22 August 2001 www.commbank.com.au Disclaimer The material that - - PowerPoint PPT Presentation

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22 August 2001 www.commbank.com.au Disclaimer The material that - - PowerPoint PPT Presentation

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Presentation of Full Year Results 22 August 2001 www.commbank.com.au Disclaimer The material that follows is a presentation of general background information about the Banks activities current at the date of the presentation, 22 August

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Presentation of Full Year Results 22 August 2001 www.commbank.com.au

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The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 22 August 2001. 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

  • bjectives, financial situation or needs of any

particular investor. These should be considered, with

  • r

without professional advice when deciding if an investment is appropriate.

Disclaimer

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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.”

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Overview

  • Retail Integration completed ahead of time & to business case
  • Additional $70 million of integration synergies identified
  • $800 million added to value of wealth management businesses
  • Strong net interest income with stable net interest margin
  • Positive contribution from other banking income
  • Home lending market share beginning to stabilise
  • Weaker life insurance operating margins & investment earnings

below long term expectations

  • Operating expenses increased above plan
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  • Performance Highlights
  • Income and Expenditure
  • Balance Sheet
  • Colonial Merger
  • Funding and Capital

Agenda

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Performance Highlights Commonwealth Bank Group

Set out in this presentation are unaudited proforma graphs and tables which comprise the profit and loss, balance sheet and life insurance and funds management statistics for the Commonwealth Bank Group and Colonial Limited for the half years ending December 1999 and June

  • 2000. These have been prepared to illustrate the proforma consolidated

position of Commonwealth Bank and Colonial as if Colonial had been merged with Commonwealth Bank as at 31 December 1999 for balance sheet purposes and from 1 July 1999 to 30 June 2000 for profit and loss purposes. The proformas do not include goodwill amortisation or life insurance appraisal value uplift. The results included within the profit and loss have been adjusted for abnormal items and other items not considered part of the ongoing operations, such as the effect of Colonial’s UK life insurance business which was sold during the year and specific payments made by Colonial in relation to the merger with Commonwealth Bank. [No adjustments have been made for inconsistencies in accounting policies between Colonial and Commonwealth].

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Managing Integration: Scale & Complexity

RETAIL INTEGRATION

  • Transaction bridge designed and

built for testing in 90 days

  • 1.3 million accounts converted
  • Internet Protocol Network roll out to 500

branches aligned with integration programme

  • 3.5 million Colonial ATM transactions / month

redirected to CBA ATM network

  • 279 branch

amalgamations and 89 Colonial branch sites rebadged over 8 weekends

  • 500 ATM movements
  • 5,100 pieces of

equipment deployed in network

  • 6000+ staff involved
  • 200+ dedicated full time

staff

  • 1,950 staff completed

Orientation workshops

  • 39,600 hours of call centre

staff training

  • 1083 branches completed

Product & System Conversion training

  • Customer

mailout programme

  • Customer Care

programme

  • Queue Walkers
  • Additional

service consultants

PEOPLE CUSTOMER TIME PLANNING & LOGISTICS TECHNOLOGY

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792 802 875 918 193 170 156 164 48 63 78 71 200 400 600 800 1,000 1,200 Dec 1999** Jun 2000** Dec 2000 Jun 2001 Banking Life & Super Funds Management

Net Operating Profit*

* * Proforma * Net Profit after tax and outside equity interest - cash basis.

Excludes abnormal items, appraisal value uplift and goodwill amortisation.

1,033 1,035 1,109 1,153 Full Year = 2,262

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67 71 72 73 34 41 42 43 8 9 8 8 40 37 36 35 29 31 30 29 34 29 25 18 24 24 23 24

50 100 150 200 250 300 Dec 1999* Jun 2000 Dec 2000 Jun 2001

Lending Assets**: * Proforma ** Excludes securitised housing loan balances $6.8b (Jun 01), $4.7b (Dec 00), $3b (Jun 00), $1.7b (Dec 99).

