatility 1,416 (15.8%) 110 110 (1.8%) (4.8%) 116.1 103 1,075 102.2
Slide 24: Wealth (Continuing Operations)
Wealth (Continuing Operations) Funds General Insurance NPAT For personal use only Strong markets driving Strong growth in funds Productivity General Insurance income AUM/FUA, partly offset management income focus driving impacted by higher event claims by lower margins (mix) and lower remediation po
Slide 25: Impairment expense
Impairment expense at 16 bpts 142 Consumer For personal use only CBA Group 18 18 17 (bpts)1 Consumer 1H17 2H17 1H18 73 Corporate Corporate Group 14 13 3 41 1H17 2H17 1H18 29 25 21 20 16 16 19 17 15 16 13 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1H18 Pro Forma 1. Cash LIE as a percentage of avera
Slide 26: Consumer arrears lower this half
Consumer arrears lower this half 90+ days For personal use only Personal Loans 1.41% 1.21% 1.21% 1.28% Credit Cards 1.03% 0.88% 0.89% 0.88% Home Loans1 0.60% 0.59% 0.53% 0.47% 0.49% 0.47% 0.44% 0.43% Ex WA 2 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Consumer arrears includes retail portfolios of Retail Ban
Slide 27: Provisioning
Provisioning $m For personal use only Individual Collective1 2,807 2,747 2,772 • Increased management overlays Overlay 756 711 811 1,017 • Economic overlay 980 978 unchanged Bankwest 140 145 212 139 198 184 195 211 216 Consumer 1,059 1,112 1,078 610 571 578 Corporate 852 779 744 Dec 16 Jun 17 Dec 17
Slide 28: Impact of adoption of AASB Financial Instruments
Impact of adoption of AASB 9 Financial Instruments Approximate pro-forma impact on For personal use only 1 collective provision (Jun 17) +$850m Approximately $850m increase in collective provision due to forward- $3.60bn looking factors Individually assessed provision unchanged $2.75bn Increas
Slide 29: Funding and liquidity
Funding and liquidity LCR Deposit Funding NSFR For personal use only Transaction accounts Supported by strong Liquid assets $139bn +14.7% deposits growth 135% 131% 129% 110% 68% 107% 67% 106% 66% CLF reduced by $10.2bn Jan 17 Dec 16 Jun 17 Dec 17 Dec 16 Jun 17 Dec 17 Dec 16 Jun 17 Dec 17 29
Slide 30: Wholesale funding
Wholesale funding • Favourable funding conditions – spreads have tightened in all maturities For personal use only • Opportunity taken to lengthen tenor at broadly flat wholesale funding costs Indicative Funding Costs1 Weighted Average Maturity3 Avg Annual Maturity 3.00% 33.8 Avg Annual Issuance 2 2
Slide 31: Strong CET1, leverage ratio well above minimum
Strong CET1, leverage ratio well above minimum CET1 Leverage Ratio For personal use only Organic +47 bpts International 16.3% International 6.1% (55) 110 (8) (8) (9) 10.4% 5.4% 10.1% 4.9% 5.1% Credit RWA 24 Operational RWA (17) Basel minimum4 IRRBB RWA (15) 3% Total (8) Jun 17 Jun 17 Cash Total Colo
Slide 32: Dividend
Dividend cents per share For personal use only 198 198 199 200 Cash NPAT Payout Ratio Payout Ratio Net of DRP 183 164 132 137 113 120 107 113 84% 71% 70% 70% 71% 70% 72% 63% 63% 62% 62% 71%1 61% 63% 57% 59% 59% 60%2 53% 46% 46% 46% 38% 37% 1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18
Slide 33: Outlook
Outlook For personal use only ► Fundamental economic trends positive overall, globally and for Australia ► Global monetary policy carries volatility risk ► Low wage growth continues to impact confidence ► Time of renewal at CBA, with continuing focus on the long term 33
Slide 34: Group Overview
For personal use only Group Overview Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 35: Our stakeholders
Our stakeholders Customers Shareholders For personal use only 1 15.9 million ~800,000 MFI for one in three Australians + millions more via super Community People $2.0bn in 48,900 1 taxes 1 Australia’s second largest taxpayer employed in 16 countries 1. Presented on a continuing operations basis. 34
Slide 36: CBA overview
CBA overview People and Technology and For personal use only Strength and customers innovation returns 48,9001 people delivering Australia’s leading technology Australia’s 2nd largest company quality service to bank and the first to offer real- by market capitalisation, with 15.9m1 customers time ba
Slide 37: Customer focus
Customer focus Our Vision Our Values Our Capabilities For personal use only To excel at securing and Integrity People Technology enhancing the financial Accountability wellbeing of Collaboration Productivity Strength people, businesses and Excellence communities Service Our “One CommBank” Growth Con
Slide 38: Customers: Net Promoter Score
Customers Net Promoter Score 1 Net Promoter Score 2 For personal use only 10 Retail Business 5 +4.4 5 +1.8 Jan 12 Dec 17 0 0.0 0 -0.7 -5 -3.2 -5 -10 -10 -15 -11.0 Dec 08 41.0% Dec 17 -14.8 31.5% -15 -20 27.1% -15.5 19.6% -25 NPS +4.4 -20 NPS Customer NPS -30 Rank Satisfaction CBA Promoters Detractor
