presentation of full year results michael cameron chief financial officer 20 august 2003
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Presentation of Full Year Results
Michael Cameron
Chief Financial Officer
20 August 2003
www.commbank.com.au
Full Year Results 20 August 2003 2
The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 20 August 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.
Disclaimer
Full Year Results 20 August 2003 3
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.”
Overview
Full Year Results 20 August 2003 5
3% increase in cash profit is in line with expectations at the last AGM
Statutory Net Profit After Tax
Net Profit After Tax (cash basis)*
June 2003
$2,012m
$2,579m
June 2002
$2,655m
$2,501m
Change
(24%)
3%
* 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.
Full Year Results 20 August 2003 6
Banking performance drives a 9% underlying growth
2200
2300
2400
2500
2600
2700
2800
2900
J un-02 Banking Life
Insurance
Funds Underlying
Dec 02
First time Invest
Earn
J un-03Cash ProfitJun-03
2,468
Banking334
FundsManagement
(132)
LifeInsurance
17
InvestmentReturns
73 2,579
$m
UnderlyingProfit Jun-02
Underlying Growth of 9%
First TimeExpenses
(181)
UnderlyingProfit Jun-03
2,687
Full Year Results 20 August 2003 7
Key shareholder ratios improving
Earnings per Share
Dividend per Share
June 2003
$2,579m
203 cents
154 cents
75.9%
13.27%
June 2002
$2,501m
197 cents
150 cents
76.2%
13.12%
Change
3%
3%
3%
-
2%
Dividend Payout Ratio
Return on Equity
Net Profit After Tax
Full Year Results 20 August 2003 8
Another record dividend
20 24
36 3845 46 49
58 6168 69
22
36
4652
57 58
66
72
8285
75
0
20
40
60
80
100
120
140
160
1993 1995 1997 1999 2001 2003
Cen
ts
First Half Second Half
•Final dividend of 85 cps,up 4% on pcp
•Payout ratio of 75.9%remains highest amongmajor banks
42
60
8290
102 104115
130136
150 154
Full Year Results 20 August 2003 9
Strategic initiative targets achieved
Costs Benefits Net Cost Annual Benefit
$m $m $m $m
Target 227 84 143 159
Outcome 214 69 145 165
Revenue: $40m Costs: $125m
Full Year to 30 June 2003
Segment Results: Banking
Full Year Results 20 August 2003 11
Banking
A strong result driven by solid home loan growth andcontinuing sound asset quality
In summary
16% underlying profit growth
4% productivity improvement
9% growth in assets
Full Year Results 20 August 2003 12
Banking result reflects the strong home loan market
1,900
2,000
2,100
2,200
2,300
2,400
2,500
2,600
Cash Profit
Dec 2001
Interest
Income
Other Bank
Income
Expenses BDD Taxation Underlying
Dec 02
One off
expense
Cash Profit
Dec 02
$m
InterestIncome
316
Other BankIncome
145
Expenses(85)
BDD144
Taxation(186) 2,249
2,067
One offexpense
(152)
2,401
16% increase from underlying business
UnderlyingProfit Jun-02
UnderlyingProfit Jun-03
Cash ProfitJun-03
Full Year Results 20 August 2003 13
Banking income has grown strongly
6,500
7,000
7,500
8,000
7,262
7,723
Jun-02 Jun-03
NetInterestIncome
316
Commission &Other Fees
181
LendingFees
34
TradingIncome
13
Other*
(83)
$m
*Sale of strategic asset in 2002
Full Year Results 20 August 2003 14
Underlying Banking Cost to Income is improving...
