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Commonwealth Bank of Australia ACN 123 123 124
Investor Information Pack15 May 2008
Commonwealth Bank of Australia
March Quarter 2008 Trading Update
Commonwealth Bank of Australia
March Quarter 2008 Trading Update
2
Environment
Global credit markets remain significantly constrained
US economy continues to slow
Domestic economic conditions remain resilient
Credit growth slowing but still at reasonably high levels
Domestic competitive conditions continue to favour larger players
Executive Summary
3
Operating Performance
Funding costs remain high, but with ongoing customer pricing adjustments
FY08 funding programme completed mid-April - maturity duration maintained
Good volume growth, but with system growth showing signs of slowing
Market share outcomes remain positive
Cost challenges continue in a tight labour market
Continuing to invest for medium term growth and productivity
No systemic issues in credit quality – ongoing management of “single names”
Wealth Management results impacted by market conditions
Executive Summary
4
Outlook
Conditions in global credit markets likely to remain difficult through calendar 2008
Domestic economy remains strong, but impact of global slowdown an issue
Credit growth likely to moderate from high levels, but remain reasonably strong
Changing competitive dynamics set to continue
Material deterioration in credit cycle a key risk – no signs at this stage
Executive Summary
5
CBA – strength in uncertain times
Strong competitive position
Prudent funding and liquidity management
Strong capital position
Sound risk management
Low-risk, domestically focussed strategy
6
Market share outcomes remain positive
13.84
12.73
29.04
18.97
Mar-08%
1.38
0.09
0.27
0.61
Mvt%
12.46
12.64
28.77
18.36
Mar-07%
FirstChoice
Business Lending
Business Deposits
Household Deposits
Home Lending
Market Shares
8.39 9.60 1.21
Note: FirstChoice data compares Dec-07 to Mar-07 (Mar-08 market share data not yet available)
7
15.9%
4.5%
9.8%
5.0%Big 4Market
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
CBA Peer 1 Peer 2 Peer 3
Source: APRA – Deposits non financial corporations
YTD Mar-08
Competitive snapshot
Non-ADI share of home loan system growth was negative in the quarter to March 2008
The Bank’s home loan market share has increased in 12 consecutive months to Mar-08
Institutional growth remains strong, assisted by both organic growth and re-intermediation
Business deposits are growing at around twice the rate of the peer group average
18.8%
18.5%
18.4%
18.7%
18.8%
19.0%19.0%
18.00%
18.20%
18.40%
18.60%
18.80%
19.00%
19.20%
Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07
-14.3%
17.8%
-20.00%
-10.00%
0.00%
10.00%
20.00%
Q307 Q308
Institutional BankingRBA Business Market
0.901.001.101.201.301.401.501.60
Jun-
06
Sep-
06
Dec
-06
Mar
-07
Jun-
07
Sep-
07
Dec
-07
Mar
-08
Inde
x
CBA home loan market shareNon-bank share of home loan growth
Institutional lending growth Business deposits growthSource: RBA/APRA Source: RBA/APRA
Source: RBA
8
5%
11%
17%15%
18%
11%
0%
5%
10%
15%
20%
25%
N S W V IC Q ld S A W A T o ta l
Home Lending
18.8%
18.5%
18.4%
18.7%
18.8%
19.0%19.0%
18.00%
18.20%
18.40%
18.60%
18.80%
19.00%
19.20%
Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07
YTD Mar-08
Book % 38% 29% 17% 5% 11% 100%
Above system balance growth continued through March
12 consecutive monthly share gains
Branch channel continues to grow faster than system
Tier 1 branch sales outperforming
Non-bank’s experienced negative growth in March quarter
11.315.212 Months to March
2.13.1March Quarter
SystemCBABalance Growth %
Home Loan Market Share
Home Loan Growth by State
Source: RBA/APRA
9
Home Loan Growth by Channel
5.1%
8.2%
6.3%
2.1%
3.2%2.7%
0.5% 0.4%
2.5%
4.0%
3.1%2.7%
2.1%
1.1%
2.7%
Quarter to Mar-07 Quarter to Dec-07 Quarter to Mar-08
Brokers Branch Premium Total CBA Total Market
Branch channel continues to grow faster than system
Note: Broker, Branch and Premium Channel figures exclude MISA balances