Slide 39: Customers
Customers use only Customer lifecycle by age Serving 15.91 million customers MFI for 1 in 3 Australians 46.2% 45.6% Leading market shares in home lending2 24.6% and household deposits3 28.5% Dec 17 Highest share-of-wallet amongst peer group For personal Dec 12 (3.09 products per customer) 40.4% MFI
Slide 40: Delivering for our customers
Delivering for our customers 1H181 For personal use only NT $329m $103bn in total new lending2 666 QLD $9.1bn $6.9m WA 24k 178,000 new home loans2 8k3 $6.5bn $518m $12.5bn6 8k 16k 212k3 47k 10k $4.3bn in new loans to rural customers 263k $1.1bn6 $312m SA 110k3 $2.7bn 67k3 219k 159k3 Insured more tha
Slide 41: Customers: Branches and Proprietary Home Loans
Customers Our Branches Proprietary Home Loans For personal use only Proprietary % of 76,000 customer insights each week Total Home Loan Flows ($) 64% 11,500 video-conferencing referrals in 1H18 62% 62 new personal lenders in 1H18 57% 1-in-4 new CBA home loans insured by CommInsure1 47% 47% ~250 new
Slide 42: Technology: Budgeting Made Easy
Technology Budgeting Made Easy For personal use only Transaction Credit Card Notifications1 Spend Tracker Savings Challenge2 Spending Limits $11 spent at Restaurant Darling Harbour. So far this month you’ve spent $111.00 on Eating out. Instant notification Information to improve Making saving for Ca
Slide 43: Technology: Making Payments Easier
Technology Making Payments Easier For personal use only Tap & Pay Android Pay Wearables Beem Telco Telco Offered on Apple devices Secure payment Pay using a compatible Pay and get paid by via PayTag sticker since experience via NFC on Fitbit or Garmin wearable anyone securely and January 2014 Androi
Slide 44: Technology: Putting Customers In Control
Technology Putting Customers In Control For personal use only Insufficient Fund Credit Card High Cost Transaction Alerts Alerts Alerts1 Without an overdraft facility At Due Date After Due Date e.g. cash advances Your account is overdrawn by Cash advance warning: $150.00 $537.00. To avoid a fee, repa
Slide 45: Technology: Security and accessibility
Technology Security and accessibility For personal use only Face ID Lock, block & limit Ceba Live Chat Secure access to Lock and control Chat to an automated Secure conversation CommBank accounts using products via the digital banking assistant with a customer Face ID (Apple iPhone X) CommBank app f
Slide 46: Technology
Technology For personal use only Albert Youth app Giving customers 24/7 access The clever EFTPOS tablet A fun and safe way to help to insights about their 50+ apps in total young customers save and business 60% new merchant sales to CBA spend responsibly >600,000 88,000+ 44,000+ users have access de
Slide 47: Technology: Innovating internationally
Technology Innovating internationally For personal use only Money Transfer (SA) Tyme Coach (SA) Indonesia +270,000 registrations to-date Enrol in 3 minutes 50 kiosks deployed2 On the spot account creation via A financial wellness platform to improve First fully digital on-boarding process in 715 sel
Slide 48: Technology
Technology For personal use only Deploying social robots to enhance and Leveraging CBA’s data to support small to Providing seamless mobility by trialling personalise customer experiences, in medium-sized Australian businesses with the use of payment by MasterCard on collaboration with The Universit
Slide 49: Technology: Net Promoter Score
Technology Net Promoter Score1 #1 Free Financial app Customer’s likelihood to recommend main financial institution based on use of For personal use only Internet Banking services (via Mobile App) (Apple App Store & Google Play Store)2 50.7% Promoters +36.6 #1 Online Banking – 8 years in a row (CANST
Slide 50: Real time, digital banking
Real time, digital banking Digital - transactions Digital - sales Repositioning branches For personal use only 56% of all transactions by 29% of retail product ~50% smaller footprint value now digital sales now digital ~250 locations 56% Digital transactions by value Digital contribution to total sa
Slide 51: Real time, digital banking
Real time, digital banking CommBank app users CommBank app CommBank app For personal use only Monthly unique customers (m)1 Logons per day (m) Value of transactions per week ($bn)2 4.8 7.1 4.4 4.9 4.1 3.7 6.1 3.4 4.3 3.0 3.9 5.5 2.7 3.4 4.6 3.1 3.8 2 2.7 2.3 3.0 2.5 1.3 1.5 Jun 14 Dec 14 Jun 15 Dec
Slide 52: Corporate responsibility
Corporate responsibility Improving our Building a strong and A healthy & Empowering & supporting For personal use only customers’ experience responsible business engaged workforce our communities • 44.4% women in Manager • Over 2,700 customers • Removed withdrawal fees • Implementing the Sedgwick an
Slide 53: Corporate responsibility – performance data
