Other key information Other key information Defined benefit superannuation plan income/(expense): This amount is influenced by actuarial estimates of the long-term return on plan assets, the � discount rate applied to plan liabilities, and the cost of additional member benefits accrued during the period Treasury shares valuation adjustment: CBA shares held within life insurance statutory funds (on behalf of policyholders) result in an � Income Statement mismatch When the Bank’s share price rises, an expense is recognised for the increase in liability to � policyholders, with no offsetting gain recognised on the “treasury shares” One-off AIFRS mismatches: Accounting loss arising in prior periods due to the unwinding of structured transactions offsetting � profit never recognised through P&L Hedging and AIFRS volatility: Unrealised accounting gains and losses arising from the application of “AASB 139 Financial � Instruments: Recognition and Measurement” 26
Non cash items – a quick explanation Non cash items – quick explanation Dec 07 Dec 06 $m $m Defined benefit superannuation plan income/(expense) (4) 4 Treasury shares (13) (38) One-off AIFRS mismatches - (46) Reclassified Hedging and AIFRS volatility 3 (25) Total non cash items (14) (105) 27
28 Notes Notes
A solid operating result A solid operating result Dec 07 Dec 06 Dec 07 vs $m $m Dec 06 Cash NPAT 2,385 2,296 4% (28) (61) Shareholder investment returns after tax 2,357 2,235 Underlying NPAT 70 Extra funding costs after tax Underlying NPAT excluding extra funding costs 2,427 2,235 9% 29
30 Notes Notes
Extra funding costs* Extra funding costs* Long term wholesale Basis risk funding costs bpts bpts 0.80% 70 0.007 68 70 0.70% 31 Dec 07 61 60 0.006 0.60% 60 50 50 0.005 0.50% 50 Margin to BBSW 42 42 40 0.004 38 0.40% 40 � 37bpts 30 0.003 0.30% 30 � 27bpts 23 17 20 0.002 20 0.20% 14 13 1 Jul 07 15 15 8 10 0.001 0.10% 10 3 0.00% 0 Dec 06 Jun 07 Dec 07 1 year 2 year 3 year 4 year 5 year Term * Borne equally between Net Interest Income and Other Banking Income 31
Funding Profile Funding Profile Notes Notes Geographic distribution 3% Australia 18% Europe Misc 42% 4% Other Asia Japan 5% Hong Kong United States 13% United Kingdom 3% 12% Long term wholesale funding (contractual maturity profile) 35 30 25 58% > 3yrs AUD (bil) 20 15 10 5 0 1< 3 3 < 5 5 < 7 7 < 10 > 10 Maturity (years) 32
Funding – w ell positioned Funding – ell positioned Source of funding No direct sub-prime exposure � 25% Short term wholesale � Strong retail funding (13% annualised Long term wholesale deposit growth YTD Dec 07) 54% Securitisation 17% � Diversified wholesale funding Retail 4% � No reliance on securitisation Wholesale funding Structured MTN 3% 13% � Long term wholesale maturity profile Vanilla MTN 10% Commercial Paper improved since June 6% 8% Structured Finance Deals (from 4.0 to 4.3 yrs) 8% Debt Capital 8% CDs Securitisation High level of liquid assets, >$25bn � 15% Bank Acceptance (~25% surplus to normal operations) 23% Deposits from other financial institutions 6% Repo, short sell liabilitiess & other 33
34 Notes Notes
Results by Business Unit Results by Business Unit Dec 07 Dec 06 Dec 07 vs $m $m Dec 06 Retail Banking Services 949 881 8% Premium Business Services 724 724 - Wealth Management 380 299 27% International Financial Services 296 233 27% Other: Corporate centre 104 181 (42%) Eliminations/Unallocated (68) (22) Large Cash NPAT 2,385 2,296 4% 35
Other key information Other key information Notes Notes 6 months % of total group operating income Dec 07 Jun 07 Dec 06 Net interest income 56% 54% 54% Other banking income 22% 24% 26% Funds Mgt. income 16% 15% 14% Insurance income 6% 7% 6% Total 100% 100% 100% Av interest earning assets ($m) * 352,107 325,380 306,868 Net interest income ($m) * 3,838 3,489 3,432 Net interest margin (bpts) 2.17% 2.16% 2.22% * Excluding securitisation 36
