2001 Investor Roadshow Presentation 12 November 2001 … · 2001 Investor Roadshow Presentation ......

36
2001 Investor Roadshow Presentation 12 November 2001 www.commbank.com.au

Transcript of 2001 Investor Roadshow Presentation 12 November 2001 … · 2001 Investor Roadshow Presentation ......

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2001 Investor Roadshow Presentation12 November 2001

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1

The material that follows is a presentation of

general background information about the Bank’s

activities current at the date of the presentation,

12 November 2001. 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

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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.”

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Agenda

1. Update

2. Outlook

3. Long Term Strategic Focus

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Update

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5

2.75

3.00

3.25

3.50

Mar

-99

Jun-9

9

Sep

-99

Dec

-99

Mar

-00

Jun-0

0

Sep

-00

Dec

-00

Mar

-01

Jun-0

1

Sep

-01

NAB WBC ANZ Commonwealth Bank Group*

Domestic Net Interest Margins

%

* Proforma

Net interest margin for Commonwealth Bank Group refers to half-yearly reporting periods ending June

and December, except for current period which is 3 months only to September. The ANZ, NAB and

WBC net interest margin refers to the half-yearly reporting periods ending March and September.

3.08

2.95

2.98

3.00

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6

Productivity

Challenges

• Bad debt

cycle

• Weak

equity

markets

• Low

interest

rates

Imperatives

• Realise

integration

synergies

• Improve

productivity

• Accelerate

strategic

initiatives

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Life & Super

Investment Earnings

Market Returns & Group Exposure (%):

Market Key Market Index Exposure*

Movement YTD at 31/10/01

Australia (7)% 52%

US (14)% 27%

UK/Europe (16)% 14%

Other (11)% 7%

* % of total Group equity exposure

Net Earnings on Shareholders Assets

($m):

For period: 01/07/01- 31/10/01

Australia (17)

New Zealand (2)

Asia (3)

Total (22)

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67 71 72 73 76

72 75 76 77 77

333441 42 43 42

34292518

2524242324

0

50

100

150

200

250

300

Dec 1999* Jun 2000 Dec 2000 Jun 2001 Sep 2001

Lending Assets**:

* Proforma

** Excludes securitised housing loan balances $6.2b (Sep 01), $6.8b (Jun 01), $4.7b (Dec 00),

$3.0b (Jun 00), $1.7b (Dec 99).

215235 243 251

Housing Other

Life & SuperFunds Management: Retail Wholesale

Total Lending Assets & Funds Under

Management

$75 billion

$153 billion

253

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9

Australian Market Share

Dec 2000 Jun 2001 Aug 2001

Home Loans 20.8% 20.3% 20.3%

(Residentially Secured)

Credit Cards^ 19.1% 21.4% 21.1%

Retail Deposits 24.6% 24.0% 24.1%

Retail FUM 15.8% 16.3% 16.3%**

Superannuation/Annuities 16.0% 16.0% 16.0%**

Retail Broking 8.5% 8.7% 8.7%*

* September 2001

** June 2001

^ Colonial data captured as part of market share calculation from June 2001

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Asset Quality

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11

Dynamic Provisioning

Profit

and Loss

General

Provisions

Specific

ProvisionsImpaired

Expected Loss Bad Debt

Charge

Performing Portfolio

Consumer

Home Loans

Other Loans

Business

Individually Risk Rated

AAA/AA

A

BBB

Non Investment Grade

Not Individually Rated

Non Performing Portfolio

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Total Individually Risk Rated Exposures by Value

Credit Risk

0%

20%

40%

60%

80%

100%

Dec 1999 Jun 2000 Dec 2000 Jun 2001 Sep 2001

Other BBB A AAA/AA

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0

500

1000

1500

2000

2500

Dec

1993

Dec

1994

Dec

1995

Dec

1996

Dec

1997

Dec

1998

Dec

1999

Dec

2000

Sep

2001

0

6

12

18

24

30

36

%

Commowealth Bank Group (Other Countries)*

Commonwealth Bank Group (Australia)*

Net Impaired assets as % of Total Shareholder Equity* (axis on right)