Corporate responsibility – performance data For personal use only 1H18 FY17 FY16 FY15 Environment Renewable energy lending exposure ($bn) 3.3 2.8 2.2 1.4 Total greenhouse gas emissions (Group) (tCO2-e) 98,214 204,3171 164,111 179,276 Emissions per FTE (Australia) Scope 1 + 2 (tCO2-e) 2.3 2.3 2.6 2.7
Slide 54: CBA in Asia and South Africa
CBA in Asia and South Africa South Africa For personal use only TymeDigital by Commonwealth Bank SA: 715 kiosks Indonesia PT Bank Commonwealth (99%): 50 branches and 50 kiosks PT Commonwealth Life (80%): 25 life offices PT First State Investments China Bank of Hangzhou (18%): 201 branches
Slide 55: Financial Overview
For personal use only Financial Overview Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 56: Key Comparative Financial Metrics
Key Comparative Financial Metrics Profit Announcement For personal use only Inclusive of discontinued Continuing operations, Pro-forma continuing operations & incl. AUSTRAC incl. AUSTRAC operations, ex. AUSTRAC penalty provision2 penalty provision2 penalty provision3 Dec 17 v Dec 17 v Dec 17 v Half
Slide 57: 1H18 – result overview
1H18 – result overview1 Financial Balance Sheet, Capital & Funding For personal use only Statutory NPAT2 ($m) 4,895 1.2% Capital – CET1 (Int’l)4 16.3% 90 bpts Cash NPAT2 ($m) 4,735 (1.9%) Capital – CET1 (APRA) 10.4% 50 bpts ROE2 % (cash) (120) bpts Total assets ($bn) 962 (1.0%) 14.5 Total liabilitie
Slide 58: Result overview
Result overview Cash NPAT1 ($m) NIM1 Underlying C:I1,2 Cash ROE1 For personal use only +5.8% +6 bpts (10) bpts flat 4,828 5,1103 ex AUSTRAC 216 15.7% 15.7%3 ex AUSTRAC penalty 40.9% 210 40.8% penalty provision3 provision3 4,735 14.5% 1H17 1H18 1H17 1H18 1H17 1H18 1H17 1H18 Cash EPS1 (cents) DPS (cen
Slide 59: Statutory NPAT up 1.2%
Statutory NPAT1 up 1.2% $m Dec 161 Dec 171 For personal use only (1.9%) Cash NPAT (incl. AUSTRAC penalty provision)2 4,828 4,735 Hedging and IFRS volatility3 8 96 NZ revenue hedge Bankwest non-cash items (1) (1) Treasury shares valuation adjustment - - Gain/(loss) on disposal and acquisition of AH
Slide 60: Divisional contributions
Divisional contributions1 1H18 vs 1H17 For personal use only % of Group Cost-to- 2 Operating Operating Operating Cash Business Unit NPAT LIE Income 3 Income Expenses Performance NPAT 1H18 1H18 4 RBS 51.9% 5.7% 2.4% 7.2% 1.1% 7.7% 30.1% BPB 18.8% 5.4% 0.3% 8.5% (10.9%) 9.3% 35.7% IB&M 11.6% (4.8%) (1
Slide 61: Divisional contributions
Divisional contributions1 $m Operating Performance $m Cash NPAT For personal use only 1H18 vs 1H17 1H18 vs 1H17 Operating Income less Operating Expenses 2 2 RBS 277 +7.2% RBS 189 +7.7% BPB 111 +8.5% BPB 82 +9.3% IB&M (63) (6.7%) IB&M (90) (13.2%) WM 82 +29.3% WM 70 +33.2% ASB ASB 79 +10.6% 73 +14.5%
Slide 62: Total income drivers
Total income drivers1 $m +2.3% For personal use only Funds & Insurance 6.3% 12,835 13,135 Average FUA 9.4% AHL 94 Visa 397 Invest Exp 13 107 Insurance income (16.0%) AHL 22 421 1,175 Invest Exp 2 1,105 2,603 2,599 Other Banking Income 2,3 0.2% Derivative Valuation Adjustment (DVA) +$26m Trading (ex
Slide 63: Net Interest Income – balancing volume and margin
Net Interest Income1 – balancing volume and margin $m Volume Margin For personal use only +3.5% +6 bpts +4 bpts (1) bpt +2 bpts +1 bpt +6.2% Home Loans +4.0% 40 (40) 79 9,253 Bus/Corp Loans +2.8% 159 Lower basis risk +2 bpts Increased liquids (1) bpt Includes Bank 305 levy impact3 8,710 Home loan re
Slide 64: Group NIM up bpts
Over 12 months, Group NIM1 up 6 bpts bpts For personal use only 2 (1) 216 (1) 2 210 4 1H17 Asset Funding Portfolio Basis Capital & 1H18 pricing costs mix risk Other 1. Comparative information has been restated to conform to presentation in the current period. Presented on a continuing operations bas
Slide 65: Volume growth
Volume growth1 Household Deposits Home Lending Business Lending For personal use only Market share1 Market share1 40% 26% CBA Peers 24.6% 28.5% 23.1% 30% 21% CBA 23.4% Peers 20% 16% 14.9% 14.3% 14.6% 13.5% 10% 11% Jun 07 Dec 17 Jun 07 Dec 17 6.3% 5.6% 5.2% 4.2% 3.7% 2.9% 2.8% 3.2% 2.0% 1.9% 0.9% 0.1
Slide 66: Market share
Market share1 % Dec 17 Jun 17 Dec 16 For personal use only Home loans 24.6 24.8 25.0 Credit cards – RBA2 24.4 24.4 24.4 Other household lending3 27.0 26.6 26.1 Household deposits 28.5 28.8 29.0 Business lending – RBA 16.3 16.5 16.6 Business lending – APRA 18.4 18.6 18.6 Business deposits – APRA 20.4
Slide 67: Underlying other banking income broadly flat
Underlying other banking income broadly flat Other banking income1 Trading income For personal use only $m $m 2,599 2,603 Other Higher SAF 180 240 600 income 556 Trading 600 556 Trading 233 Lower 163 volatility Mix shift to Lending fees 533 558 driving lower fee based Markets products performance Sa
Slide 68: Strategic approach to costs