10
Retail Deposits
Above system balance growth continues
Market share now over 29% - twice that of next largest competitor
Growth profile being maintained despite competitive environment – March quarter growth of 3.1% vs system 2.5%
Minimal change in portfolio balance mix
Frontline changes underpin performance:
“Deposit Specialists”
New KPIs
Branch Contribution Statements
12.313.412 Months to March
2.53.1March Quarter
SystemCBABalance Growth %Netbank Saver Investment AccountsSavings Deposits Business Online SaverTransaction Accounts
2bn 19bn11bn
42bn33bn
Dec 07$
Mar 08$
2bn 18bn 13bn
46bn32bn
29%
14%11%
14%
10%
0%
5%
10%
15%
20%
25%
30%
CBA Peer 1 Peer 2 Peer 3 Peer 4
Household Deposits Market Share
Balance Mix
Source: APRA
11
Unsecured personal lending
Emphasis on profitable growth
Avoiding higher risk segments such as zero rate balance transfers
Pricing for risk – more sophisticated decisioning around volume/risk trade-offs
Focus of credit card marketing on existing customer base - cross-sell opportunity to 9 million customers
Enhanced data-base marketing and analytics driving stronger net account growth
12 Months to Mar-08
5.6% 5.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
CBA Top 5
Mar-07Qtr
Mar-08Qtr
Credit Card Balance Growth
Credit Card Net Account Growth
-2,200 27,000
75% existing
customers
12
Business Lending
Balance Lending growth broadly in line with system
Combination of organic growth and re-intermediation as debt markets have become constrained
Emphasis on market share growth onlyat the right price
Positive margin outcomes
System growth showing signs of slowing 21.422.212 Months to March
2.82.4March Quarter
SystemCBABalance Growth %
Business Lending Growth
Source: RBA Business Lending
18.5% 18.6%
21.0%
12.8%
MarketBig 4
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
CBA Peer 1 Peer 2 Peer 3
YTD Mar-08
Source: APRA Lending to Non-Financial Corporations
13
Business Deposits
Business Deposits continuing to grow ahead of system
Particularly good growth from Local Business Banking
System growth negative during the March quarter with signs of slowdown
15.9%
4.5%
9.8%
5.0%Big 4Market
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
CBA Peer 1 Peer 2 Peer 3
YTD Mar-08
16.929.812 Months to March
-0.50.4March Quarter
SystemCBABalance Growth %
Source: APRA Deposits from Non Financial Corporations
Business Deposits Growth
14
Wealth Management
March Quarter FUA and FUM outcomes impacted by global market downturn
Flows positive and relatively strong at $2.1bn
Funds Under Management declined 4.9% over the quarter with Australian and International Equities impacted by volatile markets (ASX200 down 16%, MSCI World Index AUD (net) down 13%)
Funds Under Administration down 5.4%
Inforce continues to grow solidly with General Insurance experiencing strong growth
FUA Movements Mar-08 Qtr
Inforce Movements Mar-08 Qtr
Dec-07 Net Flow s InvestmentReturns/Other
Mar-08
$200bn$2bn ($13b)
$189b
Dec-07 GeneralInsurance
Personal Life Wholesale Life Mar-08
$1,094m
$27m$17m
$18m $1,156m
15
New Zealand - ASB
Home lending growth and share maintained in a slowing market
Good retail funding volume and share growth as savers seek competitive products, higher interest rates, and lower risk
Business and commercial lending share increased in a strong market
Five new branches opened
ASB strengthened position as number one on overall main bank satisfaction
Source: Auckland Business School’s 2007 Retail Banking Customer Survey
6.6
6.8
7
7.2
7.4
7.6
7.8
ASB Peer 1 Peer 2 Peer 3 Peer 4
11.111.4Home Lending
12.013.8Retail Funding
SystemASB12m Growth %
Overall Satisfaction with Main Bank
16
CBA – strength in uncertain times
Strong competitive position
Prudent funding and liquidity management
Strong capital position
Sound risk management
Low-risk, domestically focussed strategy
17
Summary – funding & liquidity
“AA” credit rating – globally respectedCompetitive Position
Surplus of almost $10bn Liquidity
Highly diversified wholesale funding Diversification
