JP Morgan Investment Conference Peter Polson Group Executive, - - PowerPoint PPT Presentation

JP Morgan Investment Conference

Peter Polson Group Executive, Investment & Insurance Services Commonwealth Bank of Australia 1 October 2002

The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentations, 1 October

• 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

Agenda

 Overview of Commonwealth Bank  Commonwealth Bank’s Wealth Management Model  Wealth Management Industry Trends  Commonwealth Bank’s Strategic Response

Overview of Commonwealth Bank

Commonwealth Bank: An Overview

$0 $5 $10 $15 $20 $25 $30 $35 $40 9/09/91 9/03/92 9/09/92 9/03/93 9/09/93 9/03/94 9/09/94 9/03/95 9/09/95 9/03/96 9/09/96 9/03/97 9/09/97 9/03/98 9/09/98 9/03/99 9/09/99 9/03/00 9/09/00 9/03/01 9/09/01 9/03/02 9/09/02

 December 2001 - the Bank’s

restructure programme “Organising for the Future” announced.

 December 1990 - the Bank

was converted into a public company with share capital. 70% shareholding retained by the Commonwealth Government.

 1991 - The Bank acquired

State Bank Victoria $1.6 billion.

 October 1993 - the

Commonwealth Government shareholding was reduced to 50.4% and in 1996 the Bank was fully privatised.

 June 2000 - the Bank

acquired Colonial Group Limited $9.1 billion.

Share price performance last 10 years

 February/March 1997 - Introduction of

• “NetBank” internet banking and
• “CommSec” discount broking

 May 2002 - “FirstChoice”

masterfund launched

Recent Result Highlights

 Solid Earnings Growth  Reported Profit up 10.7% to $2,655m  Cash Profit up 10.6% to $2,501m  Cash EPS up 10.1% to $1.97  Costs steady year on year  Improved productivity and cost to income ratio  High dividend payout ratio relative to peers  Capital position remains strong  Credit Quality and Provisioning remains strong

Net Profit by Segment*

875 918 975 1092 156 164 121 97 78 71 96 120

200 400 600 800 1,000 1,200 1,400 Dec 2000 Jun 2001 Dec 2001 Jun-02 Banking Life & Super Funds M anagement

* Net Profit after tax and outside equity interest - cash basis. Excludes appraisal value uplift and goodwill amortisation. 1,109 1,153 $million 1,192 1,309 Full Year = 2,262 Full Year = 2,501

17%

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, Institutional Clients Relationship managers, Business centres Support

Finance, Risk Management, Human Resources, Strategy, Technology, Legal, Secretariat

Commonwealth Bank’s Wealth Management Model

Investments and Insurance within Commonwealth Bank

Business Investment Products

• Colonial First State Australia
• Colonial First State Property
• First State Asia
• First State UK

Insurance

• CommInsure

Financial Planning & Advice

• Financial Wisdom
• Commonwealth Financial

Solutions

• Bank Branch Network

Country Australia/NZ Australia/NZ Asia UK, Europe, USA Australia Australia Australia Australia Activity

• Asset management & Masterfunds
• Direct property asset management
• Asset management
• Asset management
• General & life insurance
• Third party distribution
• Third party distribution
• Distribution of investment/insurance

products

Scale: Funds Under Management

$103bn

29 28 27 31 33 33 17 23 24 26 25 27 22 18 19 21

20 40 60 80 100 120 Dec 2000 Jun 2001 Dec 2001 Jun 2002

$billions

Au stralian Retail Fun ds Au stralian W holesale Fu n ds In tern ational Fu nds In tern al Life Assets Av erage FUM

Retail Australian Market Share - Investment Products

0.00% 5.00% 10.00% 15.00% 20.00% 25.00%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Market Share and Rank by Product Category Market Share and Rank by Asset Class

2 2 2 2 1 2 2 4 1 1 2 1

Superannuation Allocated Pension CMT* Unit Trusts (ex Cash) Total Retail Total Wholesale Cash Australian Shares Overseas Shares Diversified Income Property

*CMT = Cash Management Trust Source: Plan for Life June 2002

Brand - Colonial First State

0% 0% 5% 5% 10% 10% 15% 15% 20% 20% 25% 25% 7.60 7.70 7.80 7.90 8.00 8.10 8.20 8.30 0% 0% 20% 20% 40% 40% 60% 60% 80% 80% 100% 100% 32% 32% 34% 34% 36% 36% 38% 38% 40% 40% 42% 42% 44% 44%

AMP AMP AMP BT Colonial

• r

Colonial First State Colonial First State AXA Colonial First State ING Consumer Brand Awareness - Unaided