Net Impaired Assets

* Excluding Colonial prior to 30 June 2000

Asian Crisis

Acquisition

of Colonial

Two

Account

s

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Arrears

Loans Accruing past 90 days or more

30/06/00 31/12/00 30/06/01 30/09/01

$m $m $m $m

Housing Loans 211 247 218 177

Other Consumer Loans 64 66 90 68

Total 275 313 308 245

Housing Loan arrears rate

30/6/99 30/6/00* 31/12/00* 31/6/01* 30/9/01*

Housing Loans accruing

but past 90 days or more $m 182 211 247 218 177

Housing loan balances $m 52,646 70,738 71,505 73,511 75,261

Arrears rate % 0.35% 0.30% 0.35% 0.30% 0.24%

*Housing loan balances net of securitisation and includes Colonial

and home equity and similar facilities.

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Credit Risk: Historical P&L Charge

-

5.00

10.00

15.00

20.00

25.00

30.00

Dec-9

3

Jun-

94

Dec-9

4

Jun-

95

Dec-9

5

Jun-

96

Dec-9

6

Jun-

97

Dec-9

7

Jun-

98

Dec-9

8

Jun-

99

Dec-9

9*

Jun-

00*

Dec-0

0

Jun-

01

Bad Debt Expense / RWA (bp)

* Includes Colonial on a pro forma basis

Basis

Poin

t C

harg

e P

er

Half

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0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Dec

93

Dec

94

Dec

95

Dec

96

Dec

97

Dec

98

Dec

99

Dec

00*

0

50

100

150

200

250

300

%

General Provision

Specific Provision

Total Provisions/Gross Impaired Assets (axis on right)

Aggregate Provisions

* Includes Colonial

$m

illio

ns

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General Provision

Jun-00 Jun-01 APRA

Requirement

1,358

+385

-411

+67

1,399

990

Surplus 409

(ie 41% above

the APRA

requirement)

