Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — FY2019 Earnings Presentation
138 slides from Commonwealth Bank Of Australia's earnings presentation, Aug 7, 2019
Slide 1: Results Presentation and Investor Discussion Pack
For personal use only Results Presentation and Investor Discussion Pack For the full year ended 30 June 2019
Slide 2: Contents
Contents For personal use only 1 Results Presentation 3 2 Group Overview 32 3 Good Business Practice 45 4 Financial Overview 55 5 Home & Consumer Lending 81 6 Business & Corporate Lending 94 7 Deposits, Funding & Liquidity 105 8 Capital 111 9 Economic Overview 122 10 Sources, Glossary & Notes 131 Co
Slide 3: Results Presentation
For personal use only 1 Results Presentation Matt Comyn Chief Executive Officer Alan Docherty Chief Financial Officer Commonwealth Bank, South Eveleigh building, NSW Commonwealth Bank of Australia | ACN 123 123 124 | 7 August 2019 3
Slide 4: Results Presentation - Matt Comyn, CEO
For personal use only Results Presentation Matt Comyn, Chief Executive Officer Commonwealth Bank of Australia | ACN 123 123 124 | 7 August 2019 4
Slide 5: Overview
Overview ► Disciplined execution For personal use only Simpler - progress on divestments Better - cultural change, better customer outcomes Best in digital - leadership position further strengthened ► Responding to a challenging operating context Cash NPAT - 4.7% Impacted by - remediation,
Slide 6: A simpler bank
A simpler bank For personal use only Group NPAT CET1 FY19 11.8% GAM completion 10.7% Includes Strong pro-forma CMLA progress 10.5% divestments CET1 of 11.8% ~130bpts Core unquestionably strong ~95% Jun 19 Pro-forma1 Risk & Compliance $1.4bn 46.2% More to do on costs - $1.3bn targeting sub 40% 36% El
Slide 7: A better bank
A better bank Committed to Changes saving Remedial Action Committed For personal use only remediating customers Plan on track and to customers quickly $415m annually driving change rebuilding trust Customer Better Remedial Royal Remediation Costs Customer Outcomes Action Plan1 Commission Cumulative
Slide 8: Better for you
“Better for you” For personal use only Smart 24/7 fraud Book home loan Alerts monitoring appointments Regional digitally Apple support App Pay Alipay in hard times relaunch 2019 Business Business World’s largest Green Financial Smart financial mortgage Assistance Emergency Alerts 100% education Bene
Slide 9: Leading in innovation
Leading in innovation For personal use only CommSec Pocket Tax Refunds CommBank Rewards Invest with as little as $50, Notifies when refund is Pay with your CommBank with very low brokerage received and provides card and receive personalised from $2 per trade suggestions on how to use it cashback rew
Slide 10: Best in digital
Best in digital For personal use only CommBank app Benefits finder 100% security guarantee Relaunched – Finding unclaimed Protecting customers personalised experiences, rebates and benefits for from unauthorised customisable features our customers transactions, 24/7 10
Slide 11: Best in digital
Best in digital For personal use only Digital transactions #1 Net Promoter Score % of total transactions - by value1 7.0m Active digital customers 2 Customer’s likelihood to recommend main financial institution based on use of internet banking services via mobile app7 +40 CBA Online banking #1 (Cans
Slide 12: This result
This result1 For personal use only FY19 vs FY19 FY18 Statutory profit ($m) 8,571 (8.1%) Cash NPAT ($m) 8,492 (4.7%) ROE (cash, %) 12.5% (110)bpts CET1 (%) 10.7% +60bpts EPS (cash, cents) 481c (29c) Dividend per share ($) 4.31 Flat 1. Statutory profit, CET1 and Dividend per share include discontinued
Slide 13: Key outcomes
Key outcomes1 For personal use only Operating Operating Loan Impairment Cash Income Expenses Expense NPAT $m $m bpts of GLAA $m -2.0% +2.5% +1 bpt -4.7% 24,914 24,407 16 11,269 15 8,915 10,995 8,492 • Core volume growth • Remediation costs • Generally benign • NIM –5bpts (2H flat) • Elevated risk/co
Slide 14: Franchise strength
Franchise strength For personal use only Group Lending Lending Growth2 Home Lending Growth CBA growth as a multiple of system growth4 +2% +4% +4% (12%) 1.3x 760 0.9x 747 Home Business Insto. Lending Lending 3 Lending 0.6x $bn Jun 18 Jun 19 Jun 18 Dec 18 Jun 19 Group Deposits5 Transaction Balances5 D
Slide 15: Business Units
Business Units1 For personal use only Cash NPAT 2 RBS BPB IB&M NZ (NZD) (10%) (7%) (8%) +5% 4,703 4,234 2,845 2,658 1,170 1,071 1,122 1,072 $m FY18 FY19 FY18 FY19 FY18 FY19 FY18 FY19 1. Presented on a continuing operations basis. 2. Includes Bankwest and Commonwealth Financial Planning, excludes Gen
Slide 16: Balance sheet strength – supporting dividend
Balance sheet strength – supporting dividend For personal use only CET11 Dividend % cents per share Cash NPAT2 Payout Ratio 3 Strong pro-forma capital 431 420 420 429 431 401 11.8% 364 320 334 4 10.7% 290 88% 4 80% 228 76% 76% 77% 74% 73% 75% 75% 75% 10.5% 80%5 10.1% unquestionably 78% strong Jun 18
Slide 17: Results Presentation - Alan Docherty, CFO
For personal use only Results Presentation Alan Docherty, Chief Financial Officer Commonwealth Bank of Australia | ACN 123 123 124 | 7 August 2019 17
Slide 18: Summary
Summary For personal use only Disciplined Responding Delivering execution to challenges strong core outcomes ► Customer focus ► Customer remediation ► Home loans +4% ► Appropriate risk appetite ► Lower interest rates ► Transaction deposits +9% ► Balance sheet settings ► Softer housing market ► Depos