52.0
54.1
57.7
48
50
52
54
56
58
60
Jun-01 Jun-02 Jun-03
%
6%
4%
...with total improvement over 2 years of 10% achieved
Full Year Results 20 August 2003 15
9% growth in lending assets
86 100
1312
5149
1213
0
50
100
150
200
Jun 2002 Jun 2003
** Excludes securitised housing loan balances $6.5b (Jun 03), $7.0b (Jun 02).
$ bi
llion
161175
Lending Assets** Housing Personal Business & Corporate
Bank Acceptances
Full Year Results 20 August 2003 16
Strong banking product market shares
Source: RBA, APRA, East and Partners, AELA, Reserve Bank of NZ
Banking Market Shares
Notes:(1) - Includes both Credit and Debit Turnover(2) - Retail Only(3) - Mid-Corporates (turnover $20m-100m)(4) - Excludes consumer and commercial finance(5) - April Data(6) - May Data(7) - February Data(8) - March Data(9) - Eliminated effect of changes in data series
Merchant Acquiring1
Deposits2
Credit Cards
Transaction Services3
Home Loans
Business Lending
New Zealand Lending
New Zealand Deposits
Asset Finance4
0% 10% 20% 30% 40%
33.9%5
24.8%6
22.7%7
19.5%8
14.3%9
15.1%
20.4%5
16.3%5
22.9%6
2003 2002June
34.5%
24.7%
21.8%7
19.9%8
15.2%
16.5%
19.6%
15.5%
22.8%
Full Year Results 20 August 2003 17
Home lending growth profile*
Owner occupied
Viridian/Access Advantage
Investment Home Loan
Source:Balance Growth
Proprietary
Third Party
Growth represented by:
($bn) 2003 2002
LoansFunded 36.9 34.2
Reductions 24.9 23.4
NetGrowth 12.0 10.8
Loan Balances
Product Balances
Standard Variable
Honeymoon
Fixed Rate
Discount Variable
* Data relates to the Bank’s Australian home lending business
65%35%
61%31%
8%
47%
20%
12%
21%
Full Year Results 20 August 2003 18
Further improvement in the portfolio
Dec 01 Dec 02Jun 02
63% investment
grade
*CBA Equivalent Ratings ^Predominantly secured lending
Jun 03
Other Commercial
Government
Agriculture
Finance
Construction
Leasing
Energy Telcos Technology
Aviation
A High Quality Portfolio
Well Diversified Portfolio by Industry
Committed Exposure ($m) 30 June 2003
S&
P R
ati
ng
or
Eq
uiv
ale
nt
Top 20 Exposures to Corporates (Committed)
(Top 20 exposures are 3.3% of total committedexposures of $229 billion)
0 200 400 600
BBB
BBB+
BBB
A+
BB
BBB+
BBB-
A+
AAA
AA-
A-
A+
A+
A-
A-
BBB-
BBB
A-
A-
A-
2 9 2 7 2 9 2 8
1 9
1 5 1 5 1 4 1 6
3 6 3 9 4 0 3 7
2 0 1 9 1 7
0 %
2 0 %
4 0 %
6 0 %
8 0 %
1 0 0 %
A A A / A A * A B B B O t h e r ^
Full Year Results 20 August 2003 19
Continuing sound asset quality
30 June 2003 30 June 2002
Charge for Bad & Doubtful Debts $305m $449m
Charge for Bad & Doubtful Debts to RWA* 0.21% 0.32%
Gross Impaired Assets (net of interestreserved)
$639m $884m
Specific Provisions $205m $270m
General Provision $1,325m $1,356m
General Provision to RWA 0.90% 0.96%
*Risk Weighted Assets
Full Year Results 20 August 2003 20
* Includes Colonial
$mill
ion
s
The Bank remains well provisioned
0
300
600
900
1,200
1,500
1,800
2,100
Jun95
Jun96
Jun97
Jun98
Jun99
Jun00*
Jun01*
Jun02
Jun03
0
50
100
150
200
250
300
%
General Provision
Specific Provision
Total Provisions/Gross Impaired Assets (axis on right)
Segment Results: Funds Management
Full Year Results 20 August 2003 22
Funds Management
Lower result consistent with tough market conditions
Income to FUM stable at 116 basis points
Cost growth of 6%
FirstChoice growing rapidly to $3.2bn
