Commonwealth Bank Of Australia · ASX:CBA
Commonwealth Bank Of Australia — FY2006 Earnings Presentation
124 slides from Commonwealth Bank Of Australia's earnings presentation, Aug 9, 2006
Slide 1: Presentation of Full Year Results for 30 June 2006
Commonwealth Bank Ralph Norris CHIEF EXECUTIVE OFFICER Gary Thursby CHIEF FINANCIAL OFFICER (ACTING) 9 August 2006 Commonwealth Bank of Australia Acn 123 123 124 PRESENTATION OF FULL YEAR RESULTS For 30 June 2006
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, 9 August 2006. 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: Agenda
Agenda # Full Year Results — Ralph Norris Highlights Outlook » Full Year Results — Gary Thursby « Questions ConmonwealthBank «
Slide 4: Notes
Notes ConmonwealthEank
Slide 5: Highlights
Highlights Very good result - Cash NPAT of $4,053 million Good volume growth across the business Focus on profitable growth Successful delivery of WnB and good progress on new strategic initiatives ConmonwealthBank «
Slide 6: Other Key Information Notes
Other Key Information Notes Cash NPAT excluding Hong Kong ($m) Jun 06 Dec 05 Jun 05 Cash NPAT 1,992 2,061 1,759 Less: Profit on sale of Hong Kong 0 (145) 0 Cash NPAT (excl HK sale) 1,992 1,916 1,759 Some overall Bank indicators Jun 06 Dec05 Jun05 Dec 04 Jun 04 Number of branches 41,005 1,007 1,008 4
Slide 7: Highlights
Highlights 6 months 12 months Cash NPAT (excl HK) 12% Cash EPS (excl HK) 304.6 15% Dividend 224 14% Return on Equity — Cash (excl Hk) 20.6% 180 bpts Gross impaired assets / RWA 0.15% 4 5 bpts ConmonwealthEank
Slide 8: Notes
Notes ConmonwealthEank
Slide 9: Good full year result
Good full year result $4,053m Scorecard 59 (1141) 105 af EB Bee Cash ’ Banking ’ Funds ‘Insurance’ S/H ’ WnB ’ Cash ’ Profit on ’ Cash Cash EPS NPAT Mgt investment profit pre sale of NPAT dun 05 returns HK HK Jun 06 Jun 06 Cash EPS 264.8 Cash EPS 8, —<—<— > 15% 304.6 ConmonwealthEank
Slide 10: Other Key Information
Other Key Information _ Notes The payout ratio (cash basis) is calculated according to the following criteria: Payout ratio = DPS (in $) x number of shares (end of period) Cash NPAT 2.24 x 1,283 ie. —______ 71% 4,053 * Payout ratio excluding HK sale = 74% ConmonwealthEank 410
Slide 11: Highlights - dividend
Highlights - dividend Dividend (cents per share) 200 160 120 Cents oo ° L 2002 2003 2004 2005 2006 = First Half & Second Half ConmonwealthEank 1
Slide 12: Other Key Information
Other Key Information Jun06 Dec05 Jun05 Dec04 Jun04 Banking Home loans 18.8% 188% 19.0% 189% 18.9% | Credit cards 20.5% 21.4% 22.8% 22.8% 22.7% | Retail deposits 22.2% 22.9% 23.0% 236% 23.7% | Personal lending “ 16.1% 16.0% 16.7% 16.7% 15.0% Business lending 13.1% 135% 13.2% 136% 13.7% | Transaction
Slide 13: Highlights - market position
Highlights - market position Dec 05 Home Loans v | 18.8% Personal Lending vi 16.0% Credit Cards x | 21.4% Retail Deposits x | 22.9% NZ Lending x | 23.2% NZ Deposits v | 19.9% Business Lending x 13.5% Transaction Services (corporate) vi 22.1% Transaction Services (commercial) * | 25.1% Equities Tradi
Slide 14: Notes
Notes ConmonwealthEank 44
Slide 15: Which New Bank - A Success
Which New Bank - A Success Technology transformation Delivered ahead of schedule Within budget Financial and Productivity Financial Benefit EPS Growth —- CAGR Banking Funds Management Insurance $900m 10%* 48% 0.74% 42% $1,044m 14% 47.1% 0.74% 36.7% Customer Satisfaction Targets not yet achieved But
Slide 16: Notes
Notes ConmonwealthEank 16
Slide 17: CEO Priorities & Measures
CEO Priorities & Measures Customer Service = Business Banking = Technology & Operational Excellence Trust & Team Spirit “» Superior operating and financial results “» Australia’s finest financial services organisation ConmonwealthEank 17
Slide 18: Notes
Notes ConmonwealthEank 18
Slide 19: Customer Service