Slide 19: Statutory vs Cash NPAT
Statutory vs Cash NPAT For personal use only $m FY18 FY19 Statutory NPAT 9,329 8,571 Less • CommInsure Life – loss recognition, higher claims and Cash NPAT - discontinued operations 497 214 lower premiums Non-cash items: • GAM – lower performance fees • Sovereign sold July 2018 - Transaction gains/(
Slide 20: FY19 result
FY19 result1 – For personal use only FY19 FY19 vs $m FY18 Operating Income 24,407 (2.0%) Operating Expense 11,269 2.5% Operating Performance 13,138 (5.6%) Loan Impairment Expense 1,201 11.3% Cash NPAT 8,492 (4.7%) 1. Presented on a continuing operations basis. 20
Slide 21: Operating income down 2.0%
Operating income down 2.0%1 For personal use only • Core volume growth • Better Customer Outcomes - fee removals (118) • Margin -5bpts (flat 2H19) • Institutional lending fees - AASB 15 (73) -1.2% • NSW/Vic storms, Qld floods • Lower advice fees 24,914 • FUA growth +6.0% (222) -3.9% Volume Growth2 -
Slide 22: Group margin
Group margin1 For personal use only bpts bpts Last 5 halves This half 216 Flat 214 210 210 210 1 (1) 1 (1) 210 210 FY20 Headwinds bpts Home Loans: Higher Lower Switching (2) deposit earnings AASB 16 (1) Discounting (2) funding on free Cash Rate2 (4) SVR +4 equity Lending Mix +1 2H17 1H18 2H18 1H19 2
Slide 23: Operating expenses up +2.5%
Operating expenses up +2.5%1 For personal use only Strategic Targets Notable +2.4% • Absolute cost reduction items (ex notable items) • Sub 40% Cost:Income 12,000 +2.5% 158 259 (190) 11,269 11,000 10,995 (930) 977 10,000 Remediation +$866m +600 FTE 9,000 +450 FTE Wage inflation and IT increases 8,00
Slide 24: Balance sheet resilience
Balance sheet resilience For personal use only Credit Risk Funding Liquidity Capital • Disciplined approach • Peer leading deposits • Sound liquidity position • Unquestionably strong • Higher AASB 9 provisioning • Stable NSFR 112% • LCR well above minimum • Neutralisation of DRP Total Provision Depo
Slide 25: Credit risk
Credit risk For personal use only Loan Loss Rate1 - Group Loan Loss Rate1 – Divisions TIA • Single name exposures Consumer 17 BPB – Small number of larger impairments • Emerging signs of weakness - Corporate 14 IB&M – Ongoing portfolio optimisation discretionary spending, agriculture Group 16 and co
Slide 26: Credit risk – consumer credit quality & provisions
Credit risk – consumer credit quality & provisions For personal use only % Arrears1 $m Collective Provisions 90+ days Provision Coverage3 Personal Loans 0.75% 1.05% 1.41% 1.44% 1.56% 3,904 1.21% 1.44% Credit Cards 1.03% 1.03% 2,763 0.88% v v 2,416 Consumer 1.02% 0.94% 1,528 Home Loans2 0.70% 0.67% 0
Slide 27: Wholesale funding
Wholesale funding For personal use only Long Term Funding Indicative Funding Costs2 Weighted Average Maturity (WAM), Years1 3.0% New issuance (FY19) 6.5 10yr market funding cost 2.5% Portfolio 5.1 5.1 5.0 2.0% v 67% 66% 66% 1.5% Long Long Long Term Term Term 1.0% 5yr market funding cost 0.5% Jun 18
Slide 28: Capital
Capital For personal use only CET1, bpts -10bpts in 2H19 (absorbing -18 bpts of notable items & -13 bpts interim dividend DRP neutralisation) notable items3 (18) 10.7% 1 10.8% (80) 87 Credit Risk (8) IRRBB 9 Market Risk (12) 10.5% neutralisation unquestionably Op Risk (7) 10.1% Organic Capital Gener
Slide 29: Capital
Capital For personal use only bpts CET1 (18) 11.8% Capital Management • Strong capital position due to bpts timing ~130 divestments 10.7% SA-CCR2 (7) Jul-19 AASB 162 (11) Jul-19 HL RWA3 - Jan-22 • FY19 dividend maintained and RBNZ4 - TBD DRP neutralised 10.5% LAC5 - Jan-24 unquestionably • Creates f
Slide 30: Economic outlook
Economic outlook For personal use only ► Lower growth environment ► Housing market improving ► Unemployment likely to remain low ► Pipeline of stimulus: tax cuts and infrastructure ► Support from population growth and commodity prices ► Household income growth is key 30
Slide 31: Summary
Summary For personal use only ► Sustainable outcomes in a challenging environment ► Strong foundations: franchise, digital, balance sheet ► Build deeper, more trusted relationships ► Simpler bank – lower risk and lower cost ► Drive strong capital generation ► Invest for the long term; return excess
Slide 32: Group Overview
For personal use only 2 Group Overview “Weemployees are Australia’s leading bank, with over 48,000 serving over 17 million customers ”
Slide 33: Who we are
Who we are For personal use only Largest Leading Best Strong banking franchise market shares in digital balance sheet • Customers1 >17m • MFI share4 #1 • Mobile app NPS8 #1 • CET1 10.7% • Digital customers2 7m • Home loans5 #1 • Internet banking NPS9 #1 • Deposit Funded 69% • Branches 1,172 • Househ
Slide 34: Our strategy
Our strategy For personal use only Become a simpler, better bank for our customers To deliver balanced and sustainable outcomes Execution priorities Simplify our business Customers Lead in retail and commercial banking Better outcomes Best in digital People Shareholders Energised, Long-term accounta
Slide 35: Delivering long-term sustainable returns
Delivering long-term sustainable returns For personal use only ● Leading franchise ● Divesting non-core ● Strong growth ● Largest customer base ● Reduced business complexity ● Seek opportunities to invest in core ● Broadest distribution network ● Better risk outcomes ● Target sub 40% cost-to-income
Slide 36: A simpler bank – divestments/reviews
