Business SummaryCommonwealth Bank of Australia (CBA) is an Australian retail bank. Its corebusiness is the provision of a broad range of banking and financial productsand services to retail, small business, corporate and institutional clients. CBAconducts its operations primarily in Australia, New Zealand and Asia Pacificregion. It also operates in several countries including United Kingdom andUSA.

Retail Banking Services: The division provides home loan, consumerfinance and retail deposit products and servicing to all Retail bank customers.In addition, commission is received for the distribution of wealth managementproducts through the retail distribution network.

Business & Private Banking: The division provides specialised bankingservices to relationship managed business and Agribusiness customers,private banking to high net worth individuals and margin lending and tradingthrough CommSec.

Institutional Banking & Markets: The division services CBA's corporate,institutional and government clients, creating customised solutions based onspecific needs, industry trends and market conditions. The Total CapitalSolutions offering includes debt and equity capital raising, financial andcommodities risk management and transactional banking capabilities. It alsohas international operations in London, Malta, New York, New Zealand,Singapore, Hong Kong, Japan and Shanghai.

Wealth Management: The division includes the Global Asset Management(including operations in Asia and Europe), Platform Administration andFinancial Advice, as well as Life and General Insurance businesses of theAustralian operations.

New Zealand: The division includes the Banking, Funds Management andInsurance businesses operating in New Zealand.

Bankwest: The division is a full service bank active in all domestic marketsegments, with lending diversified between the business, rural, housing andpersonal markets, including a full range of deposit products.

Other Divisions: Others include International Financial Services Asiaincluding the Asian retail and SME banking operations (Indonesia, China,Vietnam and India), investments in Chinese and Vietnamese retail banks, theJV Chinese life insurance business and the life insurance operations inIndonesia.

Latest Research'Tis not too late to seek a newer world

CBA’s 2018 key result components (continuing) are: (1) cash NPAT $9.2bn(BP ~$9.1bn, consensus ~$9.3bn), -5% pcp; (2) cash EPS 529cps (BP520cps, consensus 538cps), -6% pcp; (3) final dividend 231cps (BP231cps, consensus 231cps) fully franked implying 90% payout ratio in2H18 and 80% in 2018 (or 75% excluding the AUSTRAC penalty, in linewith ~75% full year target); (4) underlying “Jaws” neutral (BP Neutral)comprising 3% income growth and 3% cost growth (excluding one-offs); (5)ROE 14.1% (BP 13.9%); (6) NIM 2.15% (BP 2.14%, consensus 2.14%);(7) LIE (BDD charge) ~$1.1bn/15bp GLA (BP ~$1.2bn/16bp, consensus~$1.2bn/16bp); and (8) CET1 ratio 10.1% (BP 10.0%, consensus 10.3%).

As alluded to in our preview note, there were lots of noise and moving

GICS - Banks

Commonwealth Bank of Australia

ASX Code: CBA Price: $70.11 12 Mth Target Price: $80.00 Rating: Buy

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

6 September 2018$123,383m1,759.8m$82.66$67.22

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Buy$80.0013.1%9.1%22.2%

Investment FundamentalsFYE 30 Jun 2018A 2019F 2020F 2021F

Profit $m 9,412.0 9,962.5 10,410.2 10,856.8Profit (norm)* $m 9,412.0 9,962.5 10,410.2 10,856.8

EPS* ¢ 538.8 564.3 584.4 584.4EPS Growth % -6.1 4.8 3.6 0.0P/E* x 13.1 12.5 12.1 12.1P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 431.0 441.0 451.0 461.0Yield % 6.1 6.2 6.4 6.5Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

parts in the result. These are mainly related to attention-grabbing items(e.g. AUSTRAC’s $700m civil penalty and $389m provisions to cover risk,compliance, shareholder class actions

and regulatory costs), AHL consolidation and discontinued operations.Looking past all the noise as the market wisely did today, CBA’s underlyingposition was ahead of

expectations with all core divisions except IB&M (ongoing RWA run-off)having performed strongly. On a continuing and more relevant basis, cashNPAT of $9.2bn was slightly ahead of our ~$9.1bn forecast – likewise cashEPS of 529cps. NIM was the standout metric (up 5bp pcp) while underlyingcosts increased by just 3.1% pcp. Combined with underlying operatingincome growth of 3.4%, underlying “Jaws” was a positive 0.3% that isconsidered remarkable in a tough operating environment.

For more information see full research report 9 Aug 2018.