Positive “Jaw s” in all business units Positive “Jaw s” in all business units Dec 07 vs Dec 06 30% 60% 52% Excluding 25% asset sales 22% 22% in FY07 20% 17% 16% 15% 13% 10% 10% 8% 8% 8% 8% 7% 5% 4% 5% 2% 0% * * * RBS PBS WM IFS Group Income Expenses NPAT * Excludes shareholder investment returns 37
38 Notes Notes
Underlying NIM dow n 4bpts Underlying NIM dow n 4bpts bpts Extra funding costs � Underlying NIM � 4bpts � Basis spread � 2 � Wholesale funding � 1 5 217 216 (3) � 3 (2) 1 212 A further 3bpts of extra funding costs � for short dated hedging in Other Banking Income Asset pricing and mix � 2 � Jun 07 Extra Asset Lending Underlying AIFRS Dec 07 funding pricing mix Dec 07 Volatility Lending mix � 1 � costs � Strong growth in (basis points) higher margin business lending 39
40 Notes Notes
Costs up 7%, or 3% since Jun 07 Costs up 7%, or 3% since Jun 07 Movement Dec 07 vs Dec 06 $m GST credits (64) Used to fund extra investment Used to fund extra investment Incremental investment spend 62 Investment for growth Investment for growth CPI increases 126 (staff, property, IT etc) (staff, property, IT etc) Volume expenses 54 Largely strong FUM growth Largely strong FUM growth Market-driven staff cost increases 57 New staff (largely customer facing) 47 Staff cost increases Staff cost increases Incentive payments 21 Net savings (69) Includes IT savings Includes IT savings ( � 7%) Total movement 234 41
Other key information Other key information Notes Notes $m Dec 07 Jun 07 Dec 06 Profit and loss 302 285 240 Capitalised 136 150 110 Cash investment spend 438 435 350 42
Continuing to invest Continuing to invest 1H08 Investment spend ($m) Expensed Capitalised Total Business Banking Growth Strategy � Online and Customer Systems Growth � 110 80 190 Home loan Top Ups projects � Motor Insurance Underwriting � Product and System Rationalisation (WM) � Home loan Simplification Productivity � 126 39 165 IT Infrastructure Upgrade projects � IT Outsourcing � Computer and Business Continuity Centres Risk and � 66 17 83 Basel II compliance � Anti-Money Laundering Projects � � 25% 302 136 438 43
44 Notes Notes
Financials Financials � Group Result � Business Unit Summaries � Capital and Basel II � Key Messages 45
Other key information Other key information Dec 07 Jun 07 Dec 06 Dec 07 vs Dec 06 Home loans 645 637 631 2% Net interest income Consumer finance 374 374 368 2% Retail deposits 1,124 1,028 1,043 8% 2,143 2,039 2,042 5% Home loans 69 56 56 23% Other banking income Consumer finance 157 223 174 (10%) Retail deposits 338 340 338 - Distribution 53 53 51 4% 617 672 619 - Home loans 714 693 687 4% Total banking income Consumer finance 531 597 542 (2%) Retail deposits 1,462 1,368 1,381 6% Distribution 53 53 51 4% 2,760 2,711 2,661 4% 1,263 1,262 1,239 2% Operating expenses 141 185 164 (14%) Loan impairment expense Expense to income 45.8% 46.6% 46.6% (2%) 949 885 881 8% Cash net profit after tax 46
Retail Banking Services Retail Banking Services Dec 07 Dec 07 vs Strong volume growth: � $m Dec 06 � Home loans � 14% Home loans 714 4% Consumer finance 531 (2%) � Deposits � 12% Retail deposits 1,462 6% Good market share outcomes � Distribution 53 4% Total banking income 2,760 4% Efficiency gains helped contain � cost growth below CPI Operating expenses 1,263 2% Loan impairment 141 (14%) Sound credit quality � Tax 407 Cash net profit after tax 949 8% 47