No reliance
Similar to FY08 (no “bubble”)
Portfolio duration maintained
At the upper end of the peer group
Securitisation
FY09 Programme
Long Term Maturity
Retail Funding
18
Funding & liquidity policies approved by CBA Board and agreed with regulator (APRA)
Asset and Liability Committee oversees compliance
Funding management framework:
Focus on diversity and flexibility
Multiple funding programmes across major domestic and international markets
Maturities managed to minimise future funding concentrations
Limits on FX forwards market and compliance with ratio based limits
Liquidity management framework:
Limits based on scenario models calibrated with very conservative assumptions
Wide range of liquid assets held and managed in Group Treasury
Prudent liquidity buffer being maintained as a contingency in current environment
A disciplined approach in the current environment
19
A respected name in global funding markets
AA credit rating
Australia’s most recognised wholesale funding franchise
Market leading international funding programmes
Award winning Medallion securitisation programme
Wholesale funding approach widely recognised and highly awarded in Australia and internationally
“International Issuer of the Year” 2006“International Issuer of the Year” Runner Up 2007
“Australian Issuer of the Year(International Bond Market)” 2006
“International Best Overall Borrower” 2007“International Best Issuer of Structured MTNs” 2007“International Best Financial Institution Borrower” 2007
“International Best Samurai Deal of the Year” 2007Nikkei Bonds &Financial Weekly
“Australian Securitisation Deal of the Year” 2006
20
20
40
60
80
100
42 42
bpts
15%
%
%
%
%
%
1 Ju
l 06
1 Au
g 06
1 Se
p 06
1 O
ct 0
6
1 N
ov 0
6
1 D
ec 0
6
1 Ja
n 07
1 Fe
b 07
1 M
ar 0
7
1 Ap
r 07
1 M
ay 0
7
1 Ju
n 07
1 Ju
l 07
1 Au
g 07
1 Se
p 07
1 O
ct 0
7
1 N
ov 0
7
1 D
ec 0
7
1 Ja
n 08
1 Fe
b 08
1 M
ar 0
8
1 Ap
r 08
Jul 06 Dec 06 Jul 07 Dec 07 Mar 08
60
15
60
17141383
5061
38
23
68
110103
95
75
30
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1 year 2 year 3 year 4 year 5 year
Mar
gin
to B
BSW
31 Dec 07
1 Jul 07
20
40
60
80
100
120
bpts
28 Apr 08
After reaching a peak of 100bp’s, basis spreads have settled at approximately 60bps
Long term funding costs have increased significantly since December
Funding costs have remained high
Basis Risk Long Term Funding Costs
21
8% 10% 12%
10% 27 25 22
12% 28 26 24
14% 29 28 25
Ass
et
Gro
wth
Retail Deposit Growth$bn
FY08 funding programme completed
Globally respected funding operation
Continued favourable access to major domestic and international markets
Total FY08 long term funding requirement of $25bn - completed mid-April
Continuing to execute structured deals to lower total funding costs + vanilla deals at levels considered reasonable
Retail Samurai – CBA the first worldwide since 2003 – two transactions, over 20,000 investors
FY09 funding task expected to be at similar levels to FY08
Pre-funding FY09 commencedLikely range
FY08 Key Deals
FY09 Long Term Funding Programme
Market Investor Tenor Currency m
EMTN Lower Tier 2 Canada 10yr non call 5 CAD 300 144A - Fixed Global 5yr USD 1,000 144A - Extendible USA 5yr (min 16mths) USD 2,500 Domestic Fixed & Floating Rate Australia 1yr AUD 1,750 Domestic Fixed & Floating Rate Australia 3yr AUD 1,500 EMTN Fixed Rate UK/Europe/Asia 3yr GBP 450 EMTN Floating Rate Switzerland 3yr CHF 325 Samurai Fixed & Floating Japan W'sale 5yr JPY 60,000 Samurai Fixed & Floating Japan W'sale 5yr JPY 107,100 Samurai Fixed Japan Retail 3yr JPY 80,000
22
-
2
4
6
8
10
12
14
16
18
20
1 to 2 2 to 3 3 to 4 4 to 5 5+
Maturity
AU
D (b
il)
June 07 April 08
Weighted Average MaturityJun-07: 4.0 yearsApr-08 4.1 years
Long term maturity profile maintained
Long Term Weighted Average Maturity Profile maintained (currently 4.1 years)
Disciplined approach from “Day-One”
Continuing to issue across a range of durations throughout the period – over 1,000 transactions completed
No FY09 funding “bubble” –similar requirement to FY08.