A simpler bank – divestments/reviews For personal use only Sovereign Completed Jul 18 TymeDigital Completed Nov 18 CET1 CFSGAM Completed Aug 19 11.8% 10.7% BoCommLife Expected Completion 1H20 Includes divestments1 10.5% CommInsure Life Expected Completion 1H20 Unquestionably ~130bpts strong PTCL Exp
Slide 37: A simpler bank – cost reduction
A simpler bank – cost reduction For personal use only Future Cost Base Focus Approach Cost-to-Income Tighten discretionary spend and Embed better 46.2% realise cost benefits of portfolio Elevated cost discipline compliance/ < 40% changes remediation FY19 1 Future Non-core Simplify Simplify IT archit
Slide 38: Our contribution in FY19
Our contribution in FY19 For personal use only $92bn of new lending for $5.9bn salaries and 427k students provided with $7.6bn paid in dividends Australian home buyers superannuation paid financial education women in $36bn of new lending for Australian businesses 39.1% leadership roles 236 CommBank
Slide 39: Delivering for all our stakeholders
Delivering for all our stakeholders Customers Customers Customers Customers For personal use only Consumer NPS1 MFI Share2 Business NPS3 Institutional NPS4 20 (Turnover $300m+ pa) CBA Jun 19 CBA Jun 19 CBA Jun 19 15 10 -10.0 35.6% 0 -22.4 70 +34.4 5 -5 50 0 34.4% -10 -15 30 -5 -20 10 -10 -25 -15 Pee
Slide 40: Lead in retail banking
Lead in retail banking For personal use only Jun 14 48.9% 48.1% Jun 18 42.5% Jun 19 CBA MFI Share CBA MFI share1 MFI share1 33.1% 34.4% 35.6% 35.6% 32.1% 27.8% 17.6% 12.7% 11.2% 27.7% Jun 14 Jun 18 Jun 19 CBA Peer 1 Peer 2 Peer 3 Aged 14-17 Aged 18-24 Aged 25-34 Aged 35-49 Aged 50-64 Aged 65+ Custom
Slide 41: Lead in commercial banking
Lead in commercial banking For personal use only BizExpress Daily IQ Better Service Simpler, faster loans Unique business insights $36bn ofbusinesses new lending for Australian 2 Same day lending decisions Optimise your cash flow, compare $8bn ofBusinesses new lending to Small 3 for unsecured loans
Slide 42: Best in digital
Best in digital For personal use only A global mobile banking leader Recognition and engagement CommBank app users Forrester Banking WaveTM: Global Mobile Apps Monthly unique customers (m)8 Asia Pacific 20181 Mobile app #1 Net Promoter Score2 5.6m 5.3 Online banking 4.4 4.8 5.0 #1 (Canstar - 10 year
Slide 43: Best in digital
Best in digital For personal use only • Relaunched app – personalising the app • Benefits finder – connecting customers with • Location security – enhancing fraud and simplifying feature discovery unclaimed rebates and benefits detection when customers log into the app • Siri shortcuts – using voice
Slide 44: Best in digital
Best in digital For personal use only NetBank Core banking Ceba Relaunched CommBank app • Full functionality 24-hour online • Real-time banking and settlement • AI-powered chatbot to assist • Personalised look and feel banking service • Standardisation and system simplification with 380 banking task
Slide 45: Good business practice
For personal use only 3 Good business practice “ we We are committed to earning trust and changing the way do things, to become a better bank for our customers and communities ”
Slide 46: Good business practice
Good business practice For personal use only Doing the right thing • Customer remediation • Better Customer Outcomes Regulatory engagement • Royal Commission - Progress • Remedial Action Plan (APRA) Doing business openly, responsibly, sustainably • Banking Code of Practice • Comprehensive Credit Rep
Slide 47: Customer remediation
Customer remediation For personal use only Remediation and Program Costs Total Cumulative spend and provisions to- $m 1H19 2H19 FY19 date Banking customers $2,174m Aligned Advice remediation1 200 334 534 534 Wealth customers 462 Wealth customer refunds • Includes an estimate of refunds and interest
Slide 48: Better customer outcomes
Better customer outcomes For personal use only Income forgone by date of initiative Examples RBS BPB WM $m 415 • Calculation of interest on credit cards • Wealth Management – Protecting Your Super Date of pricing • CFP – removal of ongoing service fees change 190 • Wealth Management – CFS re
Slide 49: Responding to heightened regulatory requirements
Responding to heightened regulatory requirements For personal use only • Royal Commission – addressing recommendations and implementing the necessary changes • APRA – delivering all 156 milestones of the Remedial Action Plan, with updates to APRA by the Independent reviewer every 3 months. Deliverin
Slide 50: Regulatory engagement
Regulatory engagement For personal use only Jun 19 Jun 19 75 23 submitted2 underway3 No action required as action is with government/regulator or CBA does not No action required by CBA4 26 operate in that business Submitted Not yet Due 27 Actively participating in consultation Government 16 legislat
Slide 51: Doing business openly, responsibly and sustainably
Doing business openly, responsibly and sustainably For personal use only ► New Code approved by ASIC, ► Enabling customers to take control of ► Enhancing customers financial security commenced 1 July 2019. their data, with the right to direct data to and enabling better risk based decisions accredit
Slide 52: Doing business openly, responsibly and sustainably
Doing business openly, responsibly and sustainably For personal use only Community investment Employee engagement Renewable energy Total community investment ($m)1 CBA Employee Engagement Index (%)2 Exposure ($bn)3 281 3.6 290 81 3.7 263 266 77 78 2.8 68 2.2 243 72 1.4 FY15 FY16 FY17 FY18 FY19 FY15