Customer Service # Roll out of Sales and Service programme (SUCCESS) well underway Increased resourcing in customer facing roles « Launch of new competitive products and Saturday trading « Some leading indicators showing positive trends a Internal measurements will track and measure customer advocac
Slide 20: Notes
Notes ConmonwealthEank 20
Slide 21: Business Banking
Business Banking « Management and structural changes better align business with customer needs Business bankers back into the branches « CommSee for Business roll out now complete « Commbiz being rolled out to key customers over next 3 months » Range of metrics being measured including customer sati
Slide 22: Notes
Notes ConmonwealthEank 22
Slide 23: Technology & Operational Excellence
Technology & Operational Excellence « Appointment of new IT Head to lead Group wide Technology » Successful renegotiation of EPS component of EDS contract « Re direct spend from operational to value creation initiatives » New corporate services function to drive bank-wide cost management culture # O
Slide 24: Notes
Notes ConmonwealthEank 24
Slide 25: Trust & Team Spirit
Trust & Team Spirit Recent management changes strengthen the leadership team while building greater collaboration across the Group Focus on developing people through investment in talent and training # Introduction of a number of initiatives for our people » Continuing measurement of progress using
Slide 26: Notes
Notes ConmonwealthEank 26
Slide 27: 2007 outlook
2007 outlook « Good result with earnings momentum going into new fiscal year « Continuing real progress made with strategic initiatives : Mainly positive outlook for the domestic economy » Competitive environment for financial services « Confident in our ability to deliver solid profitable growth Co
Slide 28: Notes
Notes ConmonwealthEank 28
Slide 29: Commonwealth Bank - Gary Thursby
Commonwealth Bank Gary Thursby CHIEF FINANCIAL OFFICER (ACTING) 9 August 2006 Commonwealth Bank of Australia ACN 123 123 124 PRESENTATION OF FULL YEAR RESULTS For 30 June 2006
Slide 30: Notes
Notes ConmonwealthEank 30
Slide 31: Highlights - NPAT growth
Highlights - NPAT growth 12 months 6 months Jun05 Jun 06 vs Jun06 Dec05 Jun 06vs $M Jun 05 $M $M Dec 05 NPAT (statutory) 3,400 16% 1,929 1,999 (4%) Add back AIFRS non cash 92 36% 63 82 . items NPAT (cash) 3,492 16% 1,992 2,061 (3%) Less profit on sale . . - (445) . Hong Kong business NPAT (cash excl
Slide 32: Other Key Information
Other Key Information Notes 42 months 6 months Contribution to profit Jun06 Jun05 Jun 06 vs Jun 06 Dec05 Jun 06 vs $M $M Jun 05 $M $M Dec 05 Banking 3,227 2,913 11% 4,638 1,589 3% Funds Management 400 354 14% 217 183 19% Insurance 215 156 38% 12 103 9% NPAT (underlying) 3,842 3,420 12% 1,967 4,875 5
Slide 33: Highlights - underlying profit by business
Highlights - underlying profit by business 12 months 6 months Jun05 Jun 06 vs Jun06 Dec05 Jun 06 vs $M Jun 05 $M $M Dec 05 Banking 2,913 11% 1,638 1,589 3% Funds Management 351 14% 217 183 19% Insurance 156 38% 112 103 9% Underlying Profit 3,420 12% 1,967 1,875 5% ConmonwealthEank 33
Slide 34: Other Key Information
Other Key Information Notes Which New Bank estimates Benefits 2004 | 2005 | 2006 Targets !) 200 620 900 Actual 237 724 | 1,044 () These were the original full year targets set out in the September 2003 presentation Investment spend 2004 | 2005 | 2006 | Total Original 660 510 310 | 1,480 Actual 634 6
Slide 35: Which new Bank - Benefits
Which new Bank - Benefits 2005/06 $1 ,044m (target was $900m) aN 2004/05 c 538 506 $724m {target was $620m) cr 2003/04 301 $237m (target was $200m) Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Cost Saving » Revenue Benefit ConmonwealthEank 35
Slide 36: Other Key Information