215 235 243 251

Housing Personal Business Corporate Life & Super Funds Management: Retail Wholesale

Total Lending Assets & Funds Under Management

$77 billion $150 billion

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Australian Market Share

Jun 2000^ Dec 2000 Jun 2001

Home Loans

(Residentially Secured)

21.4% 20.8% 20.3% Credit Cards 27.8% 26.5% 26.3%* Retail Deposits 25.3% 24.6% 24.0% Retail FUM 19.2% 19.6% 20.4% Superannuation/Annuities 22.0% 22.0% 22.3%** Retail Broking 9.0% 8.5% 8.7%

* Market share as at 31 May 2001 ** Market share as at 31 March 2001 ^ Commonwealth and Colonial combined

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Home Loan Market Share

  • Maintained 30%+ market share in proprietary channels
  • Doubled market share in mortgage broker channel
  • Increased mobile lenders and field staff
  • Market share beginning to stabilise
  • Broker channels less profitable than proprietary

channels

  • Owner occupied mortgage balances grew by $750

million in June 2001

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Jun 2000 Dec 2000 Jun 2001 Retail Lending 15.0% 14.0% 14.0%* Retail Deposits 14.2% 14.5% 14.5% Credit Cards 14.4% 13.8% 14.1%* Retail Funds Management 3.8% 4.7% 5.9%* Main Bank Share 16.8% 17.7% 16.4%*

New Zealand

New Zealand Market Share

ASB Group

* As at 31 March 2001

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2.75 3.00 3.25 3.50

M a r

  • 9

9 J u n

  • 9

9 S e p

  • 9

9 D e c

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9 M a r

  • J

u n

  • S

e p

  • D

e c

  • M

a r

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J u n

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NAB WBC ANZ Commonwealth Bank Group*

Domestic Net Interest Margins

%

* Proforma

Net interest margin for Commonwealth Bank Group refers to half-yearly reporting periods ending June and December. The ANZ, NAB and WBC net interest margin refers to the half-yearly reporting periods ending March and September.

3.09 2.97 2.98 2.82

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Income and Expenditure

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500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Dec 1999* Jun 2000* Dec 2000 Jun 2001

$millions

Net Interest Income Other Banking Operating Income Funds Management Income Life & Super Income

Operating Income

49% 26%

* Proforma

19% 49% 26% 18% 51% 27% 15% 7% 7% 6% 14% 8% 27% 51% Full Year = 8,824 4,201 4,231 4,401 4,423

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Banking

  • 8% growth in Banking total operating income
  • 8% growth in Banking net interest income
  • Other Banking operating income up 9%

– Commission and other fees, up 10%

– Trading Income, up 30% – Lending Fees, down 3%

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Funds Management

Half Year Full Year 31/12/99* $M 30/06/00* $M 31/12/00 $M 30/06/01 $M 30/06/01 $M Operating income 255 318 340 399 739 Operating expenses 186 224 224 272 496 Operating profit before tax 69 94 116 127 243 Income tax expense 21 31 38 56 94 Operating profit after tax 48 63 78 71 149

* Proforma

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Funds Management

23 27 20 24 27 31 19 24 23 24 24 18 20 14 22 21

20 40 60 80 100 120 Dec 1999* Jun 2000* Dec 2000 Jun 2001

$billions

Australian Retail Funds** Australian Wholesale Funds International Funds Australian Life Assets

** Includes listed property trusts * Proforma

76 89 95 101

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Funds Management: ASSIRT Reconciliation

Group Total $m Funds Under Management (external funds) 76,953 add life & super assets held in FUM (internal funds) 24,527 Total Funds Under Management per June 2001 Profit Announcement 101,480 less ASB Group funds under management (2,340) Other (272) Funds Under Management per ASSIRT June 2001 Report 98,868

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Life & Super

Half Year Full Year 31/12/99* $M 30/6/00* $M 31/12/00 $M 30/06/01 $M 30/06/01 $M

The Margin on Services operating profit after tax is represented by : Planned profit margins

