Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Credit Suisse First Boston 2003 Asian Investment Conference
45 slides from Commonwealth Bank Of Australia's conference presentation, Mar 27, 2003
Slide 1: Credit Suisse First Boston 2003 Asian Investment Conference
Credit Suisse First Boston 2003 Asian Investment Conference Stuart Grimshaw Chief Financial Officer 25-28 March 2003 www.commbank.com.au Commonwealth Bark |” a
Slide 2: Disclaimer
Disclaimer The material that follows is a presentation of general background information about the Bank's activities current at the date of the presentation, 25 March 2003. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to
Slide 3: Speaker's Notes
Speaker’s Notes Speaker's notes for this presentation are attached below each slide. To access them, you may need to save the slides in PowerPoint and view/print in “notes view.” Commamaeaithie: i» 3
Slide 4: Agenda
Agenda Commonwealth Bank in the Current Context Platforms for Growth Productivity Commamaeaithiz: ip 4
Slide 5: Commonwealth Bank in the Current Context
Commonwealth Bank in the Current Context
Slide 6: Australia's Economy has been relatively resilient given global conditions
Australia’s Economy has been relatively resilient given global conditions ECONOMIC GROWTH: CREDIT: 2002 % 3 Month-ended Annual Rates % China South Korea Thailand New Zealand Australia Indonesia Tatwan Canada United States Singapore Hong Kang Spain Swedes 30 20 10 United Kingdom Norway France Belgium
Slide 7: Domestic housing demand has been strong
Domestic housing demand has been strong Established ® Wisest % House Place for eo Prices New {national} Savings? Reat OF ck estate ad (Melbourne 4, UA Institute) 20 Shares Q wise EOS ug al Sar7d Sep Sep Sapesy «Satz House Price Debt z Sensitivity T Repayment (% deviation wncennese4tep i Levels: from
Slide 8: Business confidence has been subdued, but is expected to gain momentum
Business confidence has been subdued, but is expected to gain momentum CAPEX INVESTMENT ACTIVITY* % (annual % change) % (curnulative % contribution, 2001 base yr} x” 30 T Agricaiture oi Mining Manufacturing Construction Wholesale Retail Transport & storage Finance & insurance Prop. & bus. services u
Slide 9: While equity markets have showed some resilience, returns and fund flows have declined
While equity markets have showed some resilience, returns and fund flows have declined Equity Markets Totat Net Retail Fund Flows Index {for quarter ended} (Base 100) 105 100 25% 95 “16.1% Jueo2 Sep-02 Nov.o2 Jan-03 Sun02 Sep-02 Oee-02 ‘All Orainarios sms MCI word) bie Ste ndusiry Commonwealth Eek]
Slide 10: Commonwealth Bank's 1st Half result reflects modest growth in an uncertain environment
Commonwealth Bank’s 1st Half result reflects modest growth in an uncertain environment Dec 2001 % Change Net Profit After Tax {cash basis $1,192m 1% Comprising: Banking $1,092m 11% Funds Management $186m (26%) Life Insurance $31m (117%) * ie excluding appraisal value uplift/reduction and goodwill am
Slide 11: The Bank's credit quality and capital adequacy strengthened during the half
The Bank’s credit quality and capital adequacy strengthened during the half 4 Bad Debt Expense to RWA* Capital Adequacy Ratios % RWA %e RWA oaee Dec 2001 Jun 2002 Dec 2002 OcBA W@ ANZ NAB @ wee || Tier? Capital Tier 2 Capital Target Range FRIVA rek weinted esse KCommanwonitinisc. <p 11 Despite these
Slide 12: The Bank's dividend payout ratio remains high relative to peers
The Bank’s dividend payout ratio remains high relative to peers Dec 2001 Change Dividends per Share 68cps te Dividend Payout Ratio 72.6% - «and EPS has improved Earnings per Share 84cps 1c Return on Equity 12.43% (4bps) Banking Cost to Income Ratio (underlying basis) 54.2% (3%) For more detail, visi
Slide 13: Increasing leveraging from key competitive strengths is important for long term growth
Increasing leveraging from key competitive strengths is important for long term growth Scale Brand Risk Profile Products and Businesses Distribution Innovation People Conners irks yw 13 «The outlook for the full financial year will depend on the direction of investment markets and continuing growth
Slide 14: Platforms for Growth: Banking
Platforms for Growth: Banking Let's look first at Banking. 14
Slide 15: The Bank is a leading player in the Australian market
The Bank is a leading player in the Australian market Customer Share: mn All Relationships ist in Home Lending 50 7 ist in Credit Cards 0 4 0 ist in Retail Deposits 2» 4 SS ist in Online Broking 10 4 Strong in Business Lending ° y ¥ Largest customer base Dec-04 Jun-02 Dec-02 &~ CBA = wee Most points