Other Key Information Balance of capitalised software costs ] $million Jun 06 Capitalised software 229 Expense ratios Banking Expense to income Underlying Expense to income Funds Management Expense to Average FUA Underlying Expense to Average FUA Insurance Expense to average inforce premiums Underly
Slide 37: Productivity Improvements
Productivity Improvements Expense ratios () WnB 54.7% Target CAGR = 4.9% 9 47.1%(2) 6) 48% 50.4% > Banking” b CAGR = 10.0% — 36.7% 42% Insurance 0.87% CA GR = 5.3% > Funds Mgt" 0.74%(2) 0.74% Jun 03 Jun 06 © Ona cash basis 3) Expense to income iS) Expense to average funds under administration @) AGA
Slide 38: Other Key Information
Other Key Information Notes 12 months 6 months Comparable expenses Juncé Jun05 Jun06vs Jun06é Dec05 Junoévs $M $M Jun 05 $M $M Dec 05 Staff expenses 2,823 2,673 6% 1,437 1,386 4% Occupancy and equipment 621 613 1% 31 310 - IF Services 985. 956 3% 483 502 (4%) Postage and Stationery 216 220 (2%) 107
Slide 39: 2006 Operating expenses $5,994m
2006 Operating expenses 187 $5,994m $5,719m a T T T T T T T T | 2005 Hong Kong Gandel acq FX Volume — Unit Pricing New Underlying 2006 disposal Expenses Compliance Strategic growth (FM&ins) Initiative —_Initiatives 39 ConmonwealthEank
Slide 40: Other Key Information
Other Key Information 2006 results include: Gross Cap & P&L Provision WoB initiatives 238 (117) 121 Other strategic initiatives 97 (58) 39 Compliance & other projects CMLA control environment 55 - 55 Other (incl Basel fl, SOX, IFRS, etc) 35 - 35 Amortisation of Software Assets 43 - 43 Total 468 (175
Slide 41: 2007 Expense Drivers
2007 Expense Drivers 2006 Operating Expenses $6bn 2007 Expense driver increases: CPI & general salaries +3-4% Volume related expenses +1% Additional frontline & permanent staff +1-2% Additional project expenditure +1-2% Savings targeted: Technology savings (2%) Further WnB benefit & other expense re
Slide 42: Notes
Notes ConmonwealthEank 42
Slide 43: Segment Results: Banking
Segment Results : Banking ConmonwealthEank
Slide 44: Other Key Information
Other Key Information Notes Jun 06 Av interest earning assets ($m) () 282,553 Net int income (excl securitisation ($m) 3,202 Net interest Margin (AIFRS) (bp) 2.29% % of operating Income Jun 06 Net interest income 54% Other banking income 26% Funds Mgt. income 14% Insurance income 6% Total 100% ©) Ha
Slide 45: Banking - underlying profit
Banking - underlying profit 11% underlying profit Underlying profit up 11% since Jun 05 growth 488 # Strong volume growth Net interest income growth strong 2 Good expense control # Underlying credit quality remains sound ConmonwealthEank 45
Slide 46: Other Key Information
Other Key Information 42 months 6 months Reconciliation of Net Jun06 = Jun 05) Jun 06 vs Jun06 Dec05 Jun 06 vs Interest Margin % % Jun 05 % Se Dec 05 Net Interest margin) 2.34 243 (9)bpts 2.29 2.39 (10)bpts AIFRS Volatility 0.02 - 2 dpts 0.01 - Abdpt Underlying Net 2.36 2.43 (7)bpts 2.30 2.39 (9)bpt
Slide 47: NIM - Full Year Average basis points
NIM - Full Year Average 7 basis points - ae — 2.45 (0.02) 2.43 0.02 0.03 ce wma olO02) £0:03)_ (0-03) .92) 0.01 i T T FY June ‘05 AIFRS FYJune'05 AIFRS Pricing Non Funding Mix AssetMix June '06 AGAAP AIFRS Volatility Lending AIFRS IEA T T T T = ConmonwealthEank 47
Slide 48: Notes
Notes ConmonwealthEank 48
Slide 49: NIM - Half Year basis points
NIM - Half Year 9 basis points —_ (0.04) 2.39 (0.01) 2.29 2.41 2006 Quarterly NIM 2.37 2.31 2.29 Dec 05 AIFRS Flow on from Second half Restated first half pricing / funding mix = dune ‘66 He September December March 49 ConmonwealthEank
Slide 50: Other Key Information
Other Key Information Notes AIFRS Impact of hedging derivatives Jun 06 Dec 05 $M $M Net Interest Income 21 26 Other banking income (39) (40) Net Impact (18) (14) There has been a reclassification of $29m between Net Interest Income and Other Banking Income in Dec 05 half ConmonwealthEank 50