Strategic approach to costs Cost to Income1 Gross investment spend1 Investment spend1 For personal use only Underlying2 $m % of total (%) 1,214 Branches 11% 13% & Other 40.9% 40.8% 2nd Half 636 Risk & Expensed 36% 35% Compliance 349 Productivity 1st Half 578 627 1st Half 53% 52% & Growth Expensed Ex
Slide 69: Increased risk & compliance spend
Increased risk & compliance spend ($m) 1 FY13 - 1H18 (annualised) For personal use only Cumulative Spend over CAGR 5.5 years 33% 3,978 Examples • AML (Anti-Money Laundering) 3,370 • FATCA (Foreign Account Tax Compliance Act) • Stronger Super • Future Of Financial Advice 2,546 • Common Reporting Stan
Slide 70: Credit Quality & Risk Management
For personal use only Credit Quality & Risk Management Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 71: CBA home loans
CBA home loans Relatively low historical losses on the Losses manageable under a highly For personal use only Group’s home loan portfolio stressed scenario Losses to average gross loans1 Stress scenario 2.5% CBA Home Loans 3 year scenario of cumulative 31% house price decline, peak Group Total Loan
Slide 72: Home loan portfolio – Australia
Home loan portfolio – Australia Portfolio1 For personal use only Dec 16 Jun 17 Dec 17 New Business1 Dec 16 Jun 17 Dec 17 Total Balances - Spot ($bn) 423 436 444 Total Funding ($bn) 53 49 49 Total Balances - Average ($bn) 416 423 440 Average Funding Size ($’000)6 311 309 320 Total Accounts (m) 1.8 1.
Slide 73: Home loan portfolio – CBA
Home loan portfolio – CBA Portfolio1 Dec 16 Jun 17 Dec 17 New Business1 Dec 16 Jun 17 Dec 17 For personal use only Total Balances - Spot ($bn) 357 368 374 Total Funding ($bn) 47 41 42 Total Balances - Average ($bn) 351 357 371 Average Funding Size ($’000)6 313 305 316 Total Accounts (m) 1.5 1.5 1.5
Slide 74: Australian home loans – portfolio growth profile
Australian home loans – portfolio growth profile $bn Balance Growth State Profile For personal use only 1H18 1H18 Balance Growth NSW/ACT VIC/TAS QLD WA SA/NT 16 (48) % of Portfolio 49 (9) 6% 436 444 16% 34% 18% 2.8% 26% 2.2% 1.3% Jun 17 New Redraw & Repayments / External Dec 17 Fundings Interest Oth
Slide 75: Payments in advance
Payments in advance1 Payments in advance (% of accounts) For personal use only Residual: have less than 1 month 6% repayment buffer Structural: loans that structurally 9% restrict payments in advance e.g. fixed rate loans etc 4% New Accounts: loans that are less than one year on book 30% 16% Investm
Slide 76: Home loan serviceability
Home loan serviceability Key Origination Requirements1 Interest rate buffers built into For personal use only serviceability tests2 Serviceability CBA 80% or lower cap on less certain income sources 10% (e.g. rent, bonuses etc.) Income Limits on investor income allowances e.g. RBS 9% restrict th
Slide 77: Australian home loans - policy tightening
Australian home loans - policy tightening • Increased serviceability buffers • LVR restrictions on interest only and For personal use only • Reduced reliance on less investment lending stable income sources • Limits on lending to high risk apartment areas • LVR restrictions and reduced reliance on r
Slide 78: Interest only - Australia
Interest only - Australia Arrears Balances1 Arrears1 Income Profile1 For personal use only 90+ days 90+ days Applicant Gross Income Band Fundings (6 Months to Dec 17) 300 1.20% 50% Billions Interest Only Interest only 90+ day arrears balances 45% Interest Only Principal & Interest Interest only – to
Slide 79: Interest only (CBA) – switching
Interest only (CBA) – switching Balance Movement ($m)1 Scheduled IO term expiry1 For personal use only Interest Only (IO) to Principal and Interest (P&I) (% of total IO Loans) Quarterly 26% Payments in advance > 6 21% 29% 20% months2: accounts with a financial 5,540 buffer to absorb any increased 19
Slide 80: Investor lending
Investor lending Growth1 Income Profile2 Arrears2 For personal use only Year on year (%) Applicant Gross Income Band 16% 90+ days 40% Fundings (6 Months to Dec 17) 1.00% 35% 12% Owner Occupied 0.80% 30% 8.3% Investment Loans 8% 25% 7.5% 0.60% 4.1% 20% 4% 0.40% 15% 0.5% Owner Occupied 0% Portfolio 10
Slide 81: Home loan portfolio arrears
Home loan portfolio arrears Arrears by BU Arrears by Year Arrears by Vintage For personal use only Group 90+ days1 Group 90+ days1 Australia2 90+ days 1.8% 1.8% 2.0% Group Bankwest CBA ASB 2013 2014 2015 2016 2017 1.5% 1.2% 1.2% FY07-FY10 FY13 FY12 1.0% FY14 0.6% 0.6% FY11 0.5% FY15 Excluding WA FY1
Slide 82: Australian home loans arrears by State
Australian home loans arrears by State Home loan arrears Western Australia For personal use only 90+ days 1.50% % of Portfolio Rigorous stress testing 16% 34% WA 18% Credit policy tightening e.g. LVR caps, insurance 6% 26% QLD requirements 1.00% SA/NT Tailored treatments by segment National 0.