3

Consumer Brand Awareness - Total Consumer Purchase Intention

2 2

Adviser Brand Awareness - Overall Opinion of Organisation Colonial First State

Perpetual

1

Navigator

Source: Consumer Charts - Newspoll June 2002; Adviser Chart - ASSIRT Service Level Survey 2001

CommInsure - Overview

Life Insurance:

• Market Inforce $3.4bn
• CommInsure rank: 2

Annuities:

• Market FUM $10.7bn
• CommInsure Rank: 3

House & Contents Insurance:

• Market GWP* $2.5bn
• CommInsure Rank: 6

*GWP: gross written premium Source: Plan for Life, APRA adjusted

1 4 . 4 % 5.13% 12.97%

Financial Planning & Advice Services

Investment Products Insurance Products Branch Network Owned Practice Based Planning

Financial Planning & Advice Services - Overview

Key Metrics

• Practice Based Planners
• Financial Wisdom (263)
• C’wlth Financial Solutions (142)
• Bank Branch Planners (625)

Wealth Management Industry Trends

Australian Market Prospects - Product Segment Growth

50 100 150 200 250 300 350 Self Managed Funds Personal Super Unit Trusts Public Sector Funds Wholesale Savings Market Corporate Super Master Trusts Industry Funds Corporate Standalone Funds Allocated Pensions Annuities Insurance Bonds $ Billion

Value at 30 June 2001 Projected Value at 30 June 2011

Projected Size of Various Product Segments

Source: Rice Kachor projections March 2002, include 5% post fee returns, except for DIY (7%)

Growth in Master Trusts

Master Trust Market as a Percentage of Total Retail (ex cash)

0% 10% 20% 30% 40% 50% 60% 70% 80% Sep-94 Mar-95 Sep-95 Mar-96 Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 FUM gross sales

Source: Plan for Life June 2002

Australian Market Prospects: Other Trends

Top 5: Trends in Share of Retail FUM

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02

CBA NAB WBC AMP ANZ

Source: Plan for Life June 2002

Commonwealth Bank Wealth Management: Our Competitive Advantage

 Distribution - internal and external  Brand  Innovation  Flexibility to vary margins across value chain  Efficient administrator with strong service culture  Broad manufacturer across broad product base  Scale

Commonwealth Bank’s Strategic Response

Investment Products - Key Strategies

 Realise benefits of integration  Establish Colonial First State as key player in:  mastertrusts  corporate superannuation  Leverage internal distribution opportunities  Increase reputation as manager of international shares  Strengthen retail brand  Grow alternate asset classes

Investment Products - Key Strategies Global Business

 Expand global investment manufacturing capabilities  Gather assets in the UK and Europe

UK retail: IFAs, fund supermarkets, life companies Europe: sell product via European financial services companies Wholesale/Institutional

 Explore distribution opportunities in Asia

Growth through Retail Masterfunds

FirstChoice Corporate Superannuation

50 100 150 200 250 300 350 400 450 500 550 600 31-May 30-Jun 31-Jul 31-Aug

Cummulative totals for week ending

Millions

CBA Branch + CommSec CBA Third Party Other

FirstChoice: Retail Net Contribution by Channel

Period covered: 13 May 2002 - 31 August 2002

Insurance - Key Strategies

 Insurance environment has been restructured to increase

• focus. Key actions going forward are:
• product rationalisation
• migrate to modern systems architecture
• actively promote the CommInsure brand
• customer service and pricing improvements
• improve sales through both internal distribution channels

and IFAs

• strong focus on capital management

Financial Planning & Advice Services - Key Strategies

 Review positioning of non-proprietary dealerships  Confirm business model for proprietary dealerships

• extent of Group manufactured product sold
• role of technology (Avanteos)
• appropriate performance metrics

 Assess operating model interfacing with bank distribution

Summary

Revenue Generation Strategies

• Develop innovative new products
• Grow the FirstChoice Masterfund
• ffering
• Expand international asset

management capability

• Build strong links between

manufacturing and distribution businesses

• Improve service and pricing for

insurance business

Efficiency-Based Strategies

• Remove investment product overlap to
• ffer an integrated product suite
• Migrate to a single back office platform
• Eliminate duplicated functions

The structure of the IIS Group reflects a strategy

• f growing value by being the manufacturer and distributor
• f high quality wealth management products

Conclusion

 Commonwealth Bank’s wealth management strategies

are an integral part of the Group’s vision: To be chosen and respected as an excellent provider

• f financial services

Questions

JP Morgan Investment Conference

Peter Polson Group Executive, Investment & Insurance Services Commonwealth Bank of Australia 1 October 2002