Slide 51: Other Banking income - key components
Other Banking income -— key components 12 months 6 months Jun05 Jun 06 vs Jun06 Dec05 Jun 06 vs $M Jun 05 $M SM Dec 05 Commissions & Fees 1,545 6% 820 815 1% Lending Fees 733 9% 411 389 6% Trading Income 440 15% 261 244 7% Other 127 38% 138 37 Large 2,845 9% 1,630 1,485 10% Non trading derivatives 0
Slide 52: Notes
Notes 8 | i 6 months Jun 06 vs : Jun 06 Dec 05 Dec 05 i | Home Loans 689 701 (2%) |. | Consumer Finance 558 537 4% / i Retail Deposits 1,329 1,324 - : Corporate Banking 466 486 (4%) L 7 Financial Markets 475 454 5% / Lending & Finance 631 561 12% | ] Asia Pacific 537 529 2% : Other 165 108 53% Total
Slide 53: Banking - Revenue by product
Banking - Revenue by product Asia Pacific 3% Home Loans 11% 15% Lending & Finance 12% Retail Deposits 28% Financial markets 10% Corporate Banking 10% Consumer Finance 11% The current year has been affected by AIFRS. 12 months Jun 06 vs Jun 06 Jun 05 Jun 05 Home Loans 1,390 1,194 16% Consumer Finance
Slide 54: Other Key Information
Other Key Information Notes Jun 06 vs Jun 06 vs Jun 06 Dec05 Jun05 Dec 05 dun 05 Domestic growth profile ($bn) Loan Funded" 24.8 22.9 20.5 8% 21% Reduction” 16 16.7 12.3 (4%) 30% Net Growth” 88 64 B14 44% 2% Total Home Lending assets ($n) Australian Horne Lending assets ($bn) 144.8 136.0 1236.0 T% 1
Slide 55: Banking - Home Lending (domestic)
Banking - Home Lending (domestic) Spot Balances (including securitisation) « CBA Balance Growth: * 11% in 2006 7% in 2HO6 $136.0bn = #79 45% 47% = Very strong second half: Jun 05 Dec 05 Jun 06 record approval volumes ap Market Share « market shares stabilised as 149.8% ray -_ aay mone + . : ap: 8%,
Slide 56: Notes
Notes ConmonwealthEank 56
Slide 57: Home Loan Growth by Channel (Half Year)
Home Loan Growth by Channel (Half Year) (Balances sourced from each channel as a % of total CBA housing growth) 9 27.9% 30 % L 16.3% = 14.0% 14.8% Dec 04 Jun 05 Dec 05 lt Brokers & Branch @ Premium © Total CBA ©) Total Market * Dec 05 market growth figure restated by RBA ConmonwealthEank 57
Slide 58: Other Key Information
Other Key Information Notes Half ending Personal lending Jun06 Dec05 Jun05 JunQ6vs Jun 06vs gross balances $M $M $M Dec 05 Jun 05 Credit cards 6,814 6,707 6,507 2% 5% Personal loans* 3,826 3,800 4,213 1% (9%) Margin loans 5,758 4,664 4311 23% 34% Total Personal 16,398 15,171 15,031 8% 9% Lending * D
Slide 59: Banking - Personal Lending (domestic)
Banking - Personal Lending (domestic) Personal Lending Balances “ CBA Balance growth $16.4bn # +9% personal lending : « +5% credit cards Credit card market share loss _ to low rate cards (‘Yellow Jun 05 Dec 05 Jun 06 launched in March 06) © Credit Cards % PersonalLoans # Margin Loans Market Share ()
Slide 60: Notes
Notes ConmonwealthEank 60
Slide 61: Banking - Deposits (domestic)
Banking - Deposits (domestic) # CBA Balance Growth # +8% full year # +2% 2H06 Margins stable Strong growth in NetBank saver (+$3.6bn) — 63% new funds to CBA New transaction accounts (May 06) positive impact Balances $71.8bn _soog > $75.8bn Jun 05 Dec 05 Jun 06 Other Deposits # Deposit not bearing in
Slide 62: Notes
Notes ConmonwealthEank 62
Slide 63: Banking - Business Lending
Banking - Business Lending CBA Business, Corporate and 6 Very competitive market institutional Lending Balances $84.7bn $78.2bn +g « Growth in balance $68.4bn 14%” + 24% vs Jun 05 + 8% vs Dec 05 Jun 05 Dec 05 Jun 06 « Introduction of CBA Business Lending Market Share new products 16% 14% 13.65% 13.6
Slide 64: Other Key Information
Other Key Information Notes 42 months & months 7 ASB : New Zealand Jun 06 Jun 05 Jun 06 vs Jun06 Dec 05 Jun 06 vs | NZ$M $M $M Jun 05 $M $M Dec 05 Net Interest income 804 776 AG 412 392 Other income 344 268 28% 169175 Total Operating Income 1,148 1,044 10% 581-567 Operating Expenses (495) (470) 5% (
