Title: UBS Warburg 2003 Global Financial Services Conference
1UBS Warburg2003 Global Financial Services
Conference
- Michael Cameron
- Chief Financial Officer
- 28-30 April 2003
www.commbank.com.au
2Disclaimer
- The material that follows is a presentation of
general background information about the Banks
activities current at the date of the
presentation, 29 April 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.
3Speakers 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.
4Agenda
- Current Environment
- Focus
- Platforms for Growth
5Current Environment
6Australias Economy has been relatively
resilient given global conditions
Source Commonwealth Research
7Domestic housing demand has been strong
Wisest Place for New Savings? (Melbourne
Institute)
Sep-02
Sep-79
Sep-85
Sep-91
Sep-97
Source Commonwealth Research, Melbourne
Institute
8Business confidence has been subdued, but is
expected to gain momentum
Source Commonwealth Research
9While equity markets have showed some resilience,
returns and fund flows have declined
Total Net Retail Fund Flows (for quarter ended)
Equity Markets
Index (Base 100)
m
m
-74
Source Bloomberg
Source Plan for Life (ex Cash)
10Commonwealth Banks 1st Half result reflects
modest growth in an uncertain environment
- Net Profit After Tax (cash basis)
- Comprising Banking Funds Management
Life Insurance
Dec 2002 1,208m 1,079m135m(6m)
Dec 2001 1,192m
Change 1
975m182m35m
11(26)(117)
ie excluding appraisal value uplift/reduction
and goodwill amortisation. Unless otherwise
stated the numbers in this presentation refer to
the net profit after tax (cash basis) and all
comparisons are to the prior comparative period.
11The Banks credit quality and capital adequacy
strengthened during the half
Bad Debt Expense to RWA
Capital Adequacy Ratios
RWA
11
9.81
9.80
9.31
10
9
8
7
General Provision to RWA
6
6.75
6.78
7.06
5
4
RWA
Dec 2001
Jun 2002
Dec 2002
Tier 1 Capital
Tier 2 Capital
Target Range
CBA
ANZ
NAB
WBC
RWA risk weighted assets
12The Banks dividend payout ratio remains high
relative to peers
Dec 2002 69cps 72.7 95cps 12.39 52.6
Dec 2001 68cps 72.6 94cps 12.43 54.2
Change 1c - 1c (4bps) (3)
- Dividends per Share
- Dividend Payout Ratio
and EPS has improved
Earnings per Share Return on Equity Banking Cost
to Income Ratio (underlying basis)
For more detail, visit www.commbank.com.au
/shareholder
13Meeting the challenges in the current environment
and the longer term
- Immediate focus Productivity
- Implementation of strategic initiatives
- Longer-term focus key competitive strengths
- Scale
- Brand
- Risk Profile
- Products and Businesses
- Distribution
- Innovation
- People
14Focus
15Immediate focus is on improving efficiency
...to achieve
Four strategic initiatives...
- A better service experience for customers,
through greatly improved turnaround times - Elimination of duplication and inefficiencies
- Annualised benefits of 159m, following an
incremental net cost of 143m in FY2003
Remove back-office functions from branches
Streamline Business Banking processes
Rationalise investment products systems
Organisational design
16The Bank is a leading player in Australia with
the highest number of relationships...
Customer Share All Relationships
- 1st in Home Lending
- 1st in Credit Cards
- 1st in Retail Deposits
- 1st in Online Broking
- Largest customer base
- Most points of access
- Best known bank brand
Source Research International, December 2002
17 ...and achieve consistently high ratings from
retail customers
Average across all brand attributes for CBA vs
average of ANZ, NAB and Westpac
- In touch with its customers
- Is leading the way
- Is doing new and different things
- Has knowledgable and competent staff
- Has friendly and reliable staff
Source Research International Brand Monitor
18Australias Most Accessible Bank
Branches 1,000 Premium banking
centres 13 Business banking centres 70 ATMs 4,
000 EFTPOS terminals 126,000 Direct Banking
calls per annum 146m Registered NetBank
users 2m Personal lenders 700 Financial
planners 700 Mobile bankers 200 3rd party
advisers, brokers and agents 10,000 Postal and
private agencies 4,000 EzyBanking store
locations 700
Distribution channel numbers have been rounded
19Platforms for Growth Banking
20Several key trends are shaping the future of the
home loan market
Economic Environment
- Interest rates at historical lows - but
affordability has weakened - Slowing housing credit demand likely
- Historically low credit losses
- Property sector attractive compared to other
asset classes
- Mortgage market a high demand sector
- Low credit losses - increasing willingness by
some market participants to take on risk - Slowing housing credit demand - propensity for
increased poaching/ refinancing offers,
including increasing commissions to third parties
Competitive Environment
- Entrenched fast repayment psyche
- First home buying activity brought forward by
FHOG - weaker demand likely - Defined service demands
- Wealth creation mindset has fuelled investment
loan growth but expect to be tempered by
economic uncertainty
Customer Need
Distribution
- Mortgage brokers well established - but facing
first slowdown in demand - Continued market consolidation likely
- Linkages likely to intensify to financial
planners - increased competition
- Broker groups also investing in front end
CRM solutions - Centralised back end models utilising straight
through processing - Intensification in use of CRM type solutions -
owned and rented - Increased use of IVR/web for customer
servicing requests and marketing
Technology
CRM customer relationship management
FHOG First Home Owners Grant
IVR interactive voice recognition
21Share of wallet improving - cross-sell, retention
and service initiatives are in train
Share of Wallet by Financial Institution
Basis If a customer has a relationship (as a
main Financial Institution or otherwise) with a
Financial Institution, what proportion of their
holdings do they keep with that Financial
Institution?