Slide 83: Loan to Value Ratio (LVR) and portfolio insurance
Loan to Value Ratio (LVR) and portfolio insurance Home Loan Dynamic LVR1 Portfolio Insurance Profile2 For personal use only % of Australian Home Loan portfolio 70% Insurance with Genworth or QBE for higher risk loans above 80% Average Excess of Loss LVR 60% Dynamic Re-insurance LVR 22% % of Total Po
Slide 84: Consumer arrears
Consumer arrears Credit Cards Personal Loans For personal use only 1.8% Group 90+ days 1.8% Group 90+ days 1.2% Group 1.2% Bankwest CBA 0.6% 0.6% ASB 0.0% 0.0% Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Credit Cards Personal Loans 3.0% 4.0% Group 30+ days Group 30+ days 2.
Slide 85: Regulatory exposure mix
Regulatory exposure mix For personal use only Regulatory Credit Exposure Mix Portfolio CBA Peer 1 Peer 2 Peer 3 Residential Mortgages 56% 41% 47% 57% Corporate, SME, Specialised Lending 27% 31% 38% 29% Bank 4% 5% 5% 2% Sovereign 9% 15% 8% 8% Qualifying Revolving 3% 3% 1% 2% Other Retail 1% 5% 1% 2%
Slide 86: Sector exposures
Sector exposures Exposures by Industry Top 20 Commercial Exposures For personal use only AAA A+ BBB+ TCE $bn Other Dec 17 A- to AA- to A- to BBB- BBB A- Sovereign 96.8 7.5 0.5 0.1 104.9 AAA Property 2.1 6.4 13.6 45.7 67.8 BBB+ BBB- Banks 26.5 22.2 4.5 2.4 55.6 BBB- BBB Finance - Other 21.9 21.8 8.2
Slide 87: Credit exposures by industry
Credit exposures by industry Corporate Portfolio Quality For personal use only Group TCE1 TIA $m TIA % of TCE1 % of book rated investment grade Jun 17 Dec 17 Jun 17 Dec 17 Jun 17 Dec 17 TCE ($bn) 68.7 69.2 68.0 Consumer 55.4% 56.6% 1,578 1,581 0.26% 0.26% 500 Sovereign 9.7% 9.7% - - - - 400 Other Pr
Slide 88: Mining, oil & gas – lower exposure
Mining, oil & gas – lower exposure Overview Group Exposure For personal use only Exposure of $13.8bn (1.3% of Group TCE), $0.9bn 73 70 71 Dec 16 reduction on prior half due to repayments and lower Jun 17 uncommitted facility utilisations. Dec 17 Relatively stable performance over the past 12 mon
Slide 89: Commercial property – lower exposure
Commercial property – lower exposure Overview Group Exposure For personal use only Dec 16 71.870.2 67.8 Exposure has reduced in the half year. Remains diversified across Jun 17 sectors and by counterparty. Dec 17 Composition remains steady in last 6 months with 86.2% of Commercial Property expos
Slide 90: Residential apartments – weighted to Sydney
Residential apartments – weighted to Sydney Overview1 Profile (Dec 17) For personal use only Total Residential Apartment Development1 Apartment Development exposure reduced $10.9bn (16% of CP) $4.1bn (0.4% of TCE) $0.4bn for the half. Other Perth $0.2bn Facilities being repaid on time from pre-s
Slide 91: Retail trade
Retail trade Overview Group Exposure For personal use only Dec 16 12.6 12.2 Exposure of $12.2bn (1.1% of Group TCE), stable on prior half 12.2 Jun 17 Personal and household good retailing accounts for $6.1bn 35 Dec 17 31 31 (0.6% of Group TCE) Volume and margin competition continues to effect
Slide 92: Agriculture – NZ Dairy portfolio quality generally improving
Agriculture – NZ Dairy portfolio quality generally improving Overview Group Exposure For personal use only Dec 16 Exposure of $21.5bn (2.0% of Group TCE) is well diversified 21.221.7 21.5 Jun 17 by geography, sector and client base. Dec 17 Australian agriculture portfolio performing well. 14 14
Slide 93: Capital, Funding & Liquidity
For personal use only Capital, Funding & Liquidity Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 94: Capital drivers
Capital drivers bpts Capital – CET1 (APRA) For personal use only 110 24 (15) (17) (8) (9) 10.4% 10.1% (55) Jun 17 Dividends Cash Credit IRRBB Operational Colonial Other Dec 17 APRA (Net of DRP) NPAT 1 RWA RWA RWA Debt APRA Total Risk Weighted Assets Credit Risk Weighted Assets $bn $bn 6.5 0.2 441 37
Slide 95: Interest rate risk in the banking book
Interest rate risk in the banking book For personal use only bpts 13 27 48 20 56 52 71 2,235 1,880 Optionality Risk 1,401 1,712 Optionality Risk Basis Risk Basis Risk Repricing & Yield 868 596 Curve Risk 388 Repricing & Yield Curve Risk $m Embedded Gain Embedded Gain (offset to capital) (offset to c
Slide 96: Dividends over time
