Deutsche Bank - Asia-Pacific Financial Institutions Conference Stuart Grimshaw Group Executive Financial and Risk Management 8 July 2002 www.commbank.com.au
Disclaimer 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. 2
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.” 3
Agenda Introduction Australian Economy & Commonwealth Bank Group Strategy Strategic issues Competitive advantage Strategic imperatives Looking Forward Strategic plan 4
Introduction
Australian Economy & Commonwealth Bank Group Credit Growth Current position Housing market Commonwealth Bank Group Asset quality
Australian Economy: Credit Growth CREDIT % % (3 month-ended annual rates) 30 30 20 20 10 10 0 0 -10 -10 Jul-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02 Business Household Housing Other personal 7 Source: Commonwealth Research
Housing Market SYDNEY HOUSE PRICES HOUSE PRICES %pa %pa (deflated by the CPI) $'000 %pa 400 60 60 60 40 40 300 40 Real growth 20 20 (rhs) 200 20 0 0 100 0 * -20 QI 2002 -20 Level at annual (lhs) rate * estimate Source: CBA, Treasury Source: Residex 0 -20 -40 -40 Mar-60 Mar-68 Mar-76 Mar-84 Mar-92 Mar-00 1900 1912 1924 1936 1948 1960 1972 1984 1996 DEBT REPAYMENT LEVELS PRINCIPAL REPAYMENTS % % % $bn (% of h/hold income, Mar'02) 30 12 20 20 Principal (% of motgage payment) (lhs) 15 15 20 8 10 10 10 4 Cumulative overpayment of principal* (rhs) Source: Melbourne Institute 5 5 0 0 <30 31-50 51-70 71-100 >100 Sep-97 Sep-99 Sep-01 Income ($'000pa) *assumes prinipal repayment ratio fixed at 1997/98 level 8 Source: Commonwealth Research
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) 9
Credit Risk: Historical P&L Charge Bad Debt Expense / RWA 0.30% % Charge Per Half 0.20% 0.10% 0.00% CBA Other Major Australian Banks (Average) * Excludes Colonial 10
Aggregate Provisions 2,000 300 1,800 250 1,600 1,400 200 1,200 $millions 1,000 150 % 800 100 600 400 50 200 0 0 General Provision (Left Axis) Specific Provision (Left Axis) Other Major Australian Banks (Average): Total Provisions/Gross Impaired Assets (%) CBA: Total Provisions/Gross Impaired Assets (%) * Includes Colonial 11
Strategy Strategic Issues Competitive Advantage Strategic Imperatives
Strategic Issues Domestic Growth Wealth Management Distribution Technology & Productivity 13
Competitive Advantage Brand Scale Innovation 14
Brand : Commonwealth Bank Share of Mind* 75 68 71 68 63 70 65 63 66 65 64 68 69 65 63 66 CBA 50 Westpac (%) ANZ 25 NAB 0 Sept Nov Jan Mar May Jul Sep Nov '01 • 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 15
Brand : Colonial First State Adviser brand awareness - overall opinion of organisation 5 6 7 8 9 10 Rank Company Colonial FirstState 8.16 1 2 Navigator 7.98 3 Perpetual 7.85 AMP Financial 4 7.81 Services 5 AMP 7.52 Industry 7.28 Average Source: ASSIRT Service Level Survey - 2001 16
Australia’s Most Accessible Bank Personal Direct Mobile Branches Lenders Banking Bankers 1,045 over 700 over 62 million over 180 branches staff calls * Financial Planners^ ATMs over 600 nearly 4,000 10 million customers Business Banking 80 centres EFTPOS $ over 120,000 merchant NetBank terminals 1.5 million registered Agencies Third Party Distribution Premium customers (Postal & Ezy Banking over 15,000 individual Banking over 700 Stores Private) advisers, brokers and 13 Centres over 3,900 agents * for 6 months to Dec „01 17 ^ Also includes financial consultants and personal client advisers
Scale : Strong Market Share Positioning Australian Market Share Dec 2000 Jun 2001 Dec 2001 Mar 2002 Rank 1 Home Loans 20.8% 20.4% 20.1% 20.1% (Residentially Secured) 1 Credit Cards^ 21.9% 21.4% 21.4% 21.8% 1 Retail Deposits 24.6% 24.0% 24.1% 24.2% 1 Retail FUM (Plan for Life) 16.0% 16.3% 16.4% 16.3% * 2 Superannuation/Annuities 15.7% 16.3% 16.4% 16.4% 1 Retail Broking 8.5% 9.0% 8.5% 9.2% * 2 Inforce Premiums 14.6% 14.4% 14.5% 14.5% * Dec 2001 Data ^ Colonial data captured as part of market share calculation from June 2001 18
Innovation : Commsec & NetBank Growth in Customer Numbers Market Share of ASX Transactions 1200 10% 900 (000's) 8% 600 6% 300 4% 0 2% 1997 1998 1999 2000 2001 0% 1997 1998 1999 2000 2001 Profitability of CommSec Growth in Transaction Volumes ($ 000) 160 20,000 millions of transaction 120 15,000 80 10,000 40 5,000 0 0 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 19
Strategic Imperatives Strategic Issues Domestic Growth Segmentation Wealth Management Productivity Distribution Technology & Productivity 20
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, Group banking including Financial Advisers Corporate, customers, professionals Commercial Small business and business business banking customers customers Channels Branch, Ezy- Relationship Agents, Branches, Relationship Banking, ATM, managers, Brokers, Financial managers, EFTPOS, Premium Advisers, Premium Business centres Phone, On-line, investment investment centres Mortgage centres, phone, DirectDealerships brokers on-line. Services Group Technology, Back Office Operations, Procurement, Shared Services Support Finance, Risk Management, Human Resources, Strategy, Legal, Secretariat 21
Youth: Age of Acquisition Lower relative 100% CBA 90% acquisition after age 24 80% 70% 60% Key 50% acquisition Under 18 period for 40% acquisition other banks - important Retention by 30% to CBA CBA vital 20% 10% 0% CBA NAB WBC ANZ Credit Union Under 18 18-24 Over 24 22 Source: Customer Tenure Analysis - Customer Strategy and Market Research
Banking Needs Banking needs change and grow as customers age and pass through different lifestages Lower involvement products Higher value products Credit Card needs Transacting needs Savings needs 0 5 12 18 24 30 Age of Customer 23
Premium and Business Opportunity Premium Customers Current number of premium customers Potential number of premium customers Business (Middle Market) Current market share Natural market share Source : Commonwealth Bank illustration 24
Business: Increasing Cross-sell Corporate Segment Example Example Bundled Products Working Financial Capital Business Banking Markets Services 17% 26% 8% 26% Interest rate risk Financial management 8% 6% Markets FX products Investments 8% Bill financing Working Cash funded loans Capital Corporate Overdrafts Services Finance Transaction services 26% of this segment use products from all three areas 25
Funds Management Opportunity Retail Funds Management 600 (Non-Life & Life) 500 400 $Billion 300 200 100 0 1997 1999 2001 2003 2005 2007 Retail FUM (Commonwealth Bank Group) Retail FUM (Industry) Source: Plan for Life, CBA 26
Growth through Retail Masterfunds 27
What is different about FirstChoice? Underlying Investment structure Superior service standards Value for money Simplicity 28
Productivity Segmentation : premium banking Simplified transaction accounts Browser based workflow enabled systems Credit risk architecture 7 level organisation structure Shared services : HR and finance 29
Looking Forward
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