Long Term Maturity Profile
23
Continued focus on diversification
as at 31 March 2008Very strong retail funding position
Highly diversified wholesale funding programme
No reliance on securitisation
Approx. 68% private deals, 32% public
25%
18%
3%
54%
Short term wholesale
Long term wholesale
Securitisation
Retail
11%
18%
8%
7%6%
21%
7%
7%
12%3% Structured M TN
Vanilla M TN
Commercial Paper
Structured Finance Deals
Debt Capital
CDs
Securitisation
Bank Acceptance
Deposits from other financial institutions
Repo, short sell liabilities & other
Source of funding
Wholesale funding by Product
44%
13%
12%
16%
5%
4%3%
3%
Australia
Other Asia
Europe
United States
Japan
United Kingdom
Hong Kong
Misc
Geographic distributionas at 31 March 2008as at 31 March 2008
24
Very strong retail funding position
0
50
100
150
200
250$A
bn
Household deposits
Corporate deposits
Financial corporations
Certificates of Deposit (mainly wholesale deposits)
Other
CBA Peer 1 Peer 3Peer 2
Source: APRA
Deposit Mix
Deposit mix weighted towards Household Deposits
25
Prudent liquidity buffer maintained as a contingency
Holding approximately $39bn in liquid assets, almost $10bn surplus to prudential requirements
Supplemented by $12.25bn capacity within Medallion RMBS in May
Nearly all liquid assets repo-eligible with RBA and BoE –applications pending with ECB and Fed
Minimum prudential
requirement
35% or $9.8bn excess
Holdings of Medallion RMBS for contingent
liquidity purposes, as at May 2008
Liquid Assets
0
10
20
30
40
50
60
A$
bn L
iqui
d A
sset
s
Jun-07 Mar-08 Qtr
26
CBA – strength in uncertain times
Strong competitive position
Prudent funding and liquidity management
Strong capital position
Sound risk management
Low-risk, domestically focussed strategy
27
CBA is in a strong capital position
No current plans to raise additional capital
Capital ratios above peer group
Capital ratios well above internal target levels
Lower RWA’s reflects favourable portfolio composition
Basel II advanced accreditation
28^ Total Capital Target Range amended from 9-11% to 10-12% to align with US Financial Holding Company (FHC) requirements.* Pro-forma Basel II ACE ratio
Dec 06
Adjusted Common EquityTier one capital
Total CapitalTarget Range
Jun 07 Dec 07
Basel I
Total Capital Target Range
Tier 1 Target Range
ACE Target Range
Proforma Basel IIafter cessation of
DRP share purchase
1 Jan 08
^
7.06% 7.14% 7.41% 7.60%
9.78% 9.76% 9.82%
11.25%
4.70% 4.79%6.60%
4.77%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
*
Capital ratios are at the upper end of target ranges
29
ACE Ratios
CBA continues to measure ACE under Basel I
S&P do not measure ACE under Basel II
S&P moving to a new methodology – timeframe unclear
CBA ratio adjusted on a comparative basis (see table)
4.8%Peer 2
6.0%Peer 1
6.6%CBA
Ratio
CBA as at 1 Jan-08. Peers as at Mar-08.
ACE Ratios
30
Ratios compare more than favourably to the peer group –even stronger on a “like-for-like” basis
1. Effective 1 July 2008 – refer next slide. Note: CBA ratios reflect position after the cessation of the DRP share purchase.
CBA Peer 1 Peer 2 Peer 3 Peer 4Advanced
AccreditationAdvanced
AccreditationAdvanced
Accreditation Basel I Basel I1-Jan-08 Mar-08 Mar-08 Mar-08 Mar-08
Capital ($m)
Tier 1 Capital 16,199 Total Capital 23,956 Risk Weighted Assets ($m) Credit Risk 181,836 Market-Traded Risk 4,374 Interest Rate Risk in Banking Book1 14,788 Operational Risk 12,018 Other Total Risk Weighted Assets 213,016 Ratios Tier 1 Ratio (including1) 7.60%
Tier 1 Ratio (excluding1) 8.17% 6.9% 7.4% 7.0% 6.51% Total Capital Ratio (including1) 11.25%
Total Capital Ratio (excluding1) 12.09% 10.1% 10.1% 10.1% 9.71%
31
Risk Weighted Assets
Diff1-Jan-0831-Dec-07$m
(59,593)213,016272,609Total12,01812,018-Operational Risk14,78814,788-Market Risk – Non-Traded
-4,3744,374Market Risk – Traded(86,398)181,837268,235Credit Risk
Basel IIBasel 1
The Bank’s Interest Rate Risk in the Banking Book (IRRBB) component of RWA as at 1 January 2008 was $14,788m.
This is built up from a risk assessment of the following items:
Yield curve repricingOptionalityBasis RiskEmbedded gains and losses
The Bank is awaiting advanced accreditation from APRA in relation to this measure (expected to be effective 1 July 2008).
