For the half year ended 31 December 2018
First Half Summary ► Results show continued core business momentum ► Addressing issues and earning trust ► Business resilience in a challenging period ► Discipline on costs and capital 2
Australia – a favourable starting point Economy in good shape – growth at trend, at full …with major economic imbalances …and the drag from falling mining capex at an employment, stable inflation… narrowing… end Key Indicators 1 Key balances 1,5 Mining Capex 1 % (rolling annual total, % of GDP) % (% of GDP) % 4 Oil & gas Coal Metals Other Unemployment Rate (%) CPI (%pa) GDP (%pa) Budget Balance Current account 4 6 0 3 4 2 -4 2 1 -8 0 0 Dec 98 Dec 03 Dec 08 Dec 13 Dec 18 Dec 07 Dec 12 Dec 17 Dec 07 Dec 12 Dec 17 …the infrastructure boom rolls on… The lift in resource exports continues... …and Asian incomes keep growing Infrastructure Spending 3 LNG Export Volumes 2 Emerging & Developing Asia 4 % % Mt (annual % change) (annual % change) 60 15 100 Ultimate export GDP per capita (LHS) capacity Economic Infrastructure GFCE 10 40 75 Social Infrastructure GFCE Stimulus associated 5 with financial crisis 20 50 0 % 1.5 1.3 0 25 1.0 0.7 0.0 0.5 Population (RHS) -20 0 0.0 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17 18/19 1990 1995 2000 2005 2010 2015 2000 2005 2010 2015 3 1. Source: ABS. 2. Source: Dept of Industry, Innovation & Science. 3. Source: ABS/ CBA. 4. Source: IMF. 5. Source: Dept of Finance.
Australia – some risks easing, some lifting Wages growth slowly lifting The long awaited pick up in non-mining Demographics limit the residential capex is underway construction downside Non-Mining Capex 1 Wage Price Index 1 Population Growth 1 % $bn ‘000 ‘000 (rolling annual) (annual % change) (annual change) 5 150 300 160 120 4 150 200 90 3 140 60 100 Sydney (LHS) 2 130 30 Melbourne (LHS) Rest of Australia (RHS) WPI inc bonuses WPI exc bonuses 120 0 0 1 2003/04 2006/07 2009/10 2012/13 2015/16 Dec 09 Dec 12 Dec 15 Dec 18 Dec 05 Dec 08 Dec 11 Dec 14 Dec 17 …a threat to consumer spending High debt, rollover of I-O loans, falling house The drag from the drought continues prices, credit supply issues… Australian Crop Production 3 (winter H/Hold Wealth & Spending 1 Household Debt 2 Mt % (annual % change) crop) (% of GDP) % Switzerland 30 8 55 120 Australia 6 20 45 100 Canada NZ 10 4 UK 35 80 0 2 US Germany Dec 18 (f) 60 25 -10 0 Japan Housing wealth (LHS) Consumer spending (RHS) 40 -20 -2 15 Dec 00 Dec 04 Dec 08 Dec 12 Dec 16 Dec 00 Dec 04 Dec 08 Dec 12 Dec 16 2000/01 2005/06 2010/11 2015/16 4 1. Source: ABS. 2. Source: IIF. 3. ABARES Crop Report.
First half result to 31 December 1 1H19 vs 1H19 vs 1H19 1H18 2H18 Statutory profit ($m) 4,599 (6.3%) +4.0% Cash NPAT ($m) 4,676 +1.7% +8.3% ROE (cash, %) 13.8% (40)bpts +70bpts CET1 (%) +40bpts +70bpts 10.8% EPS (cash, cents) 265.2c +0.9c Dividend per share ($) 2.00 Flat 1. Statutory profit, CET1 and Dividend per share include discontinued operations. Cash NPAT, ROE and EPS are on a continuing operations basis. 5
Addressing issues and earning trust ► Focus on customer remediation ► Implementing program to address APRA report ► Consultation with regulators ► APRA - International comparability ► APRA - TLAC ► RBNZ - Capital ► Royal Commission ► Political environment – election in May 6
Key outcomes 1 Operating Income Operating Expenses LIE Cash NPAT $m bpts of GLAA $m $m +1.7% -1.9% 15bpts -3.1% 4,676 5,539 12,643 12,408 16 4,598 12,271 5,456 5,289 4,317 13 Volume growth One-off costs in Generally prior periods – offset by lower benign, some NIM, markets remediation costs pockets of revenue, storms remain elevated stress 1H18 2H18 1H19 1H18 2H18 1H19 1H18 2H18 1H19 1H18 2H18 1H19 1. Presented on a continuing operations basis. 7 7
Franchise strength Lending Growth 2 Home Lending Growth Group Lending CBA growth as a multiple of system growth 4 +4% (6%) 0.9x +2% +5% BPB +2% 0.7x 758 0.6x Home Business Insto. 740 3 Lending Lending Lending $bn 1H18 2H18 1H19 Dec 17 Dec 18 Group Deposits 5 Transaction Balances 5 Deposit Funding 69% +2% +8% 162,767 68% 68% 635 155,147 623 150,143 $bn $m 1H18 2H18 1H19 Dec 17 Jun 18 Dec 18 Dec 17 Dec 18 1. Spot balances. 2. Dec 18 vs Dec 17. 3. Includes NZ. 4. System source RBA Lending and Credit Aggregates. CBA includes Bankwest and subsidiaries. System adjusted for new market entrants. 8 5. Includes non-interest bearing deposits.