Slide 65: Banking - New Zealand (ASB)
Banking - New Zealand (ASB) # Cash profit up « + 16% full year « + 3% 2HO06 Lending balances up 17% Deposits grew 12% Margins still under pressure, but not as severe as 2005 Operational Lending* Balances (Spot - in NZD) $36.6b! $38.8bn 16% 7 ec 05 un 06 * Operational fending = excludes treasury & st
Slide 66: Other Key Information
Other Key Information Notes Jun 06 RWA $216,438m Charge for Bad Debts (6 mths) $210m Charge for Bad Debts to RWA (annualised) 0.19% Gross impaired Assets!” $326m Individually assessed provisions $471m Collective provisions $1,046m General reserve for credit losses (pre-tax) $500m Collective Provisio
Slide 67: Banking - bad debts
Banking - bad debts Bad debt expense to RWA (annualised) 0.19% o, 0.19% 0.19% 0.19% 210 188 ae 176 Dec03 Jun04 Dec04 Jun05 Dec05 Jun06 % to RWA 1.40% 1.20% 1.00% 0.80% 0.60% 0.49% + 0.20% 0.00% Gross impaired assets to RWA Dec Jun Dec Jum Dec Jun Dec Jun Dec dun Dec Jun oo 0 OF 02 02 03 038 64 O4 05
Slide 68: Notes
Notes ConmonwealthEank 68
Slide 69: Segment Results: Funds Management
Segment Results: Funds Management ConmonwealthEank 69
Slide 70: Other Key Information
Other Key Information Notes FUA Aw. FUA (Sbn) Spot. FUA ($bn) Margins Operating income/ av. FUA Net income’ av. FUA Expenses Operating expenses/ av.FUA Market shares* Platforms (latest is Mar 06) Retail funds (Mar 06) Breakdown of funds invested Local equities international equities Listed anc direc
Slide 71: Funds Management
Funds Management « Underlying profit before tax up + 23% vs Jun 05 + 16% vs Dec 05 « After tax profit affected by loss of transitional tax relief Costs impacted by one-offs » Funds under administration grew 23% to $152bn Underlying profit after tax up 14% 295 (191) : 400 351 = Jun05 Operating Operat
Slide 72: Other Key Information
Other Key Information Notes Total net flows Jun 06 $M FirstChoice & Avanteos 9,397 Cash Mgt. (389) Other retail (2,138) Wholesale 100 Property (704) International 2,082 Other {” (213) Total 8,135 6 months ended Dec 05 $M 3,936 (255) (2,316) 1,189 (366) 583 (76) 2,695 junds | $M 2,970 | (458) (1,965)
Slide 73: Funds Management - net funds flows
Funds Management - net funds flows Retail net flows ($m) (01"e #22 for Lite} wee CBA = industry FirstChoice attracts record flows and reaches $25bn 2 g « Significant inflows — ae 1000 into Avanteos from “ceo fo GSJBW alliance Mar 64 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Funds Under
Slide 74: Notes
Notes ConmonwealthEank 74
Slide 75: Investment Performance
Investment Performance June 2006 Gross performance and quartile ranking tyr % pa Quartile 3yr % pa Quartile Aust. Share — Core 29.1% 1 26.7% 1 Geared Share Fund 55.8% 1 51.9% 1 Imputation 26.2% 2 23.9% 3 Property Securities 23.7% 1 20.7% 1 Global Resources 61.2% 1 41.2% 1 Diversified 16.8% 3 14.6% 4
Slide 76: Notes
Notes ConmonwealthEank 76
Slide 77: Segment Results: Insurance
Segment Results: Insurance ConmonwealthEank 77
Slide 78: Key Information
Key Information 6 months ended Jun 06 Claims expense as % of net earned premium General insurance 57% Life Insurance AV% Sources of profit $M Planned profit margins TF Experience variations 29 Other (2) General insurance operating margin 8 Operating margins 12 After tax Shareholder investment return
Slide 79: Insurance Results - total
Insurance Results - total Underlying profit: « +35% on Jun 05* « +9% on Dec 05 # Solid inforce premium & operating margin growth in Australia and New Zealand » Good expense control Largest Life insurer in Australia and New Zealand * exciuding Hong Kong operations Underlying profit (excluding HK oper
Slide 80: Notes
Notes ConmonwealthEank 80
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Commonwealth Bank of Australia — FY2006 Earnings Presentation on 6ix