Notes Notes Home loan stress testing Credit card arrears (Net of insured and securitised losses) 4.00 Expected loss PD stress factor $m 3.00 Property value x1 x2 x4 x6 % 2.00 14.0 18.4 25.2 29.5 No decrease 33.1 44.9 63.6 76.2 10% decrease 1.00 67.1 93.9 136.5 166.4 20% decrease 0.00 116.2 166.1 246.6 304.2 30% decrease Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 06 06 06 07 07 07 07 07 07 07 07 07 07 07 07 PD = Probability of default Excludes lines of credit 30+ Days % 90+ Days % Stress test scenario consistent with experience of UK � recession of the late 1980s / early 1990s Personal loan arrears 4.0 � Up to 6 fold increase in PD, due to unemployment of 10% and interest rates of 14% 3.0 � Up to 30% fall in security value % 2.0 Under current conditions, 1 year HL expected loss at � around $14m 1.0 Under most stressed conditions, expected loss totals � $304m = 3 months home loan net income. 0.0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Additional insured losses of $330m covered by mortgage � 06 06 06 07 07 07 07 07 07 07 07 07 07 07 07 insurance and securitisation 30+ Days % 90+ Days % 48
Sound consumer credit quality Sound consumer credit quality Home loan arrears 1.40 � Arrears rates trending lower in all 1.20 1.00 portfolios 0.80 % 0.60 � Home loan stress test: 0.40 0.20 � Under most stressed 0.00 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec conditions – potential loss of 06 06 06 07 07 07 07 07 07 07 07 07 07 07 07 90+Days % $304m (3 months home loan 30+ Days % income) Annualised loan impairment expense � Approx. 60% of home loan to average gross loans and acceptances customers paying two or more 30 0.27% 0.24% payments in advance 25 0.22% 0.21% 20 0.16% bpts 15 � 70% of home loans by market 10 value have LVR <60% 5 0 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 49
Other key information Other key information Dec 07 Jun 07 Dec 06 Dec 07 vs Dec 06 Institutional Banking 469 417 374 25% Net interest income Private Client Services 121 100 88 38% Corporate Financial Services 354 324 331 7% Agribusiness 53 49 51 4% Local Business Banking 99 87 89 11% 1,096 977 933 17% Institutional Banking 422 400 435 (3%) Other banking income Private Client Services 193 173 139 39% Corporate Financial Services 232 217 218 6% Agribusiness 40 32 31 29% Local Business Banking 72 66 73 (1%) Eliminations (22) (21) (19) 16% 937 867 877 7% Institutional Banking 891 817 809 10% Total banking income Private Client Services 314 273 227 38% Corporate Financial Services 586 541 549 7% Agribusiness 93 81 82 13% Local Business Banking 171 153 162 6% Eliminations (22) (21) (19) 16% 2,033 1,844 1,810 12% 883 863 806 10% Operating expenses 175 55 20 Large Loan impairment expense Expense to income 43.4% 46.8% 44.5% (2%) Cash net profit after tax 724 721 724 - 50
Premium Business Services Premium Business Services Excluding “Loy Yang”: Dec 07 Dec 07 vs � $m Dec 06 � PBS profit � 8% Institutional Banking 891 10% Private Client Services 314 38% � Institutional � 22% Business Banking Corporate Financial Services 586 7% Strong PCS result underpinned � by CommSec growth Agribusiness 93 13% Local Business Banking 171 6% Business Banking � 20% � Eliminations (22) 16% annualised in last six months Total banking income 2,033 12% Stable margins � Operating expenses 883 10% Expense growth reflects strong � Loan impairment 175 Large volumes and investment Tax 251 Loan impairment up $155m � Cash net profit after tax 724 - 51
Other key information Other key information Annualised loan impairment expense to average gross loans and acceptances (Commercial and Consumer) 0.14% 0.20% 0.14% 0.15% 0.16% 0.15% 0.16% 0.15% 0.13% 0.13% Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 176 188 210 195 239 333 146 52