Full Year Results 20 August 2003 23
Lower Funds Management profit
100
150
200
250
300
350
400
UnderlyingProfit
NetOperating
Income
OperatingExpense
OEI Tax UnderlyingProfit
First TimeExpenses
S'holderInves t
Returns
Cash ProfitJun-03
360
208
(109)
(6)
$m
(46)(29)
37% decrease from underlying business
2289
29
Jun-02 Jun-03
Full Year Results 20 August 2003 24
Underlying expenses increased by $46m
% $bn
Und
erly
ing
Exp
ense
s/A
vera
ge
FU
M (
%)
Averag
e FU
M ($bn
)
85 bps
73 bps
81 bps
0
0.2
0.4
0.6
0.8
1
Jun-01 Jun-02 Jun-03
60
70
80
90
100
110
Average FUM Underlying Expenses/Average FUM
Full Year Results 20 August 2003 25
Movement in funds under management
85
87
89
91
93
95
97
99
101
103
105
Jun-02FUM
Net Flows Investmentreturns
Other Underlying Gandel W interthur CFS UKPrivate
Business
Jun-03FUM
$bn
103
94
97(1)(1)
(4)
2 (4)
(1)
Underlying movement of$6bn
One off netreduction of $3bn
Full Year Results 20 August 2003 26
Net flows by product category
$bn
*Cash Management Trusts^ Non-UK includes New Zealand and Asia
Net Funds Flow
-7
-5
-3
-1
1
3
5
7
Retail - OnSale
Retail -Legacy
FirstChoice Wholesale -Australia &Non-UK
Wholesale -UK
CMTs*
Full Year Results 20 August 2003 27
Strong market share position
Funds Management Market Shares
Source: Plan for Life, Fund Source Research
(1) Retail Only(2) Internally Calculated(3) March Data
Managed Investments1
0% 10% 20%
Property Managed Funds2
New Zealand Managed Investments
6.3%
14.0%3
14.8%
2003 2002June
5.2%
13.0%
15.5%
Full Year Results 20 August 2003 28
FirstChoice has made a strong contribution
Source Destination
Funds under Administration of $3.2bn at 30 June 2003
FY03 GrowthRepresented By:
Inflows $3.2bn
Outflows $0.6bn
Net $2.6bn
57%39%
4%
55%45%
IFAsBranch NetworkOther
CFS
Third Party
Segment Results: Life Insurance
Full Year Results 20 August 2003 30
Life Insurance
85% growth in net profit after tax
Improved shareholder investment returns
Lower operating costs
#1 market share in Australia and New Zealand
Full Year Results 20 August 2003 31
Steady operating margins and improving investment returns
0
20
40
60
80
100
120
UnderlyingProfit Jun-02
Asia NZ Australia UnderlyingProfit Jun-03
S'holderInvest
Returns
Cash ProfitJun-03
41
(30)41
6
58
64 12241% increase from underlying business
$m
Full Year Results 20 August 2003 32
Operating expense to average inforce premiums is improving
% $m
Ope
ratin
g E
xpen
ses/
Ave
rag
e In
forc
e P
rem
ium
s (%
) Averag
e Inforce Prem
iums ($
m)
57.3
68.8
40
50
60
70
80
Jun-02 Jun-03
500
600
700
800
900
Average Inforce PremiumsOperating Expense/Average Inforce Premiums
Full Year Results 20 August 2003 33
9% growth in annual premiums
700
800
900
1000
Opening BalanceJun-02
Sales/NewBusiness
Lapses OtherMovements
Closing BalanceJun-03
$m
810
187
(108) (9)
880
Full Year Results 20 August 2003 34
Market shares growing
Life Insurance Market Shares
Source: ISI Statistics, Plan for Life, HK Insurance Association
(1) In-force Business(2) March Data (3) Single premium new business (Jan - Mar 2003) (4) Single premium new business (Jan - Jul 2002)
New Zealand1
0% 10% 20% 30% 40%
Australia
Hong Kong
2003 2002June
26.2%
14.9%
2.1%4
28.3%2
15.0%2
2.5%3
Full Year Results 20 August 2003 35
Australian Life Insurance business
