Deutsche Bank - Asia-Pacific
Financial Institutions Conference
Stuart Grimshaw
Group Executive Financial and Risk Management
www.commbank.com.au
8 July 2002
2
The material that follows is a presentation of general
background information about the Bank‟s activities
current at the date of the presentation, 8 July 2002. 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 investors or potential investors and
does not take into account the investment objectives,
financial situation or needs of any particular investor.
These should be considered, with or without
professional advice when deciding if an investment is
appropriate.
Disclaimer
3
Speaker’s Notes
Speaker‟s notes for this presentation are
attached below each slide.
To access them, you may need to save
the slides in PowerPoint and view/print
in “notes view.”
4
Agenda
Introduction
Australian Economy & Commonwealth Bank Group
Strategy
Strategic issues
Competitive advantage
Strategic imperatives
Looking Forward
Strategic plan
Introduction
Australian Economy &
Commonwealth Bank Group
Credit Growth
Current position
Housing market
Commonwealth Bank Group
Asset quality
7
Australian Economy:
Credit Growth
Source: Commonwealth Research
CREDIT(3 month-ended annual rates)
-10
0
10
20
30
Jul-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02
-10
0
10
20
30
Business Household
Housing Other personal
% %
8
HOUSE PRICES
0
100
200
300
400
Mar-60 Mar-68 Mar-76 Mar-84 Mar-92 Mar-00
-20
0
20
40
60$'000 %pa
Real
growth
(rhs)
Level
(lhs)Source: CBA, Treasury
PRINCIPAL REPAYMENTS
0
10
20
30
Sep-97 Sep-99 Sep-01
0
4
8
12
% $bn
Cumulative
overpayment
of principal*
(rhs)
Principal
(% of motgage payment)
(lhs)
*assumes prinipal repayment ratio fixed at 1997/98 level
DEBT REPAYMENT LEVELS
(% of h/hold income, Mar'02)
5
10
15
20
<30 31-50 51-70 71-100 >100Income ($'000pa)
5
10
15
20
% %
Source: Melbourne Institute
Housing Market
Source: Commonwealth Research
SYDNEY HOUSE PRICES
(deflated by the CPI)
-40
-20
0
20
40
60
1900 1912 1924 1936 1948 1960 1972 1984 1996
-40
-20
0
20
40
60
%pa %pa
Source: Residex
QI 2002
at annual
rate
*
* estimate
9
Commonwealth Bank Group:
Low Credit Risk Profile
Housing Loans
48% of total loan book*
Loan loss rate of < 3bps in 17 of last 20 years
55% average loan to valuation ratio
Conditional acceptance of First Home Owners Grant as deposit
Asset Quality
Impaired assets to risk weighted assets of less than 1%
in line with domestic peers
Relatively low bad debt expense
Well provisioned
* Excluding securitisation (or 52% including securitisation)
10
Credit Risk: Historical P&L Charge
* Excludes Colonial
% C
harg
e P
er
Half
Bad Debt Expense / RWA
0.00%
0.10%
0.20%
0.30%
CBA Other Major Australian Banks (Average)
11
Aggregate Provisions
* Includes Colonial
$m
illio
ns
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0
50
100
150
200
250
300
%
General Provision (Left Axis)
Specific Provision (Left Axis)
Other Major Australian Banks (Average): Total Provisions/Gross Impaired Assets (%)
CBA: Total Provisions/Gross Impaired Assets (%)
Strategy
Strategic Issues
Competitive Advantage
Strategic Imperatives
13
Strategic Issues
Domestic Growth
Wealth Management
Distribution
Technology & Productivity
14
Competitive Advantage
Brand
Scale
Innovation
15
Brand : Commonwealth Bank
Share of Mind*
• CBA’s share of mind remains at a consistent level, leading the Big Four.
• Share of mind for Westpac, ANZ and NAB continue to measure at similar
levels.