Commercial Credit Quality Commercial Credit Quality Gross impaired assets to RWA 0.60% Portfolio quality remains sound � Small number of well-publicised 0.40% CBA � ANZ exposures driven by market NAB conditions WBC 0.20% Exposures to Financial Institutions � 0.00% Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec and Property sectors well 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 diversified Margin Lending Margin lending: Portfolio size $9bn � Gearing / LVR (end-January 2008) 37% � Low gearing Margin calls in January 2008 7,500 � Limited forced sale of January margin calls - % of clients <5% securities January margin calls – forced sales 4% 53
Other key information Other key information Dec 07 vs Dec 07 Jun 07 Dec 06 Dec 06 CFS GAM 431 356 305 41% Net operating income Colonial First State 378 354 306 24% CommInsure 321 327 320 - Other (4) 5 (9) (56%) 1,126 1,042 922 22% CFS GAM 191 170 140 36% Operating expenses Colonial First State 211 211 196 8% CommInsure 156 172 144 8% Other 53 56 85 (38%) 611 609 565 8% CFS GAM 172 126 117 47% Underlying profit after tax Colonial First State 117 101 74 58% CommInsure 116 106 129 (10%) Other (33) (30) (75) (56%) 372 303 245 52% CFS GAM 168 136 122 38% Cash net profit after tax Colonial First State 123 87 55 Large CommInsure 148 144 194 (24%) Other (59) (39) (72) (18%) 380 328 299 27% 54
Wealth Management Wealth Management CFS GAM: � Dec 07 Dec 07 vs � Underlying profit up 47% $m Dec 06 � FUM up 28% to $164bn CFS GAM 431 41% � Business diversification � Improved margins Colonial First State 378 24% � 32% of AWG now sold down CommInsure 321 - � Colonial First State: Other (4) (56%) Underlying profit up 58% � Net operating income 1,126 22% � FirstChoice FUA up 36% Operating expenses 611 8% � Stable margins Tax 143 28% � CommInsure: Underlying profit after tax 372 52% � Impacted by weather events Shareholder investment � Strong volume growth: 8 (85%) returns � Inforce premiums � 11% � Personal life sales � 24% Cash net profit after tax 380 27% � General insurance sales � 30% 55
Other key information Other key information Dec 07 Jun 07 Dec 06 Dec 07 vs Dec 06 ASB 400 372 336 19% Net interest income Other 42 18 23 83% 442 390 359 23% ASB 156 118 148 5% Other banking income Other 27 20 21 29% 183 138 169 8% ASB 556 490 484 15% Total banking income Other 69 38 44 57% 625 528 528 18% 22 25 21 5% Funds Management Income 120 129 115 4% Insurance Income 767 682 664 16% Total operating income 411 376 364 13% Operating expenses 12 14 6 Large Loan impairment expense Expense to income 53.6% 55.1% 54.8% (2%) Underlying profit after tax 276 235 226 22% Shareholder investment returns after tax 20 10 7 Large Cash net profit after tax 296 245 233 27% 56
International Financial Services International Financial Services Dec 07 Dec 07 vs Strong banking income growth � $m Dec 06 ASB 556 15% ASB profit � 12% in NZD � Other 69 57% Total banking income 625 18% Growing contribution from Asian � Funds management income 22 5% operations Insurance income 120 4% Total operating income 767 16% Sovereign result impacted by � Operating expenses 411 13% claims deterioration - sales growth remains strong Loan impairment 12 Large Tax and minority interests 68 - Expense growth reflects Underlying profit after tax 276 22% � additional staff (mainly Shareholder investment 20 Large returns Indonesia) and growth activities Cash net profit after tax 296 27% 57
58 Notes Notes
Financials Financials � Group Result � Business Unit Summaries � Capital and Basel II � Key Messages 59
Capital treatment – Basel I Capital treatment – asel I AIFRS APRA S&P Accounting Tier 1 Tier 2 Total ACE Shareholders' Equity Ordinary Share Capital � � � � Other Equity Instruments � � � Reserves General Reserve & Capital Reserve � � � � Asset Revaluation Reserve � � � Other reserve accounts � Retained Earnings � � � � Minority Interests � � � Hybrid Debt Issues & Loan Capital � � Other debt issues (subordinated) � � Collective & other credit provisions � � AIFRS transitional relief (T1 & T2) � � � Capital Deductions Intangibles � � � Superannuation Surplus (after tax) � � � Equity investments in other companies � � Value of acquired inforce business � Investments in offshore banks � � Other Deductions � � 60