Interest Rate Risk in the Banking Book Risk Weighting adjustments BI vs BII
32
Regulatory Expected Loss in excess of Eligible Provisions
CBAJan 08
$m
Regulatory Expected Loss (BII) - before tax 2,087
Eligible Provision Collective provision 1,084 Specific provisions 268 Other credit provisions 28 Fair value credit adjustments 22
1,402 less tax effect impact (421) other 34
Total Eligible Provision 1,015
Regulatory Expected Loss in excess of Eligible Provision 1,072
Tier 1 deduction - 50% 536 Tier 2 deduction - 50% 536 Total Capital deduction 1,072
Reflects downturn LGD’s and APRA requirements for regulatory capital
33
CBA – strength in uncertain times
Strong competitive position
Prudent funding and liquidity management
Strong capital position
Sound risk management
Low-risk, domestically focussed strategy
34
Sound risk management
Consumer:
Portfolio quality remains sound
Q3 arrears up-tick likely seasonal
Indicators remain under close review
Commercial:
Underlying portfolio quality remains sound
No systemic or sector-specific issues
Increased provisioning levels consistent with cycle
Single-name exposures remain under close attention
35
Outlook
Expect Full Year outcome of
approximately 0.23%
Annualised Loan Impairment Expense to average Gross Loans and Acceptances
Commercial and Consumer
Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07
0.13%0.15% 0.15% 0.16%
0.13%0.16%
0.15% 0.14%0.14%0.20%
36
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07 Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
NSW/ACT Qld SA/NT Vic/Tas WA
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
Jun-
03
Sep-
03
Dec
-03
Mar
-04
Jun-
04
Sep-
04
Dec
-04
Mar
-05
Jun-
05
Sep-
05
Dec
-05
Mar
-06
Jun-
06
Sep-
06
Dec
-06
Mar
-07
Jun-
07
Sep-
07
Dec
-07
Mar
-08
90+Days %30+ Days %
Home loan quality remains very sound
Small up-tick in Q3 arrears rates consistent with seasonal trends – close monitoring for any further deterioration
Up-tick broadly consistent across States
Arrears rates remain low by historical standards
Interest rate buffer built into all customer serviceability tests
60% of customers two or more payments in advance
Not participating in higher risk segments
No sub-prime or non-recourse mortgages
30+ Days %
Home loan arrears
Home loan arrears by State
37
Home Lending
0
20
40
60
80
100
Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08
Portfolio LVR ~50% based on original property value, or ~40% based on current property value. LVR on new loans ~65%
Low-doc loans:
~3% of portfolio balances
Loans >60% LVR must be insured
No loans >80% LVR
39%
61%
3%
3%
32%
65%
11%
34%
55%
Dec-07
3%Low Doc %
Balance Mix
Originations
62%Proprietary
38%Third Party
33%Fixed
65%Variable
2%Honeymoon
11%Line-of-Credit
34%Investment
55%Owner-Occupied
Mar-08
Portfolio Profile
New mortgagee in possession cases
38
0.00%
0.40%
0.80%
1.20%
1.60%
2.00%
2.40%
2.80%
3.20%
3.60%
4.00%
Jun-
03
Sep-
03
Dec
-03
Mar
-04
Jun-
04
Sep-
04
Dec
-04
Mar
-05
Jun-
05
Sep-
05
Dec
-05
Mar
-06
Jun-
06
Sep-
06
Dec
-06
Mar
-07
Jun-
07
Sep-
07
Dec
-07
Mar
-08
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
Jun-
03
Sep-
03
Dec
-03
Mar
-04
Jun-
04
Sep-
04
Dec
-04
Mar
-05
Jun-
05
Sep-
05
Dec
-05
Mar
-06
Jun-
06
Sep-
06
Dec
-06
Mar
-07
Jun-
07
Sep-
07
Dec
-07
Mar
-08
90+Days %30+ Days %
Unsecured personal lending
Small seasonal increases in Q3 arrears rates in both the credit card and personal loan portfolios – close monitoring for any further deterioration
Not participating in zero rate balance transfer segment
Enhanced scorecards enabling more sophisticated risk/volume decisioning
Pricing for risk providing volume upside without portfolio deterioration
Poorer quality older accounts being replaced by better quality newer accounts
Credit card arrears
Personal loan arrears
39
Unsecured personal lending – vintage analysis
0%
2%
4%
6%
8%
10%
12%
14%
16%
Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07
Origination Month
% 3
0+ D
ays
Arr
ears
3 Months on Books 6 Months on Books12 Months on Books
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07
Origination Month
% 3
0+ D
ays
Arr
ears
3 Months on Book 6 Months on Book12 Months on Book
General trend shows improved arrears rates over recent yearsSteepest declines in arrears correspond to dates new scorecards were introducedAnalysis shows slight increase in early arrears from new business booked post Aug-07 –
being closely monitoring
Personal LoansCredit Cards
40
Margin Lending
Portfolio Size ~$8bn
Aggregate Gearing 35%
Margin Calls ~16,000
Forced sales <4%
Mar-08 Quarter
No exposure to stock lending sector
In-house margin lending book is good quality - comprehensive portfolio review conducted mid-2007 with regular updates
Robust processes and management systems in place
Low gearing levels
Margin calls Mar-08 Qtr:
Relatively small number
Few customers impacted
Forced sales in less than 4% of margin calls
Margin Lending Summary
41
Impaired Assets
Total and New Impaired Assets
Includes both Consumer and Commercial portfolios
$m #
0
100
200
300
400
500
600
700
Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-080
20
40
60
80
100
120
140
160
180
200
Total Impaired Assets New Impaired Assets (LHS) New Impaired Assets > $1m (LHS)Number of Clients > $1m (RHS) Total Number of New Clients (RHS)
42
Impaired Assets and Provision Coverage
-
200
400
600
800
1,000
1,200
1,400
1,600
CBA Peer 1 Peer 2 Peer 30.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Gross Impaired Assets
Net Impaired AssetsIndividually assessed provision as % of impaired assets (RHS)
as at Mar-08$m
43
Portfolio Composition
100%100%100%100%Total
45%39%32%30%Overseas and Other
21%23%24%18%Australian Commercial
29%33%37%46%Australian Home Loans
1%1%1%2%Margin Lending
5%4%5%3%Unsecured Retail
Peer 3Peer 2Peer 1CBA
44
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
HY06 FY06 HY07 FY07 HY08 3Q08
Period
$m
Expected Loss IAP Charge - annualised
Retail Banking Services 0.23%Premium Business Services 0.27%International Financial Services 0.21%Group 0.24%
As at Mar-08
Expected loss
Note: Expected loss focuses on the anticipated longer term loss rates and is less volatile than IFRS credit loss provisioning. Factors are under review to further incorporate enhancements from Basel II work and modelling on through-the-cycle losses.