Slide 16: Several key trends are shaping the future of the home loan market
Several key trends are shaping the future of the home loan market + Interest rates at historical lows - but affordability has weakened + Slowing housing credit demand likely + Historically fow cradit losses + Property sector attractive compared to other asset classes + Mortgage market a high demand
Slide 17: The Bank's strategy is to segment, sell, serve & retain
The Bank’s strategy is to segment, sell, serve & retain Segments Customer Value Customer Management » Acquisition: Proposition Model First Home Buyers - safety. LB) Choice of market leading 8) Senvice, Products and ‘ - i ~ services at each stage in security& reassurance. Basic product products that
Slide 18: Share of wallet improving - cross-sell, retention and service initiatives are in train
Share of wallet improving - cross-sell, retention and service initiatives are in train Share of Wallet by Financial Institution 100 1 80 2004 | m 2002 60 StGeorge CBA Group = NAB Group Suncorp = WBC Group = ING/Merc ANZ Group ‘Bendigo Group Mutat ‘ource: Research Intemational December 2002 Soemomwaa
Slide 19: Premium Customers: Offering a Differentiated Business Model
Premium Customers: Offering a Differentiated Business Model Borrowing Services Lending Services “py Transactional Banking Advisory Services Direct investment Indirect investment Debt Products Equity Products Broking Piatform Adviser Sep Priniary: Relationship Manager: Sata Secondary: Relationship: M
Slide 20: Republic: Providing a comprehensive view of premium customers
Republic: Providing a comprehensive view of premium customers or ee _ Please note Information on these data sowens have ‘been scrambled lorpivacy purposes Gemmeanweatif ie. | 20 Akey milestone in the rollout of the premium model has been the development of the Republic system. Republic is the PFS re
Slide 21: Republic: Providing a comprehensive view of premium customers
Republic: Providing a comprehensive view of premium customers Please nole information on these data screens have been scrambled for onivacy pumoses *. Cemmonwealtinisrs <x 21 This screen provides a profile of a client's key family and business relationships. By understanding a client's wider network
Slide 22: Transforming Business and Corporate Banking
Transforming Business and Corporate Banking Transformation Agenda Structured In Three Phases Status Initiatives ES Segment clients and create fe rovialise differentiated business models to rate Completed improve client service experience Introduce streamlined credit processes Underway G @ Lift perfo
Slide 23: No change to credit standards
No change to credit standards Consumer Portfolio Commercial Portfolio Composition of | 00 Housing Portfolio jo” B owner ccupied B investment 60% Dec 01 Jun62 Bec 02 2.8% 4 40% H Bad debt charge as 20% 4 annualised % of unsecured 1e% 4 lending balances od 1.2% 4 9) 0.8% 4 ov © Bad debi charge as 0.4%
Slide 24: Platforms for Growth: Funds Management
Platforms for Growth: Funds Management 24
Slide 25: The Bank maintains its leadership position in Australian funds under management
The Bank maintains its leadership position in Australian funds under management Group Funds Under Management Australian Funds Under Management™ by Country of Source by Asset Class December 2002 December 2002 1% 1% 86% 4% 410% Bi Austraia HUrilad Kingdarn Nove Zeaknd 1 Australian shares TD informatio
Slide 26: Several key trends are shaping the future of the Australian Funds Management industry
Several key trends are shaping the future of the Australian Funds Management industry Projected Size of Various * Strong inherent growth in the Product Segments funds management market expected, particularly retail « Growth of mastertrusts « Industry consolidation « Institutionalisation of distribut
Slide 27: FirstChoice has been further enhanced... and other initiatives are underway
FirstChoice has been further enhanced... and other initiatives are underway EirstChoice Other Strategic Initiatives eatise integration benefits, including further rationatisation of legacy systems Offer increased style diversification Leverage internat distribution Opportunities Leverage scale to re
Slide 28: Platforms for Growth: Life Insurance
Platforms for Growth: Life Insurance 28
Slide 29: The Bank has a strong presence in life insurance, and a number of opportunities
The Bank has a strong presence in life insurance, and a number of opportunities Market Size and Growth Prospects: Commonwealth Bank Premiums: By Product By Product & 2400 1600 200 ° 2002 2007 projected [@term & Trauma Disability @ 3rd Party] [mterm& Trauma ODisability _@Group By Channet By Channel [