Dividends over time Payout ratio (cash) For personal use only 74.2% 75.0% 78.2% 73.9% 73.2% 75.8% 75.9% 75.1% 75.2%1 76.5% 75.0% 80% 81% 81% 82% 90% 81% 70% 71% 70% 72% 84% 70% 84% 71% 88% 87% 62% 62% 63% 61% 63% 84%74% cents 107149 113 153 113 115 120 170 132 188 137 197 164 200 183 218 198 222 198
Slide 97: International CET1 ratios
International CET1 ratios 21.7 G-SIBs in dark grey For personal use only 16.3 16.2 15.8 15.5 15.0 14.9 14.8 14.6 14.5 14.3 14.2 13.9 13.9 13.4 13.3 13.1 12.9 12.8 12.7 12.3 12.3 12.2 12.1 12.1 11.9 11.9 11.5 11.5 11.5 11.3 11.2 11.2 10.9 10.8 10.7 10.6 China Construct. Bank China Merchants Bank Stan
Slide 98: APRA and International comparison
APRA and International comparison The following table provides details on the differences, as at 31 December 2017, between the APRA Basel III capital requirements and internationally comparable capital ratio1. For personal use only CET1 APRA 10.4% Equity investments Balances below prescribed thresho
Slide 99: CET1 – Internationally comparable
CET1 – Internationally comparable (bpts) Internationally Comparable1 CET1 For personal use only 40 (35) 147 (4) (4) 16.3% 15.6% (74) Jun 17 Jun 17 Cash Credit Operational Colonial Other Dec 17 Int'l Final Dividend NPAT 2 RWA RWA Debt Int'l (Net of DRP) 1. Internationally comparable capital - refer g
Slide 100: Regulatory expected loss
Regulatory expected loss For personal use only $m Dec 16 Jun 17 Dec 17 Regulatory Expected Loss (EL) 4,698 4,736 4,592 Eligible Provisions (EP) Collective Provisions1 2,561 2,486 2,525 Specific Provisions1,2 1,900 1,856 1,813 General Reserve for Credit Losses adjustment 532 589 554 Less: ineligible
Slide 101: Leverage ratio – above Basel minimum
Leverage ratio – above Basel minimum CBA Leverage Ratio well above prescribed Basel Committee minimum For personal use only Leverage ratio introduced to constrain the build-up of leverage in $m Dec 17 the banking system. Tier 1 Capital 54,465 The Basel Committee has introduced a minimum requirement
Slide 102: Capital conservation buffer (CCB)
Capital conservation buffer (CCB)1 The Australian major banks are Domestic % of earnings able to For personal use only Systemically Important Banks (D-SIBs). be used for CET1 ratio Value range From 1 January 2016, D-SIBs are required discretionary to hold 1% additional capital in the form of payme
Slide 103: Replicating portfolio
Replicating portfolio Actual and Forecast Scenario For personal use only Replicating Portfolio Yield Official Cash Rate Jun 02 Jun 17 Dec 17 Replicating portfolio provides partial economic hedge for certain liabilities and assets that display imperfect correlation between the cash rate and the produ
Slide 104: Funding overview months to December 2017
Funding overview 6 months to December 2017 For personal use only $bn Source of funds Use of funds New 8.9 yrs Portfolio 4.6 yrs 68% Deposit Funded 131% (12) LCR 16 Core Funding Surplus $3bn 3 (11) (4) 3 (3) 7 1 Equity Long Term Long Term Short Term Collateral Customer Lending HQLA assets Other Asset
Slide 105: Deposit funding
Deposit funding Deposits vs Peers1 Deposits in LCR calculation2 For personal use only 160 December 2017 ($bn) As at 30 Sep 2017 ($bn) 140 CBA overweight more stable deposits CBA 120 Peer 1 Peer 2 489 100 Peer 3 415 Other 80 deposits 239 326 209 268 60 201 149 40 Household 250 deposits 206 20 125 119
Slide 106: Deposit funding – transactions
Deposit funding – transactions Group Transaction Balances1 Growth across divisions1 For personal use only 1H18 vs 1H17 +14.7% 153,015 18.9% Group 14.7% 14.9% 15.2% 142,916 133,427 6.3% 6.7% $m 1H17 2H17 1H18 RBS BPB IB&M 2 BW NZ 3 RBS New Transaction Accounts4 Retail Deposit Mix # ‘000 246,021 255,2
Slide 107: Funding costs vs cash rate
Funding costs vs cash rate • The path of lending rates and funding costs are influenced by the RBA cash rate, but funding cost For personal use only increase vs RBA cash rate since GFC is well illustrated • Spread between funding costs and lending rates has narrowed because not all funding cost incr
Slide 108: Wholesale funding – overview
Wholesale funding – overview Funding composition Average long term funding costs For personal use only Predicted LT funding costs Margin to BBSW (bpts) if current market rates Customer Deposits 68% remain unchanged 1 2.00 ST Wholesale Funding 12% 1.75 LT Wholesale Funding > 12 months 9% 1.50 LT Whol