Slide 53: Doing business openly, responsibly and sustainably
Doing business openly, responsibly and sustainably For personal use only Our phased approach to managing climate change risk is published in the 2019 Annual Report Governance Strategy Risk management Metrics and targets • The Board governs our • Second phase of climate • Inclusion of physical climat
Slide 54: Energy value chain
Energy value chain1 For personal use only Natural resources Infrastructure Electricity generation Network and retailers Oil Oil distribution and refining $2.3bn (-18%) Renewables $0.8bn $3.6bn (-17%) (-2%) Gas LNG terminals Gas $1.2bn $2.8bn $0.8bn (-29%) (-14%) (+24%) Electricity and gas transmissi
Slide 55: Financial Overview
For personal use only 4 Financial Overview “ We have maintained sound business fundamentals and momentum in a challenging operating context ”
Slide 56: Our profits
Our profits For personal use only 1 Profit before tax $11.9bn approximates + Tax Expense 3.4 29% PAYG of One of Australia’s largest taxpayers $1.3bn2 Dividends Returned to ~830,000 shareholders (+ millions more via Super) 7.6 64% Reinvested Retained for lending, investment 0.9 7% & growth FY19 1. Pr
Slide 57: FY19 – result overview
FY19 – result overview1 Financial Balance Sheet, Capital & Funding For personal use only Statutory NPAT2 ($m) 8,571 (8.1%) Capital – CET12,4(Int’l) 16.2% 70 bpts Cash NPAT3 ($m) 8,492 (4.7%) Capital – CET12 (APRA) 10.7% 60 bpts ROE3 % (cash) 12.5 (110)bpts Total assets ($bn) 977 0.1% Total liabiliti
Slide 58: FY19 – result overview
FY19 – result overview Cash NPAT1 ($m) NIM1 Cost-to-income1 Cash ROE1 For personal use only (4.7%) (5) bpts +210 bpts (110) bpts 8,915 215 46.2% 8,492 44.1% 13.6% 210 12.5% FY18 FY19 FY18 FY19 FY18 FY19 FY18 FY19 Cash EPS1 (cents) DPS (cents) CET1 (APRA) CET1 (International)2 (29c) Flat +60 bpts +70
Slide 59: Key comparative financial metrics
Key comparative financial metrics For personal use only Incl. discontinued operations Continuing operations Financial year ended (“cash basis”) FY19 FY19 vs FY18 FY19 FY19 vs FY18 Cash net profit after tax $8,706m (7.5%) $8,492m (4.7%) Cost-to-income1 47.8% 230 bpts 46.2% 210 bpts Effective tax rate
Slide 60: Total income drivers
Total income drivers1 For personal use only (2.1%) Funds & Insurance (10.2%) Average FUA 6.0% 2 2 24,922 24,411 1,357 Insurance income (38.2%) 1,219 5,215 5,068 Other Banking Income (2.8%) Derivative Valuation Adjustment (XVA) ($42m) Lending fees3 (10.6%) Trading (excl. XVA) (0.9%) 18,342 18,120 Com
Slide 61: Operating income by line of business
Operating income by line of business1 For personal use only % Jun 19 vs Jun 18 2 Assets: +3% Assets: +6% 2 Margin: (17)bpts Margin: (3)bpts OBI: (8%) FMI: +13% Assets: Flat 2 IB: (6%) FUA: +5% 3 Margin: +1 bpt Markets: (15%) Margin: (2)bpts 4.8% 2.5% 0.5% RBS BPB IB&M WM ASB (NZD) Group (2.0%) (4.5%
Slide 62: Net Interest Income
Net Interest Income1 For personal use only $m Volume: +1.2% Margin: (5) bpts (3) bpts +2 bpts +1 bpt (4) bpts (1) bpt 86 208 (258) 172 (344) (1.2%) 18,342 (86) 18,120 Impact of home loan discounting and Strong growth Lower Global Deposit customer switching, in transaction Markets net repricing partl
Slide 63: Balance sheet
Balance sheet Jun 19 Jun 19 For personal use only vs vs $m Jun 18 Dec 18 Jun 19 Dec 18 Jun 18 Group Lending Home Loans 501,665 512,505 522,942 2.0% 4.2% +2% Consumer finance 23,317 22,690 21,993 (3.1%) (5.7%) Flat Business and corporate loans 222,367 222,996 214,953 (3.6%) (3.3%) Total Group Lending
Slide 64: Volume growth and market share
Volume growth and market share1 For personal use only Home Lending2 Business Lending Household Deposits2 Volume growth Volume growth Volume growth System CBA System CBA System CBA annualised annualised annualised 5.0% 3.4% 3.7% 3.1% 3.9% 4.1% 4.0% 2.5% 2.5% 1.3% -3.6% -4.0% 12 Months 6 Months 12 Mon
Slide 65: Market share
Market share1 % Jun 19 Dec 18 Jun 18 For personal use only Home loans (2) 24.4 24.3 24.4 Credit cards (2) 26.9 26.6 27.2 Other household lending(2,3) 28.6 28.2 28.0 Household deposits (2) 28.1 28.3 28.4 Business lending – RBA 14.4 15.0 15.8 Business lending - APRA 16.6 17.0 17.8 Business deposits –
Slide 66: Group NIM
Group NIM1 For personal use only bpts -5bpts (3) 1 215 2 (4) (1) 210 Impact of home Impact of loan discounting Strong Lower Global Basis Risk and customer Deposit growth in Markets net (-2 bpts) and switching, partly repricing Transaction interest Replicating offset by home deposits income Portfolio
Slide 67: Group margin
Group margin For personal use only Basis Risk Replicating Portfolio (RP) & Equity Hedge Every 5 bpts = 1 bpt of NIM1 Equity and Deposit Hedge Jun 19 2H19 Exit Average Balance Avg. Tractor2 investment $bn Tractor2 Rate term 1.0% 8.0% Equity Hedge 46 2.17% 2.06% 3 yrs Deposit Hedge 67 2.26% 2.22% 5 yr
Slide 68: Margins by division
Margins by division For personal use only RBS BPB IB&M NZ (ASB) Driven by home loan competition Higher business lending and Lower yields on bond Margin remained stable over (discounting), and customer home loan margins in the half, inventories this half the half switching offset by lower deposit mar
Slide 69: Other banking income (OBI)
Other banking income (OBI) For personal use only Other Banking Income1,2 Trading Income $m $m 4,982 Derivative 1,025 4,788 Valuation 974 Other 280 Adjustment 15 336 Improved Trading 1,025 Trading 271 trading 974 316 performance Lower overdrawn reflecting Lending fees 1,109 account fees and tightenin