Source Research International, December 2002
22Youth Customers Addressing the change and growth
in banking needs
Banking needs change and grow as customers age
and pass through different life stages
Complex needs
CompetitorActivity
Secured Credit needs
Investing needs
Lower involvement products
Unsecured Credit needs
Higher value products
Credit Card needs
Transacting needs
Savings needs
0 5 12 18
24 30
Age of Customer
23Premium Customers Offering 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
24Republic Providing a comprehensive view of
premium customers
Please note information on these data screens has
been scrambled for privacy purposes
25Republic Providing a comprehensive view of
premium customers
Please note information on these data screens has
been scrambled for privacy purposes
26Transforming Business and Corporate Banking
Transformation Agenda Structured In Three Phases
Status
Initiatives
- Segment clients and create differentiated
business models to improve client service
experience - Introduce streamlined credit processes
- Lift performance of bottom quartile centres
- Better align distribution footprint to client
needs - Realise segment specific share targets
- Build client service and sales skills
1. Define and revitalise Business/Corporate
Banking
1
Completed
2
2. Re-organise for success
Underway
3
4
3. Capture industry leadership
Parallel implementation with Phase 2
5
6
27No change to credit standards
Consumer Portfolio
Commercial Portfolio
27
Composition of Housing Portfolio
25
24
bn
73
75
76
Owner Occupied
Investment
Dec 01
Jun 02
Dec 02
Bad debt charge as annualised of unsecured
lending balances
Bad debt charge as annualised of secured
lending balances
Dec 01
Jun 02
Dec 02
28Platforms for Growth Funds Management
29The Bank maintains its leadership position in
Australian funds under management
Group Funds Under Management by Country of
Source December 2002
Australian Funds Under Management by Asset
ClassDecember 2002
Total Funds Under Management 95bn Consisting
of retail 52bnwholesale 38bnretail
CMT 5bn
Australian Funds Under Management 72bn Consistin
g of retail 39bnwholesale 28bnretail
CMT 5bn
CMT cash management trust Total funds
managed in Australia, excluding Colonial First
State Property
30Several key trends are shaping the future of the
Australian Funds Management industry
Projected Size of Various Product Segments
- Strong inherent growth in the funds management
market expected, particularly retail - Growth of mastertrusts
- Industry consolidation
- Institutionalisation of distribution
- Industry commoditisation
Source Rice Kachor projections March 2002,
include 5 post fee returns, except for DIY (7)
31FirstChoice has been further enhanced... and
other initiatives are underway
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
32Platforms for Growth Life Insurance
33The Bank ranks second in the Australian life
insurance market
Market Size and Growth Prospects By Product
Commonwealth Bank Premiums By Product
CBA total annual inforce premiums 548m
4.3bn
3.4bn
m
2002
2007 projected
By Channel
By Channel
m
2002
2007 projected
Source Tillinghast, December 2002
Refers to annual inforce premiums
34Focus is on distribution, service and risk pricing
- Increase internal distribution through
- ? Personal Insurance Consultants
- ? Business Investment Managers
- Repricing of premiums
- Upskilling of call centre staff
- Product rationalisation
- Systems migration
35Key Points
- Resilient Australian economy
- Strong first half growth in our banking business
- Strong franchise scale, brand, distribution,
innovation, - people
- Cross sell, retention and service initiatives in
train in retail and business bank - Maintenance of high credit standards
- Leadership in Funds Management to continue
- Insurance business well positioned
36UBS Warburg2003 Global Financial Services
Conference
- Michael Cameron
- Chief Financial Officer
- 28-30 April 2003
www.commbank.com.au
379 growth in lending assets
169
161
155
billion
Housing
Personal
Business
Corporate
Bank Acceptances
Lending Assets
Excludes securitised housing loan balances
5.9b (Dec 02), 7.0b (Jun 02), 5.7b (Dec 01).
38A number of one offs impacted funds under
management
Underlying reduction of 8bn
106
(2)
One off reduction of net 3bn
(5)
2
(4)
(1)
98
bn
(1)
95
39Shareholder Funds in Life Insurance Companies
investment reflect underlying nature of the
business
74
26
49
51
54
46
2.1 billion
0.5 billion
2.6 billion
Income
Growth
Risk includes traditional, investment account,
annuities, personal risk and group risk.
40Continuing sound asset quality
41The Bank remains well provisioned
millions
Includes Colonial
42Arrears in consumer book remain at low levels
- Loans Accruing past 90 days or more
-
30/06/01 31/12/01 30/06/02
31/12/02 -
m m m
m - Housing Loans
218 168 176 136
- Other Loans
90 79
73 75 - Total
308 247
249 211 - Housing loans arrears rate
- 30/06/01 31/12/01
30/06/02 31/12/02 - Housing Loans accruingbut past 90 days or more
m 218 168
176 136 - Housing loan balances m 73,511
79,745 85,839 93,545 - Arrears rate
0.30 0.21 0.21 0.15
43Commercial Portfolio large exposures are mostly
investment grade
Top 20 Exposures as a of Total Committed
Exposure
Top 20 Exposures to Corporates (Committed)
Dec 2000
Dec 2001
Dec 2002
Committed Exposure (m) 31 December 2002
44Credit Exposure - Energy Sector
m
10
3
643
7
1,981
80
509
278
3,411m
45Credit Exposure - Telcos Sector
m
11
4
410
13
738
72
186
175
1,509m
46Credit Exposure - Technology Sector
m
4
9
798
86
6
35
275
Australia (68 investment grade)
North America (100 investment grade)
1,114m
Other (99 investment grade)
47Credit Exposure - Agriculture Sector
m
310
254
1,540
26
5,569
74
Australia (10 investment grade)
7,673m
New Zealand (3 investment grade)