Capital Overview Capital Overview Basel II advanced accreditation received December 2007 � Risk management benefits: � � More sophisticated internal systems � More flexible decision-making Capital impacts: � � Increased capital ratios (Total and Tier 1) � New ratios comfortably within or above target ranges Applying for Financial Holding Company Status in the U.S � 61
Capital treatment – Basel II Capital treatment – asel II AIFRS APRA Accounting Tier 1 Tier 2 Total Shareholders' Equity Ordinary Share Capital � � � Other Equity Instruments � � � Reserves General Reserve & Capital Reserve � � � Asset Revaluation Reserve � � � Other reserve accounts � Retained Earnings � � � Minority Interests � � � Hybrid Debt Issues & Loan Capital � � Other debt issues (subordinated) � � Capital Deductions Intangibles � � Superannuation Surplus (after tax) � � Equity investments in other companies/unit trusts � � � Expected losses in excess of eligible provisions � � � Investments in offshore banks � � � Other Deductions � � � Note The Bank is awaiting Standard and Poor’s guidance on the impact that Basel II regulatory changes will have on the Bank’s ACE ratio. 62
Capital ratios (pre DRP share purchase) Capital ratios (pre DRP share purchase) Basel I Proforma Basel II 12% 11.27% Total 11% Capital 9.84% Target 9.76% 9.78% 10% ^ Range 9% 8% Tier 1 7% 7.62% 7.43% Target 7.14% 7.06% 6% Range 5% ACE Target 4% Range 3% * 4.79% 4.79% 4.79% 4.70% 2% 1% 0% Dec 06 Jun 07 Dec 07 1 Jan 08 Adjusted Common Equity Total Capital Tier one capital Target Range ^ Total Capital Target Range amended from 9-11% to 10-12% to align with US Financial Holding Company (FHC) requirements. * Awaiting S&P guidance on Basel II impact on the Bank’s ACE capital. Existing Basel I ratio shown 63
64 Notes Notes
Capital ratios (post DRP share purchase) Capital ratios (post DRP share purchase) Basel I Proforma Basel II After DRP share purchase # Before DRP share After DRP share Before DRP share purchase 12% purchase # purchase 11.27% 11.06% Total 11% Capital 9.84% Target 9.67% 10% ^ Range 9% 8% Tier 1 7% 7.62% 7.35% 7.43% 7.27% Target 6% Range 5% ACE Target 4% Range 3% * * 4.79% 4.79% 4.62% 4.62% 2% 1% 0% Dec 07 1 Jan 08 Adjusted Common Equity Total Capital Tier one capital Target Range ^ Total Capital Target Range amended from 9-11% to 10-12% to align with US Financial Holding Company (FHC) requirements 65 * Awaiting S&P guidance on Basel II impact on the Bank’s ACE capital. Existing Basel I ratio shown # Represents adjusted capital ratios as the DRP will be satisfied through purchase of shares on market
66 Notes Notes
Financials Financials � Group Result � Business Unit Summaries � Capital and Basel II � Key Messages 67
68 Notes Notes
Key Messages Key Messages A solid operating result � Strong volume growth driving market share gains � Sound consumer credit quality – increased commercial � provisioning driven by market conditions Continuing to invest for growth � Very strong capital position � Well positioned in a challenging environment � 69
70 Notes Notes
Agenda Agenda Ralph Norris, CEO – Results and Company Update � David Craig, CFO – Detailed Financials � Ralph Norris, CEO – Outlook � Questions and Answers � 71
System credit grow th System credit grow th Jun 07 Jun 08 Jun 09 Actual Forecast* Forecast* Housing credit 12.9% 10.5-12.5% 12-14% Other personal credit 16.2% 8-10% 6.5-8.5% Business credit 18.9% 18.5-20.5% 13-15% * CBA economist forecast for the Australian market as at February 2008 72