Slide 70: Sequential operating income down 3.3%
Sequential operating income down 3.3%1 For personal use only • Unfavourable XVA (73) • 3 fewer days (149) • Lower profits from minority investments (33) • Margin: Flat • NZ hedge (29) • Institutional lending fees from lower volumes (13) • Customer fee removals (9) Lower ongoing service and -1.6% ini
Slide 71: Sequential operating expenses up 13.1%
Sequential operating expenses up 13.1%1 For personal use only 7,000 Notable items +2.5% (ex. notable items) +13.1% 6,000 46 105 (30) 434 5,980 136 5,000 5,289 • +310 FTE (spot) • $134m Aligned Advice remediation Redundancy and IT increases • Business Banking remediation 4,000 • Other Wealth remediat
Slide 72: Investment spend
Investment spend1 For personal use only Investment spend FY19 vs Investment spend FY19 vs FY18: $m $m FY18: 1,399 +9% 1,399 +9% 1,282 Total 1,282 1st Half 597 676 +13% 603 (1%) Capitalised 611 +6% +19% Expensed 2nd Half 685 723 671 796 FY18 FY19 FY18 FY19 Investment spend Capitalised software balanc
Slide 73: Provisions
Provisions For personal use only Total Provisions • AASB 9 adopted from 1 July 2018, increasing impairment $m provisions by $1,058 million due to recognition of impairment losses on a forward looking basis. • Collective Provisions include the impact of four probability- 4,691 4,734 4,799 weighted ec
Slide 74: Divisional contributions
Divisional contributions1 For personal use only FY19 vs FY18 % of Group Loan Cost-to- 2 Operating Operating Operating Cash Business Unit NPAT Impairment Income Income Expenses Performance Expense NPAT FY19 FY19 3 RBS 49.9% (4.5%) 2.7% (8.4%) 6.3% (10.0%) 38.4% BPB 31.3% 0.5% 8.0% (3.4%) 46.6% (6.6%)
Slide 75: Business Units
Business Units For personal use only ~ 95% of Group NPAT1 Divestments/ Strategic Reviews Movements are FY19 vs FY18 Life 13 IFS Discontinued (15) (10%) Sovereign - Eliminations (24) 4,234 (7%) (8%) 4% 49% (28%) (37%) (18%) (73%) Large 2,658 1,071 1,191 240 $m 227 (941) 160 33 (26) 2 RBS BPB IB&M ASB
Slide 76: Retail Banking Services (RBS)
Retail Banking Services (RBS)1 For personal use only % of Group NPAT2 Volume growth3,4 Balancing growth and returns - managing regulatory requirements 12 months to Jun 19 5.0% 50% System 3.4% 4.1% 3.7% Home Household Loans Deposits $m Jun 18 Jun 19 % Margin RBS provides simple, convenient Income 11,
Slide 77: Business & Private Banking (B&PB)
Business & Private Banking (B&PB) For personal use only % of Group NPAT1 Volume growth Jun 19 vs Jun 18 Transport & Storage +10% Business Services +10% 31% Property Investor +3% Property Developer -12% 2.9% 1.7% -0.7% Business Home Deposits Lending Loans We are continuing to invest in our $m Jun 18
Slide 78: Institutional Banking and Markets (IB&M)
Institutional Banking and Markets (IB&M) For personal use only % of Group NPAT1 Volume growth Front book discipline, back book optimisation 13% RWA $bn 101 97 96 90 85 Other 13 16 20 17 18 Credit 88 81 76 73 67 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Institutional Banking and Markets $m Jun 18 Jun 19 % M
Slide 79: ASB
ASB For personal use only % of Group NPAT1 Volume growth Solid volume growth in lending and deposits 13% 12 months to Jun 19 6% 6% Deposits Lending NZD $m Jun 18 Jun 19 % ASB conducts its business through Margin Income 2,600 2,726 5 four business units: Retail Banking; Margin remained stable over th
Slide 80: Wealth
Wealth For personal use only Wealth1 CFSGAM Life (Continuing) (Discontinued) (Discontinued) FUA growth from market Higher net outflows partially offset Loss recognition, higher claims momentum partially offset by higher investment markets experience and lower Inforce by net outflows Premiums from lo
Slide 81: Home and Consumer Lending
For personal use only 5 Home and Consumer Lending “ We are Australia’s largest home lender, providing $92 billion of new lending this year for Australian home buyers ”
Slide 82: Home lending – system overview
Home lending – system overview The recent modest slowdown in housing credit The slowdown has been driven by a combination of growth is expected to extend into calendar year 2020 regulatory/other factors, largely in investment lending For personal use only % Housing Credit1 CBA Economics Forecast Ran
Slide 83: Home lending - CBA
Home lending - CBA1 CBA adopted regulatory changes early and avoided Whilst some market share was ceded as a result, more For personal use only riskier segments at the peak of the market recent growth has been at or above system CBA growth vs system (6mthly) • APRA 10% cap on 12 month rolling growth
Slide 84: Borrowing capacity relatively stable
Borrowing capacity relatively stable1 A number of strengthened servicing policies and Despite tightening, maximum borrowing capacity has For personal use only practices have been implemented since June 2015 remained relatively stable over the last 12-18 months Change in maximum borrowing capacity2 I
Slide 85: Serviceability assessment
Serviceability assessment1 New loan applications are assessed based on a range An interest rate buffer is used in of income and expenditure metrics loan servicing tests For personal use only All income used in application to assess serviceability is verified Interest rate buffers (%) • Loans asses
Slide 86: Portfolio quality remains sound
Portfolio quality remains sound1 Approximately 60% of the book was originated under Significant repayment buffers For personal use only tightened standards from FY16 in place Mortgage portfolio by year of origination Repayment buffers 17% (Payments in advance2, % of accounts) 15% 16% 10% 12% 9% 6% 7