103 122 128 129 257

Experience variation

(12) (8) (33) (30) (63)

New business / losses reversal of capitalised losses

11 2 (3) 1 (2)

Operating margins

102 116 92 100 192

Investment earnings on assets in excess of policy liabilities

91 52 68 58 126

Other

  • 2

(4) 6 2

Operating profit after income tax

193 170 156 164 320

* Proforma

Sources of life & super operating profit (excluding abnormals)

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Life & Super

Investment Earnings

Net Earnings on Shareholders Assets ($m): Year ending - 30/6/00 30/6/01 Australia 112 83 New Zealand 15 (5) Asia 16 2 Total 143 80 Market Returns & Group Exposure (%): Market Movement Exposure* Index for Year at 30/6/01 All Ords 5% 50% Dow Jones 0% 20% Euro Top 300 (11%) 10% MSCI (21%) 10% * % of total Group equity exposure

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Business Value: Movement Analysis

$m Business Value as at 30 June 2000 6,736 Analysis of Movement since 30 June 2000 MoS / Cash Profits 423 Synergies Credited Against Goodwill 332 Net Appraisal Value Uplift 474 Other 38 Increase to 30 June 2001 1,267 Business Value as at 30 June 2001 8,003

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Appraisal Value Uplift (full year to 30 June 2001) Funds Management 596 Life & Super Australia (33) New Zealand (26) Asia (63) (122) Appraisal Value Uplift through Profit and Loss Account 474 Goodwill Amortisation (full year to 30 June 2001) Colonial Acquisition 285 ASB Group - Acquisition of Minority 10 State Bank Victoria 39 Other Group Entities 4 Goodwill Amortisation through Profit and Loss Account338 Accelerated Goodwill realised as Appraisal Value 332

Goodwill & Appraisal Value Uplift

$m

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500 1,000 1,500 2,000 2,500 Dec 1999** Jun 2000** Dec 2000 Jun 2001 $millions

Existing Operations

Operating Expense Analysis

** Proforma

2,349 2,473 2,470 2,619

Full Year = 5,089*

*Total operating expenses excluding $81 million attributable to Business Acquisitions and GST (net of synergies).

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Cost Ratios

55.9 58.8 58.1 57.4 2.12 2.11 2.11 2.10 1.85 1.83 1.78 1.73 35 40 45 50 55 60 65 Dec 1999* Jun 2000* Dec 2000 Jun 2001 1 1.5 2 2.5 3 3.5 Banking Cost to Income Banking Cost to Avg. Balance Sheet Assets Total Cost to Total Controllable Assets**

* Proforma ** Costs to assets held and funds under management

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Asset Quality

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Total Risk Rated Exposures

Credit Risk

0% 20% 40% 60% 80% 100% Dec 1999 June 2000 Dec 2000 June 2001

Other BBB A AAA/AA

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100 200 300 400 500 600 Dec 1999* Jun 2000 Dec 2000 Jun 2001 2 4 6 8

%

Commowealth Bank Group (Other Countries) Commonwealth Bank Group (Australia) Net Impaired assets as % of Total Shareholder Equity (axis on right)

Net Impaired Assets

* Commonwealth Bank Group excluding Colonial

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Arrears

Loans Accruing past 90 days or more 30/06/00 31/12/00 30/06/01 $m $m $m Housing Loans 211 247 218 Other Loans 64 66 90 Total 275 313 308 Housing loans arrears rate 30/6/98 30/6/99 30/6/00* 31/12/00* 30/06/01 Housing Loans accruing but past 90 days or more $m 249 182 211 247 218 Housing loan balances $m 47,471 52,646 70,738 71,505 73,511 Arrears rate % 0.53% 0.35% 0.30% 0.35% 0.30%

*Housing loan balances net of securitisation and includes Colonial and home equity and similar

  • facilities. See Profit Announcement for the full year ended 30 June 2001 (p.13)
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Credit Risk: Historical P&L Charge