Expected Loss by Business Unit EL vs Individual Provision Charge
Reflects through-the-cycle average LGD’s
45
Top 20 commercial exposures all investment grade
$m as at Mar-08
Top 20 Commercial Exposures Top 20 as % of Total Committed Exposures
0 200 400 600 800 1,000 1,200 1,400
BBB+
A-
A-
BBB-
A
AA-
A-
A-
A
A-
BBB-
A+
BBB
BBB
BBB-
BBB-
BBB-
A
BBB+
BBB-
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Jun-
03
Jun-
04
Jun_
05
Jun-
06
Jun-
07
Dec-
07
Mar
-08
46
Over 70% of commercial risk-rated exposures are investment grade
30% 32% 31% 33%
18% 18% 19% 19%
20% 20% 20% 19%
31% 29% 30% 29%
0%
20%
40%
60%
80%
100%
31/12/2006 30/06/2007 31/12/2007 31/03/2008
AAA to AA- A+ to A- BBB+ to BBB- other
71% investment
grade
Commercial Risk-Rated Exposures
*Total exposures = balance for uncommitted facilities; greater of limit or balance for committed facilities. Includes settlement risk.
Australia 74%
International 13%
New Zealand 13%
Australia 72%
New Zealand 12%
International 16%
Total Exposures by Geography
Dec 07 Mar 08Commercial & Consumer
47
Total exposures by industry
Property 6.9%
Transport & storage, 1.70%
Retail & Wholesale, 2.80%
Other, 5.40%
Mining 1.4%
Finance - Banks 11.5%
Government 3.3%
Health 1.0%
Finance - other 9.5%
Manufacturing 2.9%
Consumer 46.9%
Energy 1.8%
Business Services 0.8%
Agriculture 2.2% Construction 0.9%
Culture & Recreation 1.0%
Dec-07 Mar-08
Property 6.9%
Transport & storage, 1.70%
Retail & Wholesale, 2.7%
Other, 4.00%
Mining 1.4%
Finance - Banks 13.2%
Government 3.3%
Health 0.9%
Finance - other 9.0%
Manufacturing 3.0%
Consumer 45.9%
Energy 1.7%
Business Services 0.9%
Agriculture 2.3% Construction 0.9%
Culture & Recreation 1.0%
*Total exposures = balance for uncommitted facilities; greater of limit or balance for committed facilities. Includes settlement risk.