Slide 87: Portfolio LVRs
Portfolio LVRs1 Portfolio LVRs remain strong, with a modest uptick in Approximately 3.5% of accounts and 4.5% of balances For personal use only higher LVR bands given market softening are in a negative equity3 position Dynamic LVR Bands2 Jun 18 Proportion of Balances in Negative Equity3 60% Dec 18 5
Slide 88: Home loan portfolio – CBA
Home loan portfolio – CBA For personal use only Portfolio1 Jun 18 Dec 18 Jun 19 New Business1 Jun 18 Dec 18 Jun 19 Total Balances - Spot ($bn) 451 458 467 Total Funding ($bn) 45 49 43 Total Balances - Average ($bn) 443 455 462 Average Funding Size ($’000)7 319 326 320 Total Accounts (m) 1.8 1.8 1.8
Slide 89: Home loan portfolio – CBA ex Bankwest
Home loan portfolio – CBA ex Bankwest For personal use only Portfolio1 Jun 18 Dec 18 Jun 19 New Business1 Jun 18 Dec 18 Jun 19 Total Balances - Spot ($bn) 381 388 395 Total Funding ($bn) 39 42 36 Total Balances - Average ($bn) 374 384 391 Average Funding Size ($’000)6 317 325 317 Total Accounts (m)
Slide 90: Interest only (IO) home loans
Interest only (IO) home loans1 IO loans account for a reducing proportion of total …and a reducing proportion of portfolio balances… For personal use only total new business flow IO % of total home loans IO % of total home loans Total portfolio balance New business flow 30% 26% 22% 23% 23% 22% 2H18
Slide 91: Home loan arrears
Home loan arrears Group portfolio arrears broadly stable Trends are broadly consistent across ….with interest only arrears steady over this half loan types…. the last 12 months For personal use only Arrears by Portfolio Group Arrears by Product Arrears by Repayment Type 1.0% 1.8% 1.0% Group 90+ days
Slide 92: Portfolio losses, insurance and stress testing
Portfolio losses, insurance and stress testing1 For personal use only Losses to average gross loans2 Portfolio Insurance Profile3 2.5% % of Home Loan portfolio Excess of loss re- Insurance with Genworth insurance 4% or QBE for higher risk 2.0% 21% loans above 80% LVR 5% 1.5% CBA Home Loans Insurance
Slide 93: Consumer arrears
Consumer arrears For personal use only Group 2015 Credit Cards Bankwest Credit Cards 2016 2017 1.8% Group 90+ days CBA Group 90+ days 2018 ASB 1 2019 1.2% 1.2% 1.0% 0.6% 0.0% 0.8% Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Personal Loans Personal Loans 2015 Gr
Slide 94: Business and Corporate Lending
For personal use only 6 Business and Corporate Lending “$36Supporting Australian businesses with billion of new business lending this year ”
Slide 95: Business and Corporate Lending
Business and Corporate Lending Total lending balances down 3% …driven by front book discipline and IB&M Credit RWA’s have reduced over FY19… back book optimisation in IB&M significantly over recent years For personal use only Business and BPB +2% • Disciplined pricing - focus on relationship returns
Slide 96: Corporate lending
Corporate lending For personal use only Corporate Corporate Loan Impairment Expense Total Credit Exposures Basis Points of GLAA $bn bpts 465 477 453 445 437 382 393 142 361 332 307 300 76 43 24 23 20 13 14 11 8 10 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY09 FY10 FY11 FY12 FY13 FY14 F
Slide 97: Portfolio quality
Portfolio quality1 For personal use only Exposures by Industry Corporate Portfolio Quality Group TCE by Geography Investment Grade AAA A+ BBB+ Jun 18 Dec 18 Jun 19 Jun TCE $bn to to to Other 19 AA- A- BBB- Australia 77.6% 77.9% 78.4% 67.9% 67.9% 67.4% Sovereign 95.8 9.1 0.5 - 105.4 New Zealand 10.0%
Slide 98: Credit exposure summary
Credit exposure summary For personal use only Group TCE TIA $m TIA % of TCE Dec 18 Jun 19 Dec 18 Jun 19 Dec 18 Jun 19 Consumer 57.8% 58.6% 1,832 2,101 0.29% 0.33% Sovereign 10.0% 9.7% - - - - Property 6.2% 6.3% 652 775 0.97% 1.14% Banks 4.6% 4.5% 9 9 0.02% 0.02% Finance – Other 4.9% 4.9% 78 35 0.15%
Slide 99: Sectors of interest - Construction
Sectors of interest - Construction For personal use only Exposures of $8.2bn (0.8% of Group TCE) with no Group Exposure Jun 18 8.1 8.3 8.2 Dec 18 material changes to sector composition. Jun 19 Portfolio rated 18% investment grade and 41% of 17 17 18 exposures secured. On-going higher risk is e
Slide 100: Sectors of interest – Commercial Property
Sectors of interest – Commercial Property For personal use only Group Exposure Jun 18 Increase in investment exposures driving moderate Dec 18 68.2 increase exposure for the half year (+1.4%). 67.2 67.2 Jun 19 Diversified across sectors and by counterparty. Lower apartment development exposure
Slide 101: Sectors of interest – Residential Apartments
Sectors of interest – Residential Apartments For personal use only Apartment Development1 exposure reduced by $2.9bn Profile (56%) since Dec 16. Total Residential Apartment Development1 $9.5bn (14% of CP) $2.3bn (0.2% of TCE) Facilities being repaid on time from pre-sale settlements. Perth Other
Slide 102: Sectors of interest – Agriculture
Sectors of interest – Agriculture For personal use only Jun 18 Group Exposure Group agriculture exposure of $22.5bn (2.1% of Group Dec 18 21.8 22.4 22.5 TCE) – diversified by geography, sector, client base. Jun 19 Australian agriculture portfolio is facing weak seasonal and drought conditions. T
Slide 103: Sectors of interest – drought affected areas
Sectors of interest – drought affected areas For personal use only CBA enacted its emergency assistance package in June 2018 for drought impacted clients. Drought more pronounced in NSW and Victoria, with conditions drier than long term averages. Past droughts have not materially impacted the