Outlook Outlook � Continuing global uncertainty: � Slowing economic growth in US � Continuing sub-prime fall-out � Volatility expected to continue through calendar 2008 � Domestic economy remains strong: Low unemployment, good GDP growth, exposure to Asia/commodities � � Inflation and higher interest rates � CBA well positioned: � Strong capital position � Diversified funding profile � Strong business momentum Strategy on track – continuing to invest � � Expect EPS growth to meet or exceed the average of peers 73
74 Notes Notes
Supplementary materials For the half year ended 31 December 2007 13th February 2008 Commonwealth Bank of Australia ACN 123 123 124
Economy Economy
77 GDP, unemployment and cash rates GDP, unemployment and cash rates
78 Credit grow th Credit grow th
Spreads Spreads Aus. BBB Corporates US BBB Corporates ~ 35bpts over swaps ~ 50bpts over swaps 79
Group Group
Fully franked dividends Fully franked dividends Dividend (cents per share) 280 240 200 149 130 160 Cents 112 104 120 85 82 113 107 80 94 85 Second Half 79 69 68 First Half 40 0 2002 2003 2004 2005 2006 2007 2008 Payout Ratio (cash basis) 73.9% 73.9% 74.9% 71.0% 73.0% 81
Expenses Expenses 6 months Dec 07 Jun 07 Dec 06 Dec 07 vs Dec 07 vs $m $m $m Jun 07 Dec 06 Staff expenses 1,780 1,642 1,587 8% 12% Occupancy and equipment 373 353 335 6% 11% IT Services 416 456 427 (9%) (3%) Postage and stationery 108 104 109 4% (1%) Fees and commissions 390 375 316 4% 23% (largely volume related) Advertising, marketing etc 160 178 148 (10%) 8% Other 151 175 222 (14%) (32%) Total operating expenses 3,378 3,283 3,144 3% 7% 82
CBA grow th vs market (6 months to Dec 07) CBA grow th vs market (6 months to Dec 07) Home lending Personal lending 6.9% 5.7% 5.7% 5.8% 5.8% 4.8% 5 .3 % 5 .2 % 3 .8 % 2.5% 1 .9 % 1.0% 0.3% CBA WBC ANZ NAB SGB CBA WBC ANZ NAB SGB -0.9% Credit cards Household deposits 10.7% 9.6% 10.0% 5.4% 9 .9 % 9 .4 % 4.3% 4.4% 8.9% 4 .1 % 7.4% 3 .4 % 1.9% 2.9% CBA WBC ANZ NAB SGB CBA WBC ANZ NAB SGB Market Top 5 Source: APRA, RBA 83
Home loans (domestic) Home loans (domestic) Dec 07 Jun 07 Dec 06 Domestic growth profile ($bn) Loan funded 32.3 27.1 25.1 Reduction 21.3 16.5 19.1 Net growth 11.1 10.6 6.0 Total Home lending assets ($bn) Australian home lending assets ($bn) 172.5 161.4 150.8 Securitisation ($bn) (13.2) (15.6) (10.8) Net (Australia) 159.3 145.8 140.0 Asia Pacific home lending assets ($bn) 30.6 28.9 25.9 Totals (adjusted for rounding) 189.9 174.7 165.9 Home Lending statistics (domestic balances gross of securitisation) Balances mix (%) : Owner occupied 55% 55% 55% Investment home loans 34% 34% 35% Line of credit 11% 11% 10% Variable 65% 66% 66% Fixed 32% 29% 27% Honeymoon 3% 4% 7% Originations (% of loans funded) : 3rd Party 39% 35% 33% Proprietary 61% 65% 67% Broker originated loans as % of Aust. Book 30% 28% 26% 84
Home loan balance grow th by channel Home loan balance grow th by channel Home Loan Growth by Channel 18% 15.8% 13.3% 11.5% 13% 8% 7.0% 6.8% 6.5% 5.8% 5.0% 5.2% 5.2% 4.1% 3.3% 3.0% 3% 0.01% -0.5% -2% Dec 06 Jun 07 Dec 07 Broker Branch Premium Total CBA Total Market Note : Width of channel columns reflects relative proportion of total CBA balances 85
Market Share Trends Market Share Trends Home Loans Household Deposits RBA/APRA APRA 19.2% 30.2% 19.0% 29.8% 18.8% 29.4% 18.6% 29.0% 18.4% 28.6% 18.2% 18.0% 28.2% Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Business Lending Business Deposits Loans to Non-Financial Corporations (APRA) Deposits Non-Financial Corporations (APRA) 14.0% 14.0% 13.0% 13.0% 12.0% 12.0% 11.0% 11.0% 10.0% 10.0% Apr 04 Mar 05 Feb 06 Jan 07 Dec 07 Apr 04 Mar 05 Feb 06 Jan 07 Dec 07 86