48
Counterparty and other exposures
No direct lending exposure to hedge funds
Limited exposure to hedge funds via FX and interest rate swap products
Fund of hedge funds – exposure to diversified funds that invest in hedge funds of ~$160m
Hedge Funds
Mortgage insurance is outsourced to Genworth (98%) and PMI (2%)
Under “extreme stress” conditions, insured loan expected loss would be ~$300m. Lenders Mortgage
Insurance
No material exposure to stock-lending sectorStock Lending
Two Bank sponsored ABCP conduits with standby facilities drawn to $1.4bn
Highly rated assets – predominantly AAA, some AA
Standby facilities to other conduits of $1.2bn, currently drawn to $356m
Asset Backed
Commercial Paper
(ABCP) Conduits
No direct exposure to unhedged CDO or CLO transactions
Small number of low $ value exposures which are fully hedged
Single AUD$75m AAA CDO held indirectly via its conduit, PIE, maturing Jun-08
CDOs
No direct exposures
Like peers, the Bank has an indirect exposure to Country-Wide in the U.S (~$300m).US Sub-prime
49
CBA – strength in uncertain times
Strong competitive position
Prudent funding and liquidity management
Strong capital position
Sound risk management
Low-risk, domestically focussed strategy
50
Customer Service Customer satisfaction continuing to trend higher through Mar-08Overall satisfaction at 10 year highsNew design branches achieving peer group best practice satisfaction
Business Banking Good volume and market share outcomesVery strong customer satisfaction gains over 12 months to March Strong growth in business deposits
Technology and Operational Excellence
IT cost savings and efficiency targets on trackCore Banking Modernisation announced April 28
Trust and Team Spirit Culture survey gains consolidatedContinued focus on engagement
Profitable Growth Net FUM flows impacted by markets, but still relatively strongEncouraging improvements in group-wide referralsBranch licence in Vietnam
Recent highlights
51
Customer Satisfaction levels improving, but with significant scope for further gains
60%
65%
70%
75%
80%
85%
Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08
6 monthly average
% m
ain
finan
cial
inst
itutio
n cu
stom
ers
CBA
4.94.284.2St George
6.25.077.7All Financial Institutions
8.15.877.0Westpac
12 Months
6 MonthsMar 08 %
73.3
71.1
80.2
Customer Satisfied
2.7
9.3
4.1
Movement
4.2NAB
11.9Commonwealth
3.0ANZ
Largest improvement over the past 12 months
2 Source: TNS Business Finance Monitor Mar 08. Customer satisfaction with MFI – businesses with annual turnover to $100m (ex Agribusinesses). All time periods refer to a 12 month rolling average. Percentage point change refers to the increase / decrease of each bank’s customers who are satisfied. Satisfaction is based on business customers who said they were Very or Fairly Satisfied with their relationship with their MFI
1. Source: Roy Morgan Research. Aust MFI Population 14+, % “Very" or "Fairly Satisfied"
Customer satisfaction continues to improve
Overall Customer Satisfaction1 Business Customer Satisfaction2
52
Economic Indicators
Appendix
53
Key Economic Forecasts2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
(a) (a) (a) (a) (f) (f)
Economic Activity
Private final demand 5.9 4.6 4.3 4.1 5.1 4.1Of which: Household spending 5.4 4.4 2.6 3.6 4.5 2.5
Dwelling investment 3.1 -0.8 -4.3 2.4 3.1 6.8Business investment 9.9 12.5 16.3 8.2 8.3 8.4
Public final demand 4.6 4.6 3.7 4.0 4.5 4.1Domestic final demand 5.6 4.6 4.1 4.1 5.0 4.1
Inventories (contrib to GDP) 0.4 0.0 -0.6 0.2 0.4 -0.2GNE 6.1 4.6 3.6 4.2 5.4 3.9
Exports 2.1 3.1 2.2 3.8 3.7 7.9Imports 13.0 12.1 7.2 8.9 11.0 10.2
Net exports (contrib to GDP) -1.9 -1.7 -1.1 -1.2 -1.8 -0.9GDP 4.0 2.8 3.0 3.2 3.6 3.1