GICS - Banks

Commonwealth Bank of Australia

ASX Code: CBA Price: $70.11 12 Mth Target Price: $80.00 Rating: Buy

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

6 September 2018$123,383m1,759.8m$82.66$67.22

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Buy$80.0013.1%9.1%22.2%

Investment FundamentalsFYE 30 Jun 2018A 2019F 2020F 2021F

Profit $m 9,412.0 9,962.5 10,410.2 10,856.8Profit (norm)* $m 9,412.0 9,962.5 10,410.2 10,856.8

EPS* ¢ 538.8 564.3 584.4 584.4EPS Growth % -6.1 4.8 3.6 0.0P/E* x 13.1 12.5 12.1 12.1P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 431.0 441.0 451.0 461.0Yield % 6.1 6.2 6.4 6.5Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2014A 2015A 2016A 2017A 2018A

Net Interest Income 15,101 15,795 16,935 17,600 18,341Provision for Doubt. Debts -918 -988 -1,256 -1,095 -1,079Non Interest Income 10,667 11,210 10,562 10,850 7,865Total Operating Income 24,850 26,017 26,241 27,355 25,127Non Interest Expense -12,657 -13,321 -13,078 -13,491 -10,836Profit Before Tax 12,193 12,696 13,163 13,864 14,291Income Tax -3,410 -3,538 -3,693 -3,959 -4,026Outside Equity Int. -19 -21 -20 -24 -19Profit after Tax 8,764 9,137 9,450 9,881 10,246Significant Items after Tax -133 -74 -223 47 -871Reported Profit after Tax 8,631 9,063 9,227 9,928 9,329Preferred Dividends -- -- -- -- --

Cash Flow ($M)2014A 2015A 2016A 2017A 2018A

Interest Received 33,623 34,067 34,047 33,536 35,801Interest Paid -18,160 -17,425 -16,285 -15,006 -15,356Net Operating Cashflow 3,963 7,183 -4,561 -807 1,109Capex -913 -1,128 -1,768 -1,097 -980Acquisitions & Investments -36 -299 -857 -31 -245Sale of Invest. & Subsid. 1,012 72 110 1 --Net Investing Cashflow 201 -1,215 -2,032 -677 -1,002Proceeds from Issues -- -- 5,022 28 --Dividends Paid -5,491 -6,200 -5,827 -6,084 -5,366Net Financing Cashflow 1,935 -7,875 1,620 10,472 -934Net Increase Cash 6,099 -1,907 -4,973 8,988 -827Cash at Beginning 12,618 19,128 19,270 14,447 23,117Exchange Rate Adjust. 411 2,049 150 -318 715Cash at End 19,128 19,270 14,447 23,117 23,005

Ratios and Substantial Shareholders

Profitability RatiosNet Interest Margin % 2.07 2.00 2.02 1.96 2.04Interest Spread % 1.72 1.68 1.78 1.73 1.83Non-Int Inc/Total Inc % 42.93 43.09 40.25 39.66 31.30Tot Op. Inc/Tot Assets % 3.14 2.98 2.81 2.80 2.58Return on Equity % 17.96 17.43 15.70 15.65 15.23

Efficiency/Safety RatiosCost to Income % 47.77 47.85 46.13 44.64 39.67Capital Adequacy Ratio % 12.00 9.10 10.60 10.10 15.00

Top 5 Substantial ShareholdersBlackRock Group 5.0%

Balance Sheet ($M)2014A 2015A 2016A 2017A 2018A

Cash 26,409 33,116 23,372 45,850 22,897Due from Other Banks -- -- -- -- --Trading Securities 105,342 119,111 119,221 120,128 131,114Loans and Advances 597,781 639,262 695,398 731,762 743,365Customer Acceptances 5,027 1,944 1,431 463 379Total PP&E 2,816 2,833 3,940 3,873 2,576Other Non Earning Assets 54,076 77,180 89,716 74,298 74,834TOTAL ASSETS 791,451 873,446 933,078 976,374 975,165Deposits 498,352 543,231 588,045 626,655 630,358Due to Other Banks 24,978 36,416 28,771 28,432 20,899Bonds & Notes 142,219 154,429 161,284 167,571 172,693Bank Acceptances 5,027 1,944 1,431 463 379Provisions 2,319 2,738 3,018 3,562 2,841Other Liabilities 69,208 81,695 89,773 85,975 80,135Total Liabilities 742,103 820,453 872,322 912,658 907,305Net Assets 49,348 52,993 60,756 63,716 67,860Share Capital 27,975 28,558 33,845 34,971 37,270Reserves 2,009 2,345 2,734 1,869 1,676Retained Earnings 18,827 21,528 23,627 26,330 28,360Minorities 537 562 550 546 554TOTAL S/H EQUITY 49,348 52,993 60,756 63,716 67,860

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Clare McManusMs Taryn Leigh Morton

Directors

Mr Andrew Max Mohl(Non-Executive Director)Ms Catherine Brighid Livingstone(Non-ExecutiveDirector,Non-Executive Chairman)Sir David H Higgins(Non-Executive Director)Mr Matthew Peter Comyn(Chief Executive Officer,Executive Director)Mr Brian James Long(Non-Executive Director)Ms Anne Louise Templeman-Jones(Non-Executive Director)Mr Shirish Apte(Non-Executive Director)Ms Wendy Stops(Non-Executive Director)Ms Mary Louise Padbury(Non-Executive Director)Mr Robert Whitfield(Non-Executive Director)

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Commonwealth Bank of Australia

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