500

700

1500

1700

1900

2100

900

1100

1300

$mCharged

to P&L

Used for

Specific

Provisions

Other

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18

Non-Accrual Loans by Size

$5m<$10m

$50m<$100m

$20m<$50m

$10m<$20m

>=$100m<$5m1

Customer

3

Customers7

Customers

4

Customers

7

Customers

As at 30 September 2001

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Non Accruals by Industry

Mining

Manufacturing

AgricultureProperty &

Business Services

Finance

and Insurance

Transport

& Storage

Government

Other

As at 30 September 2001

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Industry Exposures

Accomodation, cafes and

Restaurants

-

0.5

1.0

1.5

2.0

2.5

Jun-99 Jun-00 Jun-01

Ba

lan

ce

s $b

0%

2%

4%

6%

% B

ala

nce

s

Printing Publishing and Recording

Media

-

0.2

0.4

0.6

0.8

Jun-99 Jun-00 Jun-01

Ba

lan

ce

s $

b0%

5%

10%

15%

% B

ala

nce

s

Services to Agriculture, Forestry,

Fishing & Mining

-

0.2

0.4

0.6

0.8

1.0

Jun-99 Jun-00 Jun-01

Ba

lan

ce

s $

b

0%

2%

4%

6%

8%

% B

ala

nce

s

Retail Trade

-

1.0

2.0

3.0

4.0

Jun-99 Jun-00 Jun-01

Ba

lan

ce

s $

b

0%

2%

4%

6%

% B

ala

nce

s

Transport and Storage

-

1.0

2.0

3.0

4.0

Jun-99 Jun-00 Jun-01

Bala

nces $

b

0%

2%

4%

6%

% B

ala

nces

Metal Mining & Manufacturing

-

0.8

1.5

2.3

3.0

Jun-99 Jun-00 Jun-01

Ba

lan

ce

s $

b

0%

5%

10%

15%

20%

% B

ala

nce

s

Balances $m % Portfolio % Troublesome % Impaired

Exposure to high risk industries

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Wealth Management

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Funds Management

23 27 28

20 24 2731 30

19 1724

2324

24 25

18 20

1422

21

0

20

40

60

80

100

120

Dec 1999* Jun 2000* Dec 2000 Jun 2001 Sep 2001

$b

illi

on

s

Australian Retail Funds** Australian Wholesale Funds

International Funds Australian Life Assets

** Includes listed property trusts* Proforma

7689

95101 100

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Capital

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0.0%

0.2%

0.4%

0.6%

0.8%

Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02

CBA NAB

WBC ANZ

INTERNATIONAL COMPARISON*

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1996 1997 1998 1999 2000

Australia Canada

US UK

EU

Ratio of Net Write offs to Total Loans

DOMESTIC COMPARISON

Ratio of Net Write offs to Total Loans

* Average value for geographically representative group

Commonwealth Bank Risk Profile Vs DOMESTIC AND INTERNATIONAL PEERS

† Reflects write off of acquired Colonial impaired assets

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36%

15%

33%

21%

44%

54%

45%

53%

20%

31%22% 26%

0%

20%

40%

60%

80%

100%

CBA NAB WBC ANZ

Retail Mortgages

Other

Corporate

RELATIVE ASSET MIX

Total Assets

Source: Analyst Reports; Financial Reports

100%

50%

95%

20%

100%

10%

65%

10%

0%

20%

40%

60%

80%

100%

120%

Corporate Retail - Mortgages

Current

Standard II

Foundation

Advanced

INDICATIVE RISK WEIGHTS UNDER

BIS II FOR AUSTRALIAN ASSETS

BIS II

Commonwealth Bank the Main Beneficiary

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26

• The Group’s economic capital framework supports view that life

subsidiaries improve its capital position

– Low risk profile due to the high proportion of unit-linked business

– Risk diversification

• View is supported by rating agencies and the debt markets

– S&P moved the Group to “positive” outlook after Colonial

acquisition

– Recent return to “neutral” outlook caused by concern over the

general economy, not specific to the Group

– No effect on spreads of Group debt post Colonial acquisition

• Will continue to work with APRA to achieve a risk-sensitive treatment

of life subsidiaries

Life Insurance Subsidiaries Improve

Commonwealth Bank’s Risk Profile

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Operating Environment

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Outlook - Economic

• Domestic GDP growth of 2.75% for 2001/2002

• Low interest rate environment set to continue

• Moderate credit growth of 7-9%

• Low levels of confidence may restrain household

spending and business investment

• Unemployment expected to increase

• AUD expected to remain around current levels

• Weaker trade position as demand for exports reduces

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Outlook - Operational

• Banking margins relatively stable

• Credit losses reflective of economic conditions with

large one-off charge for Pasminco

• Focus on costs and achieving remaining integration

synergies

• Life business investment earnings reflective of equity

market performance

• Funds management inflows recovering, but rate of

growth lower than last year

• Double digit EPS growth in the current year

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Long Term Strategic Focus

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Medium

Value

Business Mix / Cost Ratios

Low

Value

High

Value

Retail: 59% Commercial: 52%58%

Domestic: Offshore:

57% 123%67%

Normal: 55% Current: +5% 60%

Banking

Funds

Management

Life

Insurance

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32

Implementation

Areas of focus

• Wealth

Management

• Services

aligned to

customers

needs

• Productivity

Business Process

Re-engineering

Technology

Customisation

Distribution

Third Party

International

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Strategic Programmes

Business Process

Re-engineering

Technology

Customisation

Distribution

Third Party

Service Redesign

Service Redesign

Distribution Management

Premium Banking/

Financial Services

Reduce Cost to Serve

Third Party Development

Process Redesign

End-to-End Processing

On-line Data Architecture

Intranet Infrastructure

Benchmarking

Organisational Design

Continuous Improvement

Customised Sales & Service

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Strategic Plan to June 2006

Business Driver Profile 5 Year Plan

Growth in Market Share

Funds under managementHome LoansCredit CardsLife InsuranceCredit ProductsBusiness FinancingRetail Deposits

At or above market

Margins Comparable for business mix Continuing decline

Sources of IncomeComparable FinancialInstitutions

Rebalance towardnon-interest income

Costs Reduction in cost/income –Best practice

3%-6% p.a.productivity change

Capital ManagementOptimise regulatory capitaland maintain rating.

Rating AA

Total Shareholder ReturnTop quartile Deliver top quartile

TSR.

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2001 Investor Roadshow Presentation12 November 2001

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