Sustainability Sustainability � Greenhouse emissions 17% since 2001 � Targeting lower paper and water usage � Launch of Generation Sustainability Fund Environment � UN Principles for Responsible Investment � Online statements + � Culture of Trust and Team Spirit Long Term � Diversity – women 64% of workforce Shareholder Social � Flexibility – 21% part-time/job-share Value � Work/Life balance + � Focus on business ethics � High standard of corporate governance Governance � Responsible lending and business practices 87
Replicating Portfolio Replicating Portfolio Scenario future tightening monetary policy Current Portfolio Yield Replicating Portfolio Yield Target Cash Rate 2001 2007 2011 Replicating Portfolio Yield Scenario future easing monetary policy Target Cash Rate Replicat ing Port folio Yield Target Cash Rat e 2001 2007 2001 2007 2011 88
Variable Home Loan Margin – Variable Home Loan Margin – impact of market volatility* mpact of market volatility* bpts Basis risk 70 0.007 Locked in for 3 years and increasing 0.006 Profitability 5 50 0.005 0 Margin � 8bpts 0.004 30 0.003 � 27bpts 0.002 � 8bpts -5 5 0.001 10 0 (8) Dec 06 Jun 07 Dec 07 10 Long term wholesale funding costs bpts -15 80% 68 70% 70 31 Dec 07 61 60% 50 Margin to BBSW 50% 50 38 40% (15) -25 � 37bpts 30% 30 23 17 30/6/07 Additional Additional Variable Variable 31/12/08 20% 14 13 1 Jul 07 8 funding funding rate � rate � 10% 10 3 costs – costs – 10bps 5bps 00% term basis 1 year 2 year 3 year 4 year 5 year funding risk Term * Net of retail deposits 89
Credit Quality Credit Quality
Summary Summary Dec 07 Jun 07 Dec 06 Risk Weighted Assets (RWA) $272,609m $245,347m $234,569m Gross Loans and Acceptances (GLA) $347,682m $321,653m $299,085m Charge for Loan Impairment Expense (LIE) - 6 mths $333m $239m $195m LIE to RWA (annualised) 0.26% 0.20% 0.17% LIE to GLA (annualised) 0.20% 0.16% 0.13% Gross impaired assets $562m $421m $338m Individually assessed provisions $268m $199m $171m Collective provisions $1,084m $1,034m $1,040m Collective provisions to RWA 0.40% 0.42% 0.44% Collective provisions to GLA 0.31% 0.32% 0.35% Credit Risk Statistics Commercial portfolio Top 20 commercial exposures (as % of total committed exposure) 2.9% 2.6% 2.5% % of all commercial exposures that are investment grade or better 67% 67% 67% % of non-investment grade exposure covered by security 82% 82% 82% Consumer portfolio Consumer exposure as % of total committed exposure 46.9% 45.9% 47.4% 91
The Bank remains w ell provisioned The Bank remains w ell provisioned 0.50% 1,500 0.40% 1,200 0.30% 900 $m 600 0.20% 300 0.10% 0.00% 0 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Collective Provision (LHS) Individually Assessed Provision (LHS) Total Loan Provisions / Gross Loans and Acceptances (RHS) The General Reserve for Credit Loss within shareholders equity that was retained for prudential reporting purposes has been transferred to retained earnings Loan Impairment provisions have been recalculated under AIFRS from 1 July 2005 92
Credit quality Credit quality Home loan delinquencies by state New mortgagee in possession cases (30+ days) 100 1.60% 1.40% 80 1.20% NSW/ACT Qld 1.00% 60 SA/NT % 0.80% Vic/Tas 40 0.60% WA 0.40% 20 0.20% 0 0.00% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 06 06 07 07 07 07 07 07 07 07 07 07 07 07 Credit card vintage analysis Personal loan vintage analysis 7.0% 16% 14% 6.0% % 30+ Days Arrears % 30+ Days Arrears 12% 5.0% 10% 4.0% 8% 3.0% 6% 2.0% 4% 1.0% 2% 0% 0.0% Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 05 05 05 05 05 05 06 06 06 06 06 06 07 07 07 07 07 05 05 05 05 05 05 06 06 06 06 06 06 07 07 07 07 07 Origination Month Origination Month 3 Months on Books 6 Months on Books 12 Months on Books 3 Months on Books 6 Months on Books 12 Months On Books 93