Slide 104: Sectors of interest – Retail Trade
Sectors of interest – Retail Trade For personal use only The retail trade sector remains weak, challenged by low 11.7 11.711.3 Group Exposure Jun 18 Dec 18 wage growth, falling house prices, continued subdued Jun 19 consumer sentiment, and online disrupters. 27 Retail trading conditions, particu
Slide 105: Deposits, Funding and Liquidity
For personal use only 7 Deposits, Funding and Liquidity “with We have maintained our strong funding position the highest share of stable household deposits in Australia ”
Slide 106: Funding overview
Funding overview Resilient balance sheet with ongoing Stable wholesale funding composition ...with a >5.0yrs WAM to reduce customer deposit growth weighted to longer term funding… refinancing risk For personal use only Deposit Funding Long Term Funding Long Term Funding WAM % of total wholesale fund
Slide 107: Deposit funding
Deposit funding For personal use only Deposit Funding Deposits vs Peers1 Deposits in NSFR5 $bn As at 30 June 2019 ($bn) 69% 499 Peers as at 31 March 20196 68% 426 67% Other 343 250 deposits 235 CBA 66% 211 273 Peer 1 211 Household 155 Peer 2 63% 264 215 200 Peer 3 deposits 132 118 CBA overweight Jun
Slide 108: Wholesale funding
Wholesale funding For personal use only Portfolio Mix Short Term funding by product¹ Certificate of Deposits 46% Short term 33% 34% 34% funding¹ Commercial Paper 24% 67% 66% 66% FI Deposits 22% Long term Funding2 5.1 5.0 5.1 WAM WAM3 MTN 5% WAM Other 3% Jun 18 Dec 18 Jun 19 Long Term funding by curr
Slide 109: Long term funding
Long term funding For personal use only Group FY19 benchmark issuance New term issuance New term issuance Date Entity Type Tenor Volume Spread at Issue by currency by tenor (yr) (m) (bpts) Jul 18 CBA GBP Senior 3 GBP 250 3m GBP Libor +45 25% 23% 21% Jul 18 CBA USD Covered 5 USD 1,250 MS +40 38% 42%
Slide 110: Funding and liquidity metrics
Funding and liquidity metrics1 For personal use only NSFR 112% NSFR (%) Jun 19 641 572 112% 0.1 2.3 (1.6) (2.8) 112% Liquids and Other Assets 2 Wholesale 2.2 0.2 Funding & Other Other Loans Retail/SME Deposits Residential Mortgages ≤ 35% $bn risk weight 3 Capital Required Stable Funding Available St
Slide 111: Capital
For personal use only 8 Capital “ ahead We have maintained a strong capital position, of APRA’s unquestionably strong target ”
Slide 112: Capital overview
Capital overview For personal use only CET1 CET1 CET1 433% International APRA 10.8% 10.7% 16.5% 16.2% Assets 10.1% 15.5% 122% 2007 2009 2011 2013 2015 2017 2019 Jun 18 Dec 18 Jun 19 Jun 18 Dec 18 Jun 19 International CET1 ratios 16.9 16.3 16.2 16.2 14.8 14.8 14.6 14.6 14.5 14.3 G-SIBs in dark grey 1
Slide 113: Dividends
Dividends For personal use only Payout ratio (cash) 78% 74% 73% 76% 76% 75% 75% 77% 75% 80%2 88%2 Net of DRP 53% 61%1 53% 55% 76%1 67%1 62% 64% 53% 68% 88%1 230 231 231 218 222 222 Interim Final 197 200 198 198 199 200 200 188 183 170 164 132 137 cents 113 115 120 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Slide 114: Capital drivers
Capital drivers For personal use only bpts $bn Total Risk Weighted Assets (RWA) CET1 (4.0) 5.2 3.2 453 Market 445 3.2 Risk 10 (80) 87 (18) 1 14 5 10 IRRBB 10.8% 57 60 10.7% Op Risk Credit RWA (8) IRRBB 9 Market RWA (12) Credit 369 CET1 impact bpts1 373 Risk Op RWA (7) (8) 9 (12) (7) (18) Dec 18 Divi
Slide 115: Capital generation
Capital generation For personal use only Organic Capital Generation1 FY19 $m Bpts IB&M Credit RWA RBS 3,771 84 -37% Future Opportunities BPB 2,460 55 106 67 • Simpler operating model IB&M 2,158 49 $bn • Cost reduction New Zealand 773 18 Jun 16 Jun 19 • Emphasis on regulatory risk-adjusted returns IF
Slide 116: CET1 – internationally comparable
CET1 – internationally comparable For personal use only bpts Internationally Comparable1 CET1 CET1 APRA 10.7% Equity investments 1.0% Capitalised expenses 0.1% Deferred tax assets 0.4% 16.5% (99) 110 (49) 8 16.2% IRRBB RWA 0.3% Residential mortgages 2.1% Other retail standardised exposures 0.1% Unse
Slide 117: Regulatory expected loss
Regulatory expected loss For personal use only $m Jun 18 Dec 18 Jun 19 Regulatory Expected Loss (EL) 4,453 4,600 4,706 Eligible Provisions (EP) Collective Provisions1 2,484 3,4532 3,5102 Specific Provisions1,3 1,581 1,650 1,751 General Reserve for Credit Losses adjustment 589 539 515 Less: ineligibl
Slide 118: Leverage ratio
Leverage ratio For personal use only Leverage ratio introduced to constrain the build-up of leverage in $m Jun 19 the banking system. Tier 1 Capital 57,355 Leverage ratio = Tier 1 Capital Total Exposures 1,023,181 Total Exposures Leverage Ratio (APRA) 5.6% $m Jun 19 6.3% 6.4% 6.5% Group Total Assets
Slide 119: Regulatory capital changes
Regulatory capital changes Change Details Implementation For personal use only APRA’s • Capital to exceed unquestionably strong benchmark of CET1 >10.5% by 1 Jan 2020 1 Jan 2020 unquestionably strong APRA commenced consultation in 2018 on: • Revisions to risk-based capital requirements for credit, i
Slide 120: APRA's LAC proposal
APRA’s LAC proposal For personal use only 18.0% • Additional 3% of RWA in Total Capital Capital Surplus applicable to all domestically systemically 15.5% 15.0% important banks (D-SIBs) by 1 January 2024. 14.5% Tier 2 Capital • This represents additional $13.6bn of Total Capital Surplus 12.7% Conserv
Slide 121: RBNZ capital proposal
