Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — Investor Day (October 2004)
17 slides from Commonwealth Bank Of Australia's investor day presentation, Oct 19, 2004
Slide 1: Investor Half Day: Risk Management
Investor Half Day Risk Management Mick Leonard Chief Risk Officer Financial & Risk Management 19 October 2004 ConmonwealthBank
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, 19 October 2004. It is information given in summary form and does not purport to be complete. It is not financial product advice and is not in
Slide 3: Agenda
Agenda 1. Overview Risk Structure Design Framework 2. Credit Risk » Business Performance “ Housing Loan Portfolio # Diversification 8 Credit Losses 3. Market Risk 4. Operational Risk 5. Compliance and Prudential Regulation “ Basel Il * IFRS poe Which Bank ConmonweailthBank
Slide 4: 1. Risk Structure
1. Risk Structure > Set Risk Appetite under Board direction > Approve risk policies, procedures and methodologies that are consistent with the Bank's appetite as > Manage the portfolio of risks across the Bank Approve the organisational structure as wall as, appoint key risk_ managers i | Ha i) i a
Slide 5: 1. Risk: Design Principles
1. Risk : Design Principles HIGH LEVEL PRINCIPLES Recommend corporate risk strategy Focus on policy and standards Reporting and monitoring Methodology and measurement + Risk governance and assurance + Operationalise framework & policies + Educate and create awareness + Ensure risk requirements embed
Slide 6: 2. Overall Bank Portfolio
2. Overall Bank Portfolio $ bi (a) Bank Portfolio {excludes Securitised Home Loans *& Securitised investment Home Loans) 400 350 300 250 oss AAA 200 AA mA n868 150 oes me mcce 100 50 Jun-O1(a) Dec-01(a) Jun-62 (a) Jun-02 (b) Dec-02 (b) Jun-03 (b}) Dec-03 (b) Jun-04 (b) Excl settlement exposure (b) i
Slide 7: 2. Net lending losses in consumer book remain low
2. Net lending losses in consumer book remain low Home Loan Portfolio 0.020% - Net Lending Losses 0.015% 0.010% 4 0-008% 9 TO 0.000% T T T T T T T T T T T ] ommmmmmmnE YOY {02 =F Y 0 2/03 FYO3/04 Which Bank ConmonwealthBark
Slide 8: 2. Diversification "Drivers"
2. Diversification “Drivers” « Large Credit Exposure Policy Aligned to the Bank’s earnings and economic capital « Industry Limits Determined by each industry's share of Australian borrowings aggregates « Country Limits Based on the country’s GDP relative to the US, Financial Flow Indicators and the
Slide 9: 2. Credit Risk Forecast
2. Credit Risk Forecast The main drivers of credit risk for loans are: interest rates » the unemployment rate gross domestic production private consumption
Slide 10: 2. The Bank remains well provisioned
$millions 2. The Bank remains well provisioned 2,100 5 1,800 5 1,500 4 1,200 4 900 4 600 5 300 4 0 Jun 99 Jun 00* Jun 01* Jun 02 Jun 03 Jun 04 Specific Provision 4 General Provision — Bad Debt Expense ype Which: Sank ConmonwealthGark 10
Slide 11: 2. Peer Group Comparisons
2. Peer Group Comparisons Bad Debt Expense to RWA (annualised) General Provision to RWA 1.0% 4 14% 9 0.8% 4 1.2% 4 0.6% 4 1.0% 4 04% 4 0.8% J 0.2% J 0.6% 4 0.0% 0.4% T T T T Jun-02 Dec-02 Jun-03 Dec-03 dun-04 dun-02 Dec-02 Jun-03 Dec-03 Jun-04 coma NJ NAP BC “CBA commit NJ NAB BC = CBA ConmonwealthG
Slide 12: 3. Market Risk
3. Market Risk Recent In es Systems/Processes Market risk is a small but significant part of total Bank risk profile. Sophisticated management and measurement processes optimise the market risk capital adequacy allocation requirement. Value at Risk (VaR) modelling is extensively used. Additional exp
Slide 13: 4. Operational Risk
4. Operational Risk Strategy & Processes Policies and processes to ensure business _ managers identify and manage operational risks Periodic reporting to Risk Committee on Risk Profile and trends on security and fraud Operational risk measurement based on business judgments and scenario analysis Mea
Slide 14: 5. Compliance and Prudential Regulation
5. Compliance and Prudential Regulation Board endorsement of Compliance Risk Management Framework Compliance matters are reported to Business Unit Heads, Board Committees and Boards, with escalation process as necessary » Expanded Group Compliance function to include centralised review and approval
Slide 15: 5. Basel II timetable
5. Basel Il timetable Draft Prudential Common implementation Standards date Parallel run “Locked soinoiononoononnonsnni in? 12/03 12/04 © 12/05 : 12/06 : 12/07 12/08 To be finalised Accreditation Accreditation window opened Accreditation window closed for banks Accreditation window reopened where AP
Slide 16: 5. IFRS
5. IFRS » Many practical issues & hurdles to overcome * Uncertainty underlying principles and methodologies (eg emergence period for IBNR book) » “Excess” provisions booked back to equity on transition *» General Provision likely to fall * Specific Provision likely to increase slightly » Some increa
Slide 17: Investor Half Day: Risk Management
Investor Half Day Risk Management Mick Leonard Chief Risk Officer Financial & Risk Management 19 October 2004 ConmonwealthBank
Commonwealth Bank of Australia — Investor Day (October 2004) on 6ix