Home loans – Home loans – LVR Profile VR Profile Original LVR 100.0% � Strong LVR profile 90.0% 80.0% 70.0% 60.0% � % of loans at <60% LVR: 80%+ 50.0% 60-80% 0-60% 40.0% 30.0% 60% if based on � 20.0% 10.0% original security values 0.0% Dec 05 Jun 06 Dec 06 Jun 07 Current Market LVR 70% if based on � 100.0% current market values 90.0% as a result of a well 80.0% 70.0% diversified security 60.0% 80%+ 50.0% 60-80% position 0-60% 40.0% 30.0% 20.0% � The majority of loans > 80% 10.0% 0.0% LVR are mortgage insured Dec 05 Jun 06 Dec 06 Jun 07 Australian Owner Occupied and Investment Housing only, excludes Lines of Credit Market value marked against the APM database 94
Top 20 Commercial Exposures – Dec 07 Top 20 Commercial Exposures – ec 07 Top 20 as % of Total Committed Exposures S&P’s Rating Equivalent BBB+ A- Var i ed BBB- 4.0% BBB+ A 3.5% AA- 3.0% A 2.5% BBB A 2.0% A- 1.5% BBB+ A- 1.0% BB+ 0.5% A- 0.0% BBB A- FY03 FY04 FY05 FY06 FY07 1H08 BB+ BBB- BBB+ 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 $m 95
Quality of commercial risk-rated exposures Quality of commercial risk-rated exposures Quality of commercial risk-rated exposures: There is security over 82% of the non-investment grade exposure 100% 33 33 32 33 33 33 34 34 36 80% 60% 15 17 16 16 16 19 20 20 17 17 18 18 20 22 40% 18 17 17 17 67% investment grade 20% 35 32 32 31 30 30 30 30 29 0% Dec Dec Jun Dec Jun Dec Jun Dec Jun 04 05 06 06 07 03 05 07 04 AAA/AA A BBB Other 96
Total geographic exposure Total geographic exposure Total exposure* : $515.5bn International 13% At 30 June 07 Total exposure = $471.2bn New Zealand International = 14% 13% New Zealand = 13% Australia = 73% Australia 74% *Total exposure = balance for uncommitted facilities; greater of limit or balance for committed facilities 97
Total industry exposure Total industry exposure Business Services 0.8% At 30 June 07 Agriculture 2.2% Construction 0.9% Consumer = 45.9% Agriculture = 2.3% Culture & Recreation Other, 5.40% Transport & storage, 1.0% Business Services = 0.8% 1.70% Construction = 1.0% Retail & Wholesale, Finance - Banks Culture and recreational services = 1.1% 2.80% 11.5% Energy = 1.4% Property 6.9% Energy 1.8% Finance - Banks = 13.8% Mining 1.4% Finance - Other = 10.6% Government 3.3% Government = 1.5% Health 1.0% Health and community = 1.1% Manufacturing = 3.1% Mining = 1.2% Finance - other 9.5% Property = 6.0% Retail and Wholesale = 2.6% Transport and storage = 1.7% Manufacturing 2.9% Other = 5.9% Consumer 46.9% *Total exposure = balance for uncommitted facilities; greater of limit or balance for committed facilities 98
International commercial exposure International commercial exposure Total exposure* : $68.0bn At 30 June 07 Total exposure = $65.7bn Finance = 80% Government = 2% Other commercial = 13% Specific industries = 5% Other Commercial 17% Government 11% Specific Industries 6% Aviation Technology Telcos Energy Leasing Construction Automobile Finance 66% Total non-finance offshore outstandings = $23.2bn of which over 87% are investment grade. *Total exposure = balance for uncommitted facilities; greater of limit or balance for committed facilities. Excludes ASB 99
Credit Exposure - Credit Exposure - Property Sector roperty Sector At 30 June 07 Total exposure = $27.8bn Total exposure*: $35.6bn Australia = 80% New Zealand = 17% Other = 3% Dec 07 Jun 07 Dec 06 $bn $bn $bn Rating Other 5% New Zealand AAA to A- 5.7 3.3 3.2 14% BBB+ to BBB- 8.3 7.5 7.3 BB to BB- 11.8 8.6 8.2 < BB- 9.8 8.4 8.7 TOTAL 35.6 27.8 27.4 Australia 81% *Total exposure = balance for uncommitted facilities; greater of limit or balance for committed facilities 100
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