Group margin 1 This half Last 5 halves bpts Deposits bpts Repricing +3 214 -4 bpts Replicating (2) 216 214 210 210 210 (3) 1 (2) 1 (1) 210 Home Loans bpts Switching (2) Discounting (1) SVR +3 Fixed (2) Other Pers. (1) 1H17 2H17 1H18 2H18 1H19 2H18 Asset Deposit Portfolio Basis Treasury 1H19 Pricing Pricing Mix Risk and Markets 1. Comparative information has been restated to conform to presentation in the current period. Presented on a continuing operations basis. 9
Balance sheet resilience Credit Risk Funding Liquidity Capital • Disciplined approach • Focus on risk-adj. returns • Peer leading deposits • Sound liquidity position • Enhanced risk models • Higher AASB 9 provisioning • Increased NSFR (112%) • LCR well above minimum CET1 Total Provision Deposit Balances 2 LCR 3 Coverage 1 $bn 10.8% 495 1.28% 131% 421 10.1% 100% 0.98% Other 342 233 206 267 211 148 Household 262 215 131 119 CBA Peer 3 Peer 2 Peer 1 Jun 18 Dec 18 Regulatory Dec 18 Jun 18 Dec 18 Minimum 1. Total provisions divided by credit risk weighted assets. 2. Source: APRA Monthly Banking Statistics. Total deposits (excluding CD’s). CBA includes Bankwest. 3. Pillar 3 quarterly average. 10
Credit risk TIA Group LIE/GLAA Basis Points of GLAA 1 BPB – Small number of larger impairments Single large institutional impairment; IB&M – Ongoing portfolio optimisation higher home loan impairments 85 % of Consumer 15 0.56% 0.60% 0.62% 1H18 1H19 bpts TCE Corporate 15 RBS 17 16 6.7 6.5 6.0 BPB 13 19 28 IB&M 18 7 22 17 16 15 14 ASB 6 11 Group 2 16 15 $bn Dec 17 Jun 18 Dec 18 1H09 1H11 1H13 1H15 1H17 1H18 1H19 1. Cash LIE as a percentage of average Gross Loans and Acceptances (GLAA) (bpts) annualised. 1H09 includes Bankwest on a pro-forma basis. 2. Includes Other. 11
Credit risk – consumer arrears & provisions Arrears 1 $m Collective Provisions % 90+ days Provision Coverage 3 Personal Loans 1.44% 1.44% 1.41% 1.03% 0.76% 1.28% 1.21% 3,814 Credit Cards 1.03% 1.03% 0.88% 0.94% 0.88% 2,772 v 2,350 Consumer 0.70% Home Loans 2 1,473 0.67% 0.60% 0.59% 0.53% Corporate 1,464 1,299 Dec 17 Dec 18 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 AASB 139 AASB 9 1. Group consumer arrears including New Zealand. 2. Excludes Reverse Mortgage, Commonwealth Portfolio Loan and Residential Mortgage Group loans. 3. Collective provisions divided by credit risk weighted assets. 12
Operating expenses 1 Remains elevated; Higher IT amortisation AUSTRAC penalty (375) • Financial Crimes Compliance 7,000 Regulatory Costs (110) • Customer remediation 6,500 • Better Risk Outcomes Program 6,000 -3.1% (485) 76 5,500 121 200 5,456 (145) 66 5,289 5,000 4,500 4,000 3,500 $m 3,000 1H18 1H19 1H18 Prior period AUSTRAC Mortgage NewCo Risk and Staff, IT, 1H19 2 4 one-offs insurance Broking indemnity compliance and Other 3 recoveries consolidation provision uplifts and customer remediation 1. Presented on a continuing operations basis. 2. Prior period = 1H18. 3. Includes AHL and the impact of the implementation of AASB 15. 4. Excludes staff costs related to the NewCo indemnity 13 provision, the Program of Action, and other risk and compliance uplifts.
Investment spend 1 Investment spend Investment spend $m $m 1,282 +13% Total 676 597 2 nd Half 292 -2% Capitalised 685 298 1 st Half +28% Expensed 384 676 597 299 FY18 1H19 1H18 1H19 Investment spend Capitalised software balance % of total $bn 2.23 Average amortisation 8% 12% Branches & Other period 3.9 years 2.09 Risk & compliance 41% 1.93 64% 1.82 1.78 Average amortisation period 5.0 years Productivity & 47% 28% Growth FY15 FY16 FY17 FY18 1H19 1H18 1H19 1. Comparative information has been restated to conform to presentation in the current period. 14
Remediating customers Remediation and Program Costs Cumulative spend and provisions $1,460m • Package Fees Banking customers 245 • Interest and fee remediation Wealth customers • Open Advice Review • Service Delivery Review 1,215 • Credit Card Plus • CommInsure Life Insurance • CommInsure Loan Protection • NewCo Indemnity 1 FY14 FY15 FY16 FY17 FY18 1H19 1. Includes $580m for Advice Review program costs (ASX Announcement 9 October 2018). The Advice Review program costs included Future Advice Model and Regulatory Reform spend of $122m. 15
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