* Research International November 2001
68 71 6863
7065 63 66 65 64
68 6965 63 66
0
25
50
75
Sept Nov Jan
'01
Mar May Jul Sep Nov
(%)
CBA
Westpac
ANZ
NAB
16Source: ASSIRT Service Level Survey - 2001
Adviser brand awareness - overall opinion of organisation
Brand : Colonial First State
Rank Company
1
2
3
4
5
7.28
7.52
7.81
7.85
7.98
8.16
5 6 7 8 9 10
Industry
Average
AMP
AMP Financial
Services
Perpetual
Navigator
Colonial FirstState
17
Australia’s Most Accessible Bank
10 million customers
$
Personal
Lenders
over 700
staff
Direct
Banking
over 62 million
calls *
Branches
1,045
branches
ATMs
nearly
4,000
Premium
Banking
13 Centres
Ezy Banking
over 700 Stores
NetBank
1.5 million
registered
customers
Business Banking
80 centres
Agencies
(Postal &
Private)
over 3,900
Mobile
Bankers
over 180
* for 6 months to Dec „01
EFTPOS
over 120,000
merchant
terminals
Financial
Planners^
over 600
Third Party Distribution
over 15,000 individual
advisers, brokers and
agents
^ Also includes financial consultants and personal client advisers
18
^ Colonial data captured as part of market share calculation from June 2001
Australian Market Share
Scale : Strong Market Share Positioning
RankDec 2000 Jun 2001 Dec 2001 Mar 2002
Home Loans 20.8% 20.4% 20.1% 20.1%
(Residentially Secured)
Credit Cards^ 21.9% 21.4% 21.4% 21.8%
Retail Deposits 24.6% 24.0% 24.1% 24.2%
Retail FUM (Plan for Life) 16.0% 16.3% 16.4% 16.3%
Superannuation/Annuities 15.7% 16.3% 16.4% 16.4%
Retail Broking 8.5% 9.0% 8.5% 9.2%
Inforce Premiums 14.6% 14.4% 14.5% 14.5%
1
1
1
1
1
2
2
*
*
* Dec 2001 Data
19
Market Share of ASX Transactions
0%
2%
4%
6%
8%
10%
1997 1998 1999 2000 2001
0
5,000
10,000
15,000
20,000
($ 000)
1997 1998 1999 2000 2001
Profitability of CommSec
Innovation : Commsec & NetBank
0
300
600
900
1200
(000's
)
1997 1998 1999 2000 2001
Growth in Customer Numbers
0
40
80
120
160
mil
lio
ns
of
tran
sacti
on
1997 1998 1999 2000 2001
Growth in Transaction Volumes
20
Strategic Imperatives
Segmentation
Productivity
Strategic Issues
Domestic Growth
Wealth Management
Distribution
Technology & Productivity
21
Segmentation: Aligned Domestic
Structure with Customer Needs
Retail BankingServices
PremiumFinancialServices
Investment &InsuranceServices
Institutional &BusinessServices
CustomerGroup
Personalbankingcustomers,Small businessbankingcustomers
Premium clientsincludingprofessionalsand business
Agents, Brokers,Financial Advisers
Institutional,Corporate,Commercialbusinesscustomers
Channels Branch, Ezy-Banking, ATM,EFTPOS,Phone, On-line,Mortgagebrokers
Relationshipmanagers,Premiuminvestmentcentres, phone,on-line.
Agents, Branches,Brokers, FinancialAdvisers, Premiuminvestment centresDirectDealerships
Relationshipmanagers,Business centres
Services Group Technology, Back Office Operations, Procurement, Shared Services
Support Finance, Risk Management, Human Resources, Strategy, Legal, Secretariat
22
Youth: Age of Acquisition
Source: Customer Tenure Analysis - Customer Strategy and Market Research
Key
acquisition
period for
other banks -
Retention by
CBA vital
Under 18
acquisition
important
to CBA
Lower relative
CBA
acquisition
after age 24
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CBA NAB WBC ANZ Credit Union
Under 18 18-24 Over 24
23
Banking Needs
0 5 12 18 24 30
Lo
we
r in
vo
lve
me
nt p
rod
ucts
Hig
he
r va
lue
pro
du
cts
Age of Customer
Savings needs
Transacting needs
Credit Card needs
Banking needs change and grow as customers age and pass through
different lifestages
24
Premium and Business Opportunity
Business (Middle Market)
Premium Customers
Source : Commonwealth Bank illustration
Current market share
Natural market share
Current number of premium customers
Potential number of premium customers
25
Business: Increasing Cross-sell
Corporate Segment Example Example Bundled Products
Working
Capital
Services
26%
17%26% 8%
8%
6%8%
26% of this segment use
products from all three areas
Financial
Markets
Corporate
Finance
Business Banking
Financial
Markets
Working
Capital
Services
Interest rate risk
management
FX products
Investments
Bill financing
Cash funded loans
Overdrafts
Transaction services
26
Funds Management Opportunity
Source: Plan for Life, CBA
Retail Funds Management
(Non-Life & Life)
0
100
200
300
400
500
600
1997 1999 2001 2003 2005 2007
$B
illio
n
Retail FUM (Commonwealth Bank Group)
Retail FUM (Industry)
27
Growth through Retail Masterfunds
28
Underlying Investment structure
Superior service standards
Value for money
Simplicity
What is different about FirstChoice?
29
Segmentation : premium banking
Simplified transaction accounts
Browser based workflow enabled systems
Credit risk architecture
7 level organisation structure
Shared services : HR and finance
Productivity
Looking Forward
31
Business Driver Profile 5 Year Plan
Growth in Market Share
Funds under managementHome LoansCredit CardsLife InsuranceCredit ProductsBusiness FinancingRetail Deposits
At or above market
Margins Comparable for business mix Continuing decline
Sources of Income Comparable Financial Institutions Rebalance toward non-interest income
Costs Reduction in cost/income – Bestpractice
3%-6% p.a. productivitychange
Capital ManagementOptimise regulatory capital andmaintain rating.
Rating AA-
Total Shareholder Return Top quartile Deliver top quartile TSR.
Strategic Plan to June 2006 is
Underpinned by Growth Assumptions
Deutsche Bank - Asia-Pacific
Financial Institutions Conference
Stuart Grimshaw
Group Executive Financial and Risk Management
www.commbank.com.au
8 July 2002