Slide 109: Wholesale funding – portfolio
Wholesale funding – portfolio Term Wholesale Funding profile – issuance & maturity Current Period Issuance For personal use only $bn Date Type Tenor (yr) Volume Spread at Issue Issuance Maturity Jul 17 USD Senior 30.0 1,500 T+103 Jul 17 AUD Senior 5.0 125 3m BBSW +0.88% 50 Weighted average maturity
Slide 110: Regulatory requirements
Regulatory requirements Liquidity Coverage Ratio (LCR) Net Stable Funding Ratio (NSFR) For personal use only 135% 129% 131% 110% 616.6 154.7 558.8 Liquids and Wholesale 141.7 138.5 Other Assets Funding & Other 114.8 110.1 105.4 Other Loans Retail/SME Residential CLF Mortgages 58.5 CLF CLF <35% 48.3
Slide 111: Regulatory change timetable
Regulatory change timetable 2018 2019 2020 2021 2022 For personal use only ADIs to target unquestionably strong capital ratios, Capital to exceed APRA’s unquestionably which will also cover “Basel III” proposals unquestionably strong Implementation strong Consultations expected from early 2018 bench
Slide 112: Economic Overview
For personal use only Economic Overview Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 113: Key economic indicators (June FY)
Key economic indicators (June FY) GDP % CPI% Unemployment Rate % For personal use only GDP Nominal GDP 6.2 3.1 5.8 5.9 2.8 2.7 2.7 5.8 2.6 2.4 5.7 2.4 2.1 4.1 4.2 2.0 3.7 1.7 1.7 5.4 1.4 5.2 2.4 1.5 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2
Slide 114: Key economic indicators (June FY)
Key economic indicators (June FY) 2013 2014 2015 2016 2017 2018 2019 For personal use only World GDP 3.5 3.6 3.4 3.2 3.6 3.7 3.7 Australia Credit Growth % – Total 3.1 5.0 5.9 6.2 5.4 5-6 4-6 Credit Growth % – Housing 4.6 6.4 7.3 6.7 6.6 4½ - 5½ 4-6 Credit Growth % – Business 1.2 3.4 4.4 6.5 4.3 5½ -
Slide 115: A sustainable global upturn is underway
A sustainable global upturn is underway Global growth momentum1 OECD gross fixed CAPEX2 For personal use only (number of countries) (annual % change) % of total % 100 7 forecasts 75 Accelerating 0 Mar 06 Mar 09 Mar 12 Mar 15 Mar 18 50 Slowing -7 25 Contracting 0 2004 2007 2010 2013 2016 2019 -14 IMF
Slide 116: A sustainable global upturn is underway
A sustainable global upturn is underway Global industrial production1 Policy indicators2 For personal use only (annual % change) % % 8.00 2.00 14.0 OECD fiscal pulse ((-) stimulatory / (+) 7.00 restrictive) 1.00 (RHS) 7.0 6.00 0.00 5.00 % 0.0 4.00 -1.00 3.00 -2.00 -7.0 2.00 G-7 policy rate -3.00 1.0
Slide 117: Global risks remain
Global risks remain Global debt1 Global debt1 For personal use only (% of GDP) (% of GDP) % % % 30 360 Outstandings (RHS) 20 315 100 Mature market government debt 10 270 Emerging market 75 non-financial corporates 0 225 Annual change (LHS) -10 180 50 Mar 99 Mar 03 Mar 07 Mar 11 Mar 15 Mar 99 Mar 03
Slide 118: Australia ended 2017 with a respectable growth momentum
Australia ended 2017 with a respectable growth momentum CBA Purchasing Managers Indexes1 CBA Composite PMI1 For personal use only Index (leading indicators) Index 60 Future Output Manufacturing Index 80 55 70 Services Leading Index (based on orders/jobs Expansion 60 sub indexes) Expansion 50 Contrac
Slide 119: Getting easier to grow
Getting easier to grow The commodity boom-bust Fundamental drivers1 For personal use only (start = 100) (index) index index index 600 140 Mining capex 160 Real TWI (LHS) 400 100 120 Unit labour costs (RHS) 200 Commodity prices (RBA USD index) 80 60 0 Sep 01 Sep 04 Sep 07 Sep 10 Sep 13 Sep 16 2002/03
Slide 120: Growth positives
Growth positives Mining output by sector Public investment For personal use only (Q3’12 = 100) (Work yet to be done, % of annual GDP) index % 1.5 175.0 Iron ore Engineering 150.0 1.0 Oil & gas Coal 125.0 0.5 Building 100.0 Other 0.0 75.0 Sep 01 Sep 04 Sep 07 Sep 10 Sep 13 Sep 16 Sep 12 Sep 14 Sep 16
Slide 121: Growth positives
Growth positives Asian income growth by proxy Population For personal use only (Australian GDP exposed to Asian income growth) (annual % change) % pa % 9.0 2.4 Long run average 6.0 1.6 3.0 0.8 0.0 Sep 00 Sep 03 Sep 06 Sep 09 Sep 12 Sep 15 0.0 1973/74 1981/82 1989/90 1997/98 2005/06 2013/14 -3.0 Stro
Slide 122: Growth risks
