Michael Cameron

1
UBS Australian Financial Services Conference

• Michael Cameron
• Chief Financial Officer
• 11-12 June 2003

www.commbank.com.au
2
Disclaimer

• The material that follows is a presentation of
  general background information about the Banks
  activities current at the date of the
  presentation, 12 June 2003. 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.

3
Speakers Notes

• Speakers 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.

4
Agenda

• Long Term Growth Outlook
• Commonwealth Banks Position
• Divisional Focus

5
Long Term Growth Outlook
6
Strong credit growth over the last 20 years...
In Australia, average total credit growth over
the last 20 years has been 12p.a.
Per cent of nominal GDP
Sources Cyclical Prudence - Credit Cycles in
Australia, Kent DArcy Commonwealth Research
7
...but banking margins have been squeezed
Average Operating Margins 4 Major Banks (1997 -
2002)

• Importance of
• Scale
• Brand
• Large customer base
• Extensive proprietary and third party distribution

Margin calculated as Total Income / Total
Controllable Assets
Source Company Financial Statements
8
Investor returns - natural cycle or structural
shift?
Ratio of Market Value of Companies Over
Fundamental Value (1926 - 2002)

200
180
160
Expectation premium gt 0
140
120
100
80
60
40
20
0
1927
1937
1947
1952
1967
1972
1977
1982
1992
1997
1987
1942
1932
1957
1962
2002
Source Moody's Manual of Investments Value
Management Research Engine Top Performer Study
2002
9
Weak equity markets and declining fund flows
Total Net Retail Fund Flows (for quarter ended)
Equity Markets
Index (Base 100)
m
Source Bloomberg
Source Plan for Life (ex Cash)
10
Recent trends shaping the future of funds
management...
Projected Size of Various Product Segments

• Strong inherent growth
• expected, particularly retail
• Growth of mastertrusts
• Industry consolidation
• Institutionalisation of
• distribution
• Industry commoditisation

Billion
Source DEXXR projections February 2003, assumes
5 pa post-fee returns
11
...and the life insurance industry
Projected Size of Various Product Segments

• Strong industry growth
• to continue
• Repricing of products
• Product rationalisation
• customer migration
• Increasing regulation

Billion
Source DEXXR projections February 2003
12
Summary

• Long Term Growth Outlook
• Credit growth will slow
• Margins will decline
• Funds Management and Insurance to grow

13
Commonwealth Banks Position
14
Organising to meet current and longer term
challenges

• Immediate Environment Productivity
• Implementation of strategic initiatives
• Longer Term Environment Leverage key competitive
  strengths
• Scale
• Brand
• Risk Profile
• Products and Businesses
• Distribution
• Innovation
• People

15
Our starting position
Commonwealth Bank Market Shares
Rank
Merchant Acquiring Sovereign Deposits Transaction
Services Credit Cards Home Loans Global
Markets Asset Finance Managed Investments Life
Insurance Corporate and Business
Lending Institutional Banking Products New
Zealand Deposits New Zealand Lending Property
Managed Funds General Insurance Hong Kong
1
36
31
1
25
1
22
2
22
1
20
1
16
2
15
2
1
15
15
1
18
17
15
13
9
5
3
0
10
20
30
40
Source CBA portfolio analysis 2003
Sorted by market share rank
16
A re-aligned organisational structure
InternationalFinancialServices
Premium Financial Services
Investment Insurance Services
Institutional Business Services
Retail Banking Services
Personal, Business, Rural, Corporate and
Commercial customers, Agents, Brokers and
Financial Advisers
Personal banking customers, Small business
banking customers
Premium client including professionals and
business
Agents, Brokers, Financial Advisers
Institutional, Corporate, Commercial business
customers
Customer Group
Agents, Brokers, Financial advisers, Branches,
Internet, Call centres, ATM, EFTPOS, Strategic
alliances
Branches, Ezy-Banking, ATM, EFTPOS, Phone,
On-line, Mortgage brokers
Relationship managers, Premium investment
centres, phone, on-line
Agents, Branches, Brokers, Financial advisers,
Premium investment centres, DirectDealer-ships,
Institutional clients
Relationship managers, Business centres
Channels
Finance, Risk Management, Human Resources,
Strategy, Technology, Legal, Secretariat
Support
17
Deepening our customer relationships
From...
To...
Pure cross sell
Needs based bundling
Fragmented definition
Concise definition
Varied measures
Consistent measure
Inconsistent group-wide sales and service system
One Group approach
No published targets
Transparent targets
18
Summary

• Commonwealth Banks Position
• Productivity Improvement
• The Customer

19
Divisional Focus

• Retail Banking Services
• Premium Financial Services
• Institutional Business Services
• Investment Insurance Services
• International Financial Services