Prices & WagesCPI 2.4 2.4 3.2 2.9 3.1 3.0
Underlying CPI 2.6 2.5 2.6 2.9 3.5 3.1AWOTE 4.9 4.6 4.8 3.6 4.5 3.9
WPI 3.6 3.8 4.1 4.0 4.2 3.9Real h/hold disposable income 4.9 5.6 4.4 4.9 6.0 3.8
Labour MarketEmployment 1.8 2.8 2.4 2.7 2.5 2.0
Unemployment rate 5.7 5.2 5.0 4.5 4.3 4.6
External AccountsCurrent Account: $bn -46.2 -55.4 -54.5 -59.6 -70.7 -61.8 % of GDP -5.5 -6.2 -5.6 -5.7 -6.3 -5.1
54
Economic Indicators - Housing
H O U S I N G I N D I C A T O R S( a n n u a l % c h a n g e )
- 10
0
10
2 0
3 0
S e p - 9 0 S e p - 9 4 S e p - 9 8 S e p - 0 2 S e p - 0 6- 3
0
3
6
9R e n t s( r h s )
H o u s e p r i c e s( lh s )
% %
0
5
10
15
2 0
2 5
S e p - 9 6 S e p - 9 9 S e p - 0 2 S e p - 0 5 S e p - 0 80
5
10
15
2 0
2 5% %
H O U S I N G C R E D I T( % c h a n g e )
Q u a r t e r l y
A n n u a l
H O U S I N G D E M A N D & S U P P L Y
10 0
15 0
2 0 0
S e p - 9 0 S e p - 9 4 S e p - 9 8 S e p - 0 2 S e p - 0 610 0
15 0
2 0 0D e m a n d
S u p p l y
' 0 0 0 ' 0 0 0
D E B T & H O U S E S A L E S
- 4 0
- 10
2 0
5 0
S e p - 7 9 S e p - 8 5 S e p - 9 1 S e p - 9 7 S e p - 0 3
- 3 . 0
- 1.0
1.0
3 . 0
% p a A n nc h
" S a l e s "a c t i v i t y
( l h s )
H / h o l d i n t e r e s t p a y m e n t s( % o f i n c o m e , i n v e r t e d )
( a d v 2 q t r s , r h s )
7 . 5 %c a s h
55
Economic Indicators - Business
F I N A N C E( n e t % r e p o r t i n g h a r d e r t o o b t a i n )
- 2 0
0
2 0
4 0
S e p - 9 6 S e p - 9 9 S e p - 0 2 S e p - 0 5- 2 0
0
2 0
4 0% %
* S o u r c e : A C C I- W B C
B U S I N E S S C R E D I T( a n n u a l % c h a n g e )
- 8
0
8
16
2 4
S e p - 8 8 S e p - 9 2 S e p - 9 6 S e p - 0 0 S e p - 0 4 S e p - 0 8- 3 0
- 11
8
2 6
4 5% %
B u s i n e s sc r e d i t
( l h s )
C B A ( f )
B u s i n e s si n v e s t m e n t
( r h s )
C A P E X & C A P A C I T Y U S E
- 2 0
- 10
0
10
2 0
19 5 9 / 6 0 19 6 8 / 6 9 19 7 7 / 7 8 19 8 6 / 8 7 19 9 5 / 9 6 2 0 0 4 / 0 57 0
7 5
7 9
8 4
8 8% p a %
* S o u r c e : A B S / C B A / N A B / W B C
C a p a c i t y u t i l i s a t i o n
( r h s )
T o t a lc a p e x
( l h s )
4 0
5 0
6 0
S e p - 0 0 S e p - 0 2 S e p - 0 4 S e p - 0 64 0
5 0
6 0
P l a n t & e q u i p
B u i l d i n g & s t r u c t u r e s
C B A - A C C I S U R V E Y : C A P E X P L A N S( i n d e x > 5 0 i n d i c a t e s r i s e ) In d e xIn d e x
E x p e c t e d e c o n o m i c
p e r f o r m a n c e
56
Economic Indicators – Other Personal
C O N S U M E R F U N D I N G( c h a n g e s a s a % o f G D P )
- 8
- 4
0
4
8
12
19 8 9 / 9 0 19 9 3 / 9 4 19 9 7 / 9 8 2 0 0 1/ 0 2 2 0 0 5 / 0 6 2 0 0 9 / 10- 8
- 4
0
4
8
12
% %
C o n s u m e rs p e n d i n g
C r e d i t
S a v i n g( ( + ) r u n d o w n / ( - ) b u i l d u p )
C B A( f )In c o m e
& " o t h e r "
D E B T & P E R S O N A L C R E D I T
- 10
0
10
2 0
3 0
S e p - 7 9 S e p - 8 5 S e p - 9 1 S e p - 9 7 S e p - 0 3
- 3 .0
- 1.5
0 .0
1.5
3 .0
% p a A n nc h
O t h e r p e rs o n a lc re d it( lh s )
H / h o ld i n t e r e s t p a y m e n t s( % o f in c o m e , i n v e r t e d )
( a d v 7 q t r s , r h s )
7 .5 %c a s h
I S N O W A G O O D T I M E T O B U Y( n e t % s a y i n g y e s )
- 2 5
0
2 5
5 0
7 5
S e p - 9 7 S e p - 0 1 S e p - 0 5
S o u r c e : M e l b o u r n e I n s t i t u t e
- 2 5
0
2 5
5 0
7 5% %
ac a r ?
a m a j o r h o u s e h o l d
i t e m ?
U S E O F " S A V I N G S "( % s a y i n g p a y o f f d e b t )
0
6
12
18
2 4
S e p - 9 7 S e p - 9 9 S e p - 0 1 S e p - 0 3 S e p - 0 5 S e p - 0 7
S o u r c e : M e l b o u r n e I n s t i t u t e0
6
12
18
2 4% %
2 0 0 0 - 2 0 0 4a v e r a g e
Commonwealth Bank of Australia ACN 123 123 124
Investor Information Pack15 May 2008
Commonwealth Bank of Australia
March Quarter 2008 Trading Update
Commonwealth Bank of Australia
March Quarter 2008 Trading Update