Slide 30: Focus is on distribution, service and risk pricing
Focus is on distribution, service and risk pricing Increase internal distribution through PIC’s and BIM’s Repricing of premiums Upskilling of call centre staff Product rationalisation Systems migration Commanaeaithiiiz: © 30 Going forward, we see the several opportunities for gains in this business:
Slide 31: Productivity
Productivity 31
Slide 32: Focus is on improving efficiency
Focus is on improving efficiency Four productivity initiatives... ..to achieve: + Abetter service experience for customers, through greatly improved turnaround times Remove back-office functions: from branches Streamline Business Banking ‘processes: + Elimination of duplication and Rationalise inves
Slide 33: Credit Suisse First Boston 2003 Asian Investment Conference
Credit Suisse First Boston 2003 Asian Investment Conference Stuart Grimshaw Chief Financial Officer 25-28 March 2003 www.commbank.com.au So in closing, | would just like to briefly reiterate the main points: «The Australian economy has held up reasonably well despite global uncertainty - however dow
Slide 34: 9% growth in lending assets
9% growth in lending assets 200 161 155 150 $ billion 100 50 Dec 2001 Jun 2062 Dec 2002 Lending Assets**; Housing i q Personal £3] Business & Corporate isa Bank Acceptances ~ Excludes securitised housing loan balances $5.9b (Dec 02), $7.0b (Jun 02), $5.7b (Dec 014). 34
Slide 35: A number of one offs impacted funds under management
A number of one offs impacted funds under management Underlying reduction of $8bn 108 —_—_ 106 106 One off reduction § f net $3b toa (5) of net $3bn 102 100 Z J Sbn ge 96 94 92 30 v T T v Dec-01 NetFlows Investment Other Underlying Gandel Winterthur CFSUK = Dec-02 FUM retuims Private FUM Business Ge
Slide 36: Shareholder Funds in Life Insurance Companies
Shareholder Funds in Life Insurance Companies: investment reflect underlying nature of the business Risk* Unit Linked Group $2.1 billion $0.5 billion $2.6 billion Income Growth siment account, annuities, personal risk and group risk. e : : Commenweatity Sic a 36 36
Slide 37: Continuing sound asset quality
Continuing sound asset quality Dec 2001 Jun2002 Dec 2002 Cee te eu | $2g0m} $159] $151m DebistoRWAennvatsea)| 042%] 0.23%] 0.21% Gross avec asotsret| secon] san] __S666n Specific Provisions $309m $270m $264m General Provision $1,334m $1,356m $1,327m General Provision to RWA 0.96% 0.96% 0.92% Rommiam
Slide 38: The Bank remains well provisioned
The Bank remains well provisioned 2,100 7 1,800 4 is} T Dec Dec Dec Dec Dec Dec Dec Dec o4 95 986 97 98 99 00” 01 Dec 62 ME General Provision EI Specific Provision — Total Provisions/Gross Impaired Assets {axis on right) * Includes Colonial 38
Slide 39: Arrears in consumer book remain at low levels
Arrears in consumer book remain at low levels Loans Accruing past 90 days or more 30/06/01 31/12/01 30/06/02 31/12/02 $m $m $m $m Housing Loans 218 168 176 136 Other Loans 80 79 73 75 Total 308 247 249 211 Housing loans arrears rate 30/06/01 31/12/01 30/06/02 31/12/02 Housing Loans accruing but past
Slide 40: Commercial Portfolio: large exposures are mostly investment grade
S&P Rating or Equivalent Commercial Portfolio: large exposures are mostly investment grade Top 20 Exposures to Top 20 exposures as a % of Corporates (Committed) Total Committed Exposure At A BRB. 4.0% a 3.5% A A 3.0% At A. 2.5% A ia 2.0% BBB ANA 1.5% BBE A 1.0% BBE At 0.5% Ad B88 0.0% 9 200 400 600
Slide 41: Credit Exposure - Energy Sector
Credit Exposure - Energy Sector 10% DAAA to A- BBB+ to BBB- BEE+to a Australia (73% investment grade} Asia (84% investment grade) North America (58% investment grade) Other (97% investment grade) habe Commeanaeaittii op 41 41
Slide 42: Credit Exposure - Telcos Sector
Credit Exposure - Telcos Sector 11% Australia (72% investment grade} Asia (100% investment grade} North America (400% investment grade) ‘Other (64% investment grade) hho Commamaeaithiiizn i» 42 42
Slide 43: Credit Exposure - Technology Sector
Credit Exposure - Technology Sector Australia (68% investment grade} £1 North America (100% investment grade) © Other (89% investment grade) Commeanaeaithiiz: op» 43 43
Slide 44: Credit Exposure - Agriculture Sector
Credit Exposure - Agriculture Sector 1 Australia (10% investment grade) $7,673m © New Zealand (3% investment grade} Commanaeaithitzn op 44 44
Slide 45: Group FUM across asset classes
Group FUM across asset classes Other 1% Australian Equities 27% Fixed Interest & Cash 43% ~~ international Equities + 13% Listed & Direct Property 16% As at 31 December 2002 : Commanmeatif tizi 45
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