• v

20
Retail a leading profile
Our staff -
Our footprint - Leading market share in core
Retail products total footings of 169.6bn at
31 March 2003
18,000 people (including operations)
Our network -
Branch/Agencies Total Branches 1,016
Total Agencies 3,890
Electronic Total ATMs 3,116 EFTPOS
Terminals 122,767
Online Netbank customers 2.6m CBA Market
Share 27
Mobile Mobile Bankers 216
Direct Banking Total Calls (02/3 YTD) 110m
Advice/3rd Party Active Mortgage
252origination head agreements Financial
Planners 335 Financial Consultants 161
Ezy Banking - over 758 Woolworths stores
All data as at 30/04/03 unless specified
21
Retail product positioning
Transaction accounts - simplified and
rationalised Home loans - re-engineered by 2004
Credit cards - growing Deposits - 65 of Bank
funding
Sustainable cost to income ratios
Improved service at lower cost
Increased cross-sell and innovation
Low cost funding platform
22
Premium a differentiated business model
Advisory Services Direct Investment Indirect
Investment Debt Products Equity Products
Broking Platform
Client
Borrowing Services Lending Services Transactional
Banking
Banking Platform
Primary Relationship Manager
Secondary Relationship Manager specialised
advice
23
Premium building a long term business

• Over 170,000 client relationships migrated by end
  June 2003
• Physical capacity substantially completed
• We have recently acquired TD Waterhouse.

Key Performance Indicators
Apr 02
Dec 02
Jun 03
Relationships
40,000
gt75,000
gt170,000
Staff
830
1,130
1,546
Locations
24
25
27
CommSec Accounts
685,000
720,000
gt1.1M
Cost to Income Banking
48
Equities
75
24
Institutional Business redesign for business
customers
Market Share 2002 ()
Relationship Model
Focus of Change Initiatives
Client Turnover (m)
Client Total Footings (m)
Number of Clients
Segment
Dedicated Relationship Executive De
dicated team of Business Bankers
Institutional
gt5 0.85-5 0.85-5 0.15-0.85 lt0.15
800 2,200 9,200 4,300 59,000 118,000
gt150 10-150 1-10

• Deepen relationship
• More clients
• Deepen relationship
• More clients
• Deepen relationship
• More clients
• Deepen relationship
• Deepen relationship
• Efficiency gains
• Efficiency gains

Top Tier Corporate
11
Corporate
Corporate
19
Regional
19
SME
22
Business
Small
22
25
Institutional Business improve overall
satisfaction levels
Banking (Business Customers)
Satisfaction with Main Financial Institution
Relationship Main Bank clients
WBC
CBA
ANZ
NAB
6 10 26 32 25
5 9 28 33 25
7 9 32 32 21
5 8 24 34 29
Very Dissatisfied Fairly Dissatisfied Neither
Satisfied nor Dissatisfied Fairly Satisfied Very
Satisfied
Source Business Finance Monitor October 2002 to
March 2003 - businesses with turnover up to 40
million
26
Funds management building opportunities
FirstChoice
Other Strategic Initiatives
m

• Realise integration benefits, including further
  rationalisation of legacy systems
• Offer increased style diversification
• Leverage internal distribution opportunities
• Leverage scale to reduce costs
• Grow alternate asset classes
• Increase reputation as manager of international
  shares

27
Insurance distribution, service and risk pricing
Trend in Share of Inforce Premiums (Top 5
Players)
Strategic Focus

• Increase internal distribution
• through
• ? Personal Insurance Consultants
• ? Business Investment Managers
• Repricing of premiums
• Upskilling of call centre staff
• Product rationalisation
• Systems migration

Source Plan for Life
28
International our geographical presence
Life Insurance
Funds Management
Banking
New Zealand
UK
USA
Hong Kong
Singapore
Other Asia Pacific
includes Japan, Indonesia, Vietnam, China, Fiji
29
International ASB Bank a strong performer
Net Profit - Banking ASB Bank represented 10 of
the total banking net profit after tax (as at
December 2002)
Lending Assets - Banking ASB Bank represented 11
of the total banking lending assets (as at
December 2002)
30
Summary

• Divisional Focus
• Further improve the service experience
• Building on our leading funds management position
• Insurance business well positioned
• Continue to develop international businesses

31
Key Points

• A number of trends are shaping the outlook for
  financial services
• Banking Slowing growth in a lower margin
  environment
• Funds Management industry dynamics are changing
  
• Insurance positioning to drive growth and
  efficiency gains
• Focus on improved productivity and customer
  commitment
• Customer relationship initiatives being
  implemented in the retail bank
• Customer migration, service model and product
  development
• well progressed in the premium business
• New segmentation and service models implemented
  in the
• institutional and business bank
• Leadership in funds management to continue
• Insurance business well positioned
• A sound international strategy
• Strong growth position

32
UBS Australian Financial Services Conference

• Michael Cameron
• Chief Financial Officer
• 11-12 June 2003

www.commbank.com.au