[PPT] - Financial Institutions Conference Stuart Grimshaw Group Executive PowerPoint Presentation

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Deutsche Bank - Asia-Pacific Financial Institutions Conference

Stuart Grimshaw Group Executive Financial and Risk Management

www.commbank.com.au

8 July 2002

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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, 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

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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Agenda

 Introduction

Australian Economy & Commonwealth Bank Group

 Strategy

Strategic issues
Competitive advantage
Strategic imperatives

 Looking Forward

Strategic plan

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Introduction

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Australian Economy & Commonwealth Bank Group

 Credit Growth

Current position
Housing market

 Commonwealth Bank Group

Asset quality

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Australian Economy: Credit Growth

Source: Commonwealth Research

CREDIT

(3 month-ended annual rates)

10

10 20 30 Jul-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02

10

10 20 30 Business Household Housing Other personal % %

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HOUSE PRICES

100 200 300 400 Mar-60 Mar-68 Mar-76 Mar-84 Mar-92 Mar-00

20

20 40 60 $'000 %pa Real growth (rhs) Level (lhs)

Source: CBA, Treasury

PRINCIPAL REPAYMENTS

10 20 30 Sep-97 Sep-99 Sep-01 4 8 12 % $bn Cumulative

verpayment
f 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 >100 Income ($'000pa) 5 10 15 20 % %

Source: Melbourne Institute

Housing Market

Source: Commonwealth Research

SYDNEY HOUSE PRICES

(deflated by the CPI)

40
20

20 40 60 1900 1912 1924 1936 1948 1960 1972 1984 1996

40
20

20 40 60 %pa %pa

Source: Residex QI 2002 at annual rate

*

* estimate

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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)

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Credit Risk: Historical P&L Charge

* Excludes Colonial

% Charge Per Half

Bad Debt Expense / RWA

0.00% 0.10% 0.20% 0.30%

CBA Other Major Australian Banks (Average)

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Aggregate Provisions

* Includes Colonial

$millions 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 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 (%)

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Strategy

 Strategic Issues  Competitive Advantage  Strategic Imperatives

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Strategic Issues

 Domestic Growth  Wealth Management  Distribution  Technology & Productivity

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Competitive Advantage

 Brand  Scale  Innovation

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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 68 63 70 65 63 66 65 64 68 69 65 63 66 25 50 75 Sept Nov Jan '01 Mar May Jul Sep Nov

(%) CBA Westpac ANZ NAB

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Source: 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

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Australia’s Most Accessible Bank

10 million customers

$

Personal Lenders

ver 700

staff Direct Banking

ver 62 million

calls * Branches 1,045 branches ATMs nearly 4,000 Premium Banking 13 Centres Ezy Banking

ver 700 Stores

NetBank 1.5 million registered customers Business Banking 80 centres Agencies (Postal & Private)

ver 3,900

Mobile Bankers

ver 180

* for 6 months to Dec „01

EFTPOS

ver 120,000

merchant terminals Financial Planners^

ver 600

Third Party Distribution

ver 15,000 individual

advisers, brokers and agents

^ Also includes financial consultants and personal client advisers

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^ Colonial data captured as part of market share calculation from June 2001

Australian Market Share

Scale : Strong Market Share Positioning

Rank Dec 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

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19 Market Share of ASX Transactions

0% 2% 4% 6% 8% 10%

1997 1998 1999 2000 2001

5,000 10,000 15,000 20,000 ($ 000) 1997 1998 1999 2000 2001

Profitability of CommSec

Innovation : Commsec & NetBank

300 600 900 1200

(000's)

1997 1998 1999 2000 2001

Growth in Customer Numbers

40 80 120 160

millions of transaction

1997 1998 1999 2000 2001

Growth in Transaction Volumes

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Strategic Imperatives

 Segmentation  Productivity

Strategic Issues

 Domestic Growth  Wealth Management  Distribution  Technology & Productivity

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Segmentation: Aligned Domestic Structure with Customer Needs

Retail Banking Services Premium Financial Services Investment & Insurance Services Institutional & Business Services Customer Group Personal banking customers, Small business banking customers Premium clients including professionals and business Agents, Brokers, Financial Advisers Institutional, Corporate, Commercial business customers Channels Branch, Ezy- Banking, ATM, EFTPOS, Phone, On-line, Mortgage brokers Relationship managers, Premium investment centres, phone,

n-line.

Agents, Branches, Brokers, Financial Advisers, Premium investment centres DirectDealerships Relationship managers, Business centres Services Group Technology, Back Office Operations, Procurement, Shared Services Support Finance, Risk Management, Human Resources, Strategy, Legal, Secretariat

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Youth: Age of Acquisition

Source: Customer Tenure Analysis - Customer Strategy and Market Research

Key acquisition period for

ther 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

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Banking Needs

0 5 12 18 24 30

Lower involvement products Higher value products

Age of Customer Savings needs Transacting needs Credit Card needs Banking needs change and grow as customers age and pass through different lifestages

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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

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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

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Funds Management Opportunity

Source: Plan for Life, CBA

Retail Funds Management (Non-Life & Life) 100 200 300 400 500 600 1997 1999 2001 2003 2005 2007

$Billion

Retail FUM (Commonwealth Bank Group) Retail FUM (Industry)

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Growth through Retail Masterfunds

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 Underlying Investment structure  Superior service standards  Value for money  Simplicity

What is different about FirstChoice?

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 Segmentation : premium banking  Simplified transaction accounts  Browser based workflow enabled systems  Credit risk architecture  7 level organisation structure  Shared services : HR and finance

Productivity

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Looking Forward

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Business Driver Profile 5 Year Plan

Growth in Market Share Funds under management Home Loans Credit Cards Life Insurance Credit Products Business Financing Retail 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 – Best practice 3%-6% p.a. productivity change Capital Management Optimise regulatory capital and maintain rating. Rating AA- Total Shareholder Return Top quartile Deliver top quartile TSR.

Strategic Plan to June 2006 is Underpinned by Growth Assumptions