0.00% 0.05% 0.10% 0.15% 0.20% Dec-98* Jun-99* Dec-99 Jun-00 Dec-00 Jun-01 Bad Debt Expense / RWA

* Excludes Colonial Basis Point Charge Per Half

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200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Jun 94 Dec 94 Jun 95 Dec 95 Jun 96 Dec 96 Jun 97 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00* Dec 00* Jun 01* 50 100 150 200 250 300 % General Provision Specific Provision Total Provisions/Gross Impaired Assets (axis on right)

Aggregate Provisions

* Includes Colonial $millions

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Colonial Merger

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$m Base case synergy target 380 Additional synergies:

  • Staff costs
  • Property savings

70

  • Other (net)

Total anticipated integration synergies by end of year 3 (June 2003) 450

Overall Synergies

Additional integration synergies:

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Integration Expenditure

Restructuring Provision

Provision 30/06/00 $m Expenditure Full Year Ended 30/06/01 $m Adjustments to Opening Balance $m Closing Balance 30/06/01 $m Restructuring Costs

  • Colonial

294 244 145 195

  • Commonwealth

106 100

  • 6

Total Restructuring Costs (pre tax) 400 344 145 201 Net of Tax 330 275 87 142 Fair Value Adjustments (pre tax) 475 n/a 162 637 Net of Tax 327 n/a 151 478

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Integration Related Staff Movements

Business Case Merger

Jan-00 Jun-00

Total Staff 40,018 37,205 EDS Migration & Technology Net Exits (113) Other Net Reduction Retrenchments (110) (269)

Movement

Jan to Jun Jun-01

34,960 (5,058) (459) (1,196) (1,469) (3,124) Total Integration Mvt (1,083) (1,359) (2,855) (413) (3,124) (46)

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Funding and Capital

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20 40 60 80 100 Dec-99 Jun-00 Dec-00 Jun-01 25 50 75 100

Total Retail Deposits (LHS) Market Share of Retail Deposits (RHS) Retail Funding % (RHS)

A$b

Retail

%

Funding Sources

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Capital Adequacy

31 Dec 99 30 Jun 00 31 Dec 00 30 June 01 Total Tier One Capital 7,336 9,618 8,914 9,015 Total Tier Two Capital 3,945 6,097 5,802 5,784 Tier One and Tier Two Capital 11,281 15,715 14,716 14,799 Deductions (1,389) (3,197) (2,278) (2,119) Total Regulatory Capital 9,892 12,518 12,438 12,680 Risk Weighted Capital Ratios (%) Tier one 6.76 7.49 6.71 6.51 Tier two 3.63 4.75 4.37 4.18 Less Deductions (1.28) (2.49) (1.71) (1.53) Total 9.11 9.75 9.37 9.16

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ROE and EPS

* As reported in prior profit announcements (i.e. not proforma)

88 90 91 91

22.58% 20.78% 12.46% 13.10% 23.07% 12.74% 14.26% 21.19%

25 50 75 100 Dec-99 Jun-00 Dec-00 Jun-01 EPS 0% 5% 10% 15% 20% 25% ROE

Earnings per share - cash basis ROE - cash basis ROE - before abnormals

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Annual Dividends

20 20 24 36 38 45 46 49 58 61 20 22 36 46 52 57 58 66 75 72

25 50 75 100 125 150 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Cents 10 20 30 40 50 60 70 80 90 100 %

First Half Second Half Payout Ratio

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Overview

  • Retail Integration completed ahead of time & to business case
  • Additional $70 million of integration synergies identified
  • $800 million added to value of wealth management businesses
  • Strong net interest income with stable net interest margin
  • Positive contribution from other banking income
  • Home lending market share beginning to stabilise
  • Weaker life insurance operating margins & investment earnings

below long term expectations

  • Operating expenses increased above plan
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Presentation of Full Year Results 22 August 2001 www.commbank.com.au