Growth risks Transition drivers1 CBA Manufacturing PMI2 For personal use only (end 2012 = 100) (price pressure indicators) Index Index 140 60 Residential Input construction prices 120 55 Backlog of work Non-mining 100 capex 50 Suppliers delivery times 80 45 Government capex 60 40 Jun 12 Jun 13 Jun 1
Slide 123: Growth risks
Growth risks Wages & debt1 Household wealth and Liabilities2 For personal use only (% of annual household disposable income) % % pa % 150 6 750 Net Wealth Household debt 600 (% of GDP) (LHS) Dwellings 100 4 450 300 50 Wage price 2 Financial assets index (RHS) 150 Liabilities 0 0 0 Mar 00 Mar 04 Mar
Slide 124: Growth risks
Growth risks Wisest place for new savings?1 Saving ratio For personal use only % % 20 48 15 36 Cash savings 10 (deposits) 24 5 12 Paying off debt 0 0 -5 Sep 97 Sep 02 Sep 07 Sep 12 Sep 17 Sep 72 Sep 81 Sep 90 Sep 99 Sep 08 Sep 17 Household behaviour has changed in a way that favours The ability to “
Slide 125: The housing market is cooling
The housing market is cooling Home loan deposit1* Dwelling price momentum2 For personal use only (% of household disposable income) (8 capital cities) % % 100 * Based on 20% 24 of national price Price 85 growth 12 70 0 2006-2013 average Price 55 -12 momentum 40 -24 Mar 93 Mar 98 Mar 03 Mar 08 Mar 13
Slide 126: Typical housing bubble factors not evident in Australia
Typical housing bubble factors not evident in Australia Housing “Bubble” – Current position in Australia For personal use only typical characteristics Unsustainable asset prices • Strong building in recent years means that demand and supply are now more in balance • Price growth is slowing as afford
Slide 127: New Zealand
New Zealand Global dairy trade auction results1 NZ short term arrivals2 For personal use only (USD/tonne) (monthly, seasonally adjusted) 6,000 '000 340 Whole Milk Powder Lions tour 320 5,000 300 280 4,000 CWC 260 RWC 240 3,000 Lions tour 220 2,000 GDT overall price 200 180 1,000 160 2008 2009 2010 2
Slide 128: New Zealand
New Zealand NZ CPI inflation1 OCR forecasts2 For personal use only (%) (ASB forecast and implied market pricing, %) % % 6 4.0 5 Annual % (f) 3.5 4 3 3.0 2 2.5 OCR implied by current 1 market pricing 2.0 0 ASB Economics Forecast quarterly change (peak of 3.5% in 2020) -1 1.5 Jun 00 Jun 03 Jun 06 Jun
Slide 129: New Zealand
New Zealand NZ household lending growth1 NZ median house price2 For personal use only % (annual % change) (3 month moving average, $’000) 20 $ 000's 1000 15 Mortgage lending 900 Auckland 10 800 700 5 600 NZ 0 500 Wellington 400 -5 Consumer Credit 300 Canterbury/Westland -10 200 Mar 04 Mar 08 Mar 12
Slide 130: Sources & Notes
For personal use only Sources & Notes Commonwealth Bank of Australia | ACN 123 123 124 | 7 February 2018
Slide 131: Customer metrics
Customer metrics 1 Roy Morgan Research Retail Main Financial Institution (MFI) Customer Satisfaction. Australian population 14+, % “Very Satisfied” or “Fairly Satisfied” with For personal use only relationship with that MFI. 6 month rolling average to December 2017. Peers includes ANZ, NAB and Westp
Slide 132: CBA overview metrics
CBA overview metrics Sources for ‘CBA overview’ For personal use only Technology and innovation 1 Digital customers are those who have logged into NetBank or the CommBank app at least once for the month. 6.4m digital customers refers to Dec 2017. 2 Customer advocacy is measured with the Roy Morgan S
Slide 133: Technology metrics
Technology metrics Source information for ‘Technology’ For personal use only 1. Net Promoter Score – Internet Banking (via Mobile App): Roy Morgan Research. Australian population 14+ who used the internet banking services of their (self-nominated) main financial institution via website and/or app in
Slide 134: Glossary
Glossary Capital & Other Funding & Risk For personal use only Risk Weighted Assets or The value of the Group’s On and Off Balance Sheet assets are Liquidity coverage ratio The LCR is the first quantitative liquidity measure that is part of the Basel III RWA adjusted by risk weights calculated accord
Slide 135: Notes: Disclaimer
Notes Disclaimer For personal use only The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 7 February 2018. It is information given in summary form and does not purport to be complete. Information in this
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