RBNZ capital proposal For personal use only RBNZ proposed capital requirement changes 16.0% 18.0% • Potential capital increase in ASB of ~NZ$3bn, Minimum assuming current balance sheet size and 2.0% Tier 2 Tier 1 composition. 1.5% AT1 CCYB Buffer • RBNZ expected to finalise reforms towards the end 1
Slide 122: Economic Overview
For personal use only 9 Economic Overview “ Against a volatile global backdrop, the Australian economy has slowed, but remains resilient ”
Slide 123: Key economic indicators (June FY)
Key economic indicators (June FY) GDP % Underlying CPI % Unemployment Rate % For personal use only GDP Nominal GDP 5.9 5.7 5.9 5.5 2.9 5.6 5.1 5.0 4.8 2.8 2.1 2.1 2.5 2.6 4.7 4.9 4.7 1.8 2.3 1.7 1.6 2.1 1.4 2.4 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021
Slide 124: Key economic indicators (June FY)
Key economic indicators (June FY) 2014 2015 2016 2017 2018 2019 2020 2021 For personal use only World GDP 3.6 3.5 3.3 3.8 3.6 3.3 3.6 3.6 Australia Credit Growth % – Total 5.0 5.9 6.2 5.4 4.4 3.3 3½-5½ 4½-6½ Credit Growth % – Housing 6.4 7.3 6.7 6.6 5.6 3.5 3½-5½ 4½-6½ Credit Growth % – Business 3.4
Slide 125: Global growth risks remain elevated
Global growth risks remain elevated The global economy has …as trade war risks …and policy uncertainty remains For personal use only slowed… escalate… elevated Index Global PMI1 New Export Orders2 Index Global Policy Uncertainty3 60 65 (higher readings indicate greater uncertainty) US 300 Services E
Slide 126: Australia – the economy has slowed
Australia – the economy has slowed GDP growth has dipped below Progress in reducing unemployment Inflation rates remain For personal use only trend has stalled low % GDP Growth1 Unemployment Rate1 % CPI Growth1 % 6 6 6 4 4 4 2 2 2 0 0 0 Jun 07 Jun 13 Jun 19 Jun 07 Jun 13 Jun 19 Jun 07 Jun 13 Jun 19
Slide 127: Australia – some positives
Australia – some positives The major economic imbalances continue Population growth remains strong, Policy stimulus is coming via interest For personal use only to narrow supporting demand rate cuts and tax cuts % Key balances1,2 % Population1 Impact on disposable income3 (rolling annual total, % of
Slide 128: Household Spending Intentions Series
Household Spending Intentions Series For personal use only ► Household Spending Intentions Series (HSIS) – combines actual CBA transactional data and publically available Google Trends search data. ► Combined, these two data sets provide unique insights and a new perspective on the Australian econom
Slide 129: Household Spending Intentions Series
Household Spending Intentions Series For personal use only % CBA HSI: Home Buying1 % CBA HSI: Retail Sales1 (annual % change) (annual % change) 12 8 Smoothed 0 4 HSI Smoothed -12 0 HSI -24 -4 Jun 16 Jun 17 Jun 18 Jun 19 Jun 16 Jun 17 Jun 18 Jun 19 ► Home buying intentions have been in negative terri
Slide 130: New Zealand
New Zealand Dairy prices have remained relatively NZ’s terms of trade expected to remain Inflation is likely to range between 1-2% For personal use only steady since late 2016 near record highs over next few years Global dairy trade auction results1 Index NZ Terms of Trade2 % NZ CPI inflation3 (USD/
Slide 131: Sources, Glossary & Notes
For personal use only 10 Sources, Glossary & Notes
Slide 132: Sources and Notes
Sources and Notes Best in digital For personal use only Slide 11 1. The total value ($) of transfers and BPAY payments made in digital (NetBank, the CommBank mobile app, CommBank tablet app and old mobile app) as a proportion of the total value ($) of transfers in over-the-counter, ATM, EFTPOS and d
Slide 133: Sources and Notes
Sources and Notes Who we are For personal use only Slide 33 1. Presented on a continuing basis. Number based on revised methodology. 2. Active digital customers includes total number of customers that logged onto NetBank, the CommBank mobile app, CommBank tablet app and old mobile app at least once
Slide 134: Sources and Notes
Sources and Notes Delivering for all our stakeholders For personal use only Slide 39 1. DBM Consumer MFI *Net Promoter Score. Based on Australian population aged 14+ years old rating their Main Financial Institution. Net Promoter Score refers to customer likelihood to recommend their MFI using a sca
Slide 135: Sources and Notes
Sources and Notes Best in digital For personal use only Slide 42 1. The Forrester Banking WaveTM: Global Mobile Apps Summary, 2018. Commonwealth Bank of Australia received the highest industry WaveTM overall score among mobile apps in APAC in Forrester's proprietary Industry WaveTM evaluation. Forre
Slide 136: Sources and Notes
Sources and Notes Home Lending - CBA For personal use only Slide 83 1. CBA including Bankwest unless noted otherwise. Market share includes subsidiaries. System source: RBA Lending and Credit Aggregates. 2. Presented on a gross basis before value attribution to other business units. 3. Includes refi
Slide 137: 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 The LCR is the first quantitative liquidity measure that is part of the RWA adjusted by risk weights calculated according to various A
Slide 138: Notes – Disclaimer
Notes Disclaimer The material in this presentation is general background information about the Group and its activities current as at the date of the presentation, 7 August 2019. It is information given in For personal use only summary form and does not purport to be complete. Information in this pr
Commonwealth Bank of Australia — FY2019 Earnings Presentation on 6ix