JP Morgan Investment Conference Peter Polson Group Executive, Investment & Insurance Services Commonwealth Bank of Australia 1 October 2002
Disclaimer 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.
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 Share price performance last 10 years May 2002 - “ FirstChoice ” $40 December 1990 - the Bank masterfund launched was converted into a public June 2000 - the Bank company with share capital. acquired Colonial Group $35 70% shareholding retained Limited $9.1 billion. by the Commonwealth $30 Government. 1991 - The Bank acquired $25 State Bank Victoria $1.6 billion. October 1993 - the $20 Commonwealth Government shareholding was reduced to December 2001 - the Bank’s $15 50.4% and in 1996 the Bank restructure programme was fully privatised. “Organising for the Future” $10 announced. February/March 1997 - Introduction of $5 - “ NetBank ” internet banking and - “ CommSec ” discount broking $0 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
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* Full Year = 2,262 Full Year = 2,501 1,400 1,309 1,192 1,153 120 17% 1,109 1,200 97 96 71 $million 78 121 1,000 164 156 800 600 1092 975 918 875 400 200 0 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.
Segmentation: Aligned Domestic Structure with Customer Needs Retail Banking Premium Investment & Institutional & Services Financial Insurance Business Services Services Services Customer Personal Premium clients Agents, Brokers, Institutional, banking including Financial Advisers Corporate, Group customers, professionals Commercial Small business and business business banking customers customers Channels Branch, Ezy- Relationship Agents, Branches, Relationship Banking, ATM, managers, Brokers, Financial managers, Business centres EFTPOS, Premium Advisers, Premium Phone, On-line, investment investment centres, Mortgage centres, phone, DirectDealerships, brokers on-line. Institutional Clients Support Finance, Risk Management, Human Resources, Strategy, Technology, Legal, Secretariat
Commonwealth Bank’s Wealth Management Model
Investments and Insurance within Commonwealth Bank Business Activity Country Investment Products • Colonial First State Australia • Asset management & Masterfunds Australia/NZ • Colonial First State Property • Direct property asset management Australia/NZ • First State Asia • Asset management Asia • First State UK • Asset management UK, Europe, USA Insurance • CommInsure • General & life insurance Australia Financial Planning & Advice • Financial Wisdom • Third party distribution Australia • Commonwealth Financial • Third party distribution Australia Solutions • Distribution of investment/insurance Australia • Bank Branch Network products
Scale: Funds Under Management 120 100 26 25 24 23 80 $billions 17 18 19 60 21 $103bn 33 33 31 40 27 20 29 28 27 22 0 Dec 2000 Jun 2001 Dec 2001 Jun 2002 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 2 25.00% 2 2 2 1 2 20.00% Market Share and Rank by Product Category 15.00% Superannuation Allocated Pension 10.00% CMT* Unit Trusts (ex Cash) Total Retail Total Wholesale 5.00% 0.00% *CMT = Cash Management Trust 35.00% 1 1 30.00% Market Share and Rank 1 by Asset Class 25.00% 2 Cash Australian Shares 20.00% 2 Overseas Shares Diversified 15.00% 4 Income Property 10.00% 5.00% 0.00% Source: Plan for Life June 2002
Brand - Colonial First State Consumer Brand Awareness - Unaided Consumer Brand Awareness - Total 25% 25% 100% 100% 2 3 20% 20% 80% 80% AMP 60% 60% 15% 15% Colonial AMP Colonial AXA First BT or 40% 40% 10% 10% State Colonial 20% 20% 5% 5% First State 0% 0% 0% 0% Adviser Brand Awareness - Overall Consumer Purchase Intention Opinion of Organisation 44% 44% 8.30 1 8.20 42% 42% 2 8.10 40% 40% 8.00 Colonial 38% 38% AMP First 7.90 Colonial Navigator State 36% 36% First 7.80 Perpetual State 34% 34% ING 7.70 7.60 32% 32% Source: Consumer Charts - Newspoll June 2002; Adviser Chart - ASSIRT Service Level Survey 2001
CommInsure - Overview Life Insurance: House & Contents Insurance: • Market Inforce $3.4bn • Market GWP* $2.5bn • CommInsure rank: 2 • CommInsure Rank: 6 5.13% % Annuities: 0 4 . 4 1 • Market FUM $10.7bn • CommInsure Rank: 3 12.97% *GWP: gross written premium Source: Plan for Life, APRA adjusted
Financial Planning & Advice Services - Overview Investment Branch Products Network Financial Planning & Advice Services Owned Practice Key Metrics Insurance Based Planning • Practice Based Planners Products - Financial Wisdom (263) - C’wlth Financial Solutions (142) • Bank Branch Planners (625)
Wealth Management Industry Trends
Australian Market Prospects - Product Segment Growth 350 Projected Size of Various Product Segments 300 Value at 30 June 2001 250 Projected Value at 30 June 2011 200 $ Billion 150 100 50 0 Corporate Standalone Funds Self Managed Funds Personal Super Corporate Super Master Trusts Industry Funds Unit Trusts Wholesale Savings Market Annuities Insurance Bonds Public Sector Funds Allocated Pensions 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) 80% 70% 60% 50% 40% 30% 20% 10% 0% 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 18% CBA 16% 14% NAB WBC 12% AMP 10% ANZ 8% 6% 4% 2% 0% Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 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
FirstChoice: Retail Net Contribution by Channel Period covered: 13 May 2002 - 31 August 2002 600 550 500 450 400 350 Millions 300 250 200 150 100 50 0 31-May 30-Jun 31-Jul 31-Aug Cummulative totals for week ending CBA Branch + CommSec CBA Third Party Other
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
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