Distribution by Channel Product Sales
Network & Direct*Third Party
FY03 GrowthRepresented by:
Sales/NewBusiness $128m
Lapses $80m
Net $48m
* Network - Internal Bank Channels
Direct - Telemarketing & Phone
Excludes Group Risk and Masterfunds
59%41% 48% 41%
11%
Lump SumDisability IncomeGroup Risk & MasterFund
Investment Earnings
Full Year Results 20 August 2003 37
Investment earnings
30 Jun 03 30 Jun 02 Change
$m $m $m
Funds Management 9 8 1
Life Insurance
- Australia 35 18 17
- New Zealand 15 3 12
- Asia 14 4 10
Net Profit After Tax 73 33 40
Full Year Results 20 August 2003 38
Investment Mandate Structure
The Bank has $3bn of shareholders funds across its insurance and funds management business, which is invested in:
Australia New Zealand Asia Total
Local Equities 27% 1% 17% 22%International Equities 7% 12% 0% 6%Property 15% 3% 0% 10%Other 0% 10% 29% 7%Sub Total 49% 26% 46% 45%Fixed Interest 11% 19% 54% 20%Cash 40% 55% 0% 35%Sub Total 51% 74% 54% 55%Total 100% 100% 100% 100%
Wealth Management Valuations
Full Year Results 20 August 2003 40
Wealth management valuations
6,000
6,500
7,000
7,500
8,000
8,500
9,000
Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Jun-03
8,546
$m Increase in appraisal value since acquisition of 27%
(222)(48)625
818
449
6,736
188
Full Year Results 20 August 2003 41
Wealth management valuations - movement analysis
5000
6000
7000
8000
9000
Directors’Valuation
Jun-02
Directors’Valuation
Jun-03
Reduction in Value
(426)
Profit129
OtherCapital
Movements75
8,580 8,546
$mNet appraisal value reduction of
$222m
Increasein Value
181
OtherCapital
Movements(194)
Profit201
8,358
Directors’ValuationDec-02
Net appraisal value increase of$188m
Total
Profit 330
Capital (119)
Value (245)
Net (34)
Capital
Full Year Results 20 August 2003 43
Capital ratios remain strong
Credit Ratings unchanged or improved
since 1996...
Short Term Long Term
Fitch
Moody’s
S&P
F1+ AA
(Stable)
P1 Aa3
(Stable)
A1+ AA-
(Stable)4%
5%
6%
7%
8%
9%
10%
11%
Dec 2001 Jun 2002 Dec 2002 Jun 2003
Tier 1 Capital Tier 2 Capital
9 .3 1 % 9 .8 0 % 9 .8 1 %
6 .7 5 % 6 .7 8 % 7 .0 6 %
T a rg e t R a n g e
6 .9 6 %
9 .7 3 %
Full Year Results 20 August 2003 44
Generation and use of capital
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
Tier 1 Cashearnings
Dividend Growth inRW A
ASB Prefs Currency &Other
Movements
Tier 1
6.78
1.76 (1.34)
(0.27)0.13 (0.10)
6.96
15bps of Capital Generated
Tier 1Issue
(Oct-02)
Currency &Other
Movements
Jun 02 Jun 03
Summary
Full Year Results 20 August 2003 46
Summary
Cash profit up 3% with underlying Group profit growth of 9%
2003 strategic initiatives delivered
Underlying bank cost/income improvement of 4%
Further improvement in credit quality
Continued strengthening of our Tier 1 capital position
Presentation of Full Year Results
Michael Cameron
Chief Financial Officer
20 August 2003
www.commbank.com.au
Supplementary Slides
Full Year Results 20 August 2003 49
Underlying EPS growth of 16 cents per share
170
180
190
200
210
220
230
De c -01 EP S c a s hba s is
B a nking F unds M a na ge m e nt Life Ins ura nc e De c -02 Unde rlyingEP S
F irs t-tim e c o s ts Inve s tm e nt re turns De c -02 EP S c a s hba s is
U n d e r ly in g G ro w th u p 1 6 c e n ts 8 c e n t n e t d e c re a s e f r o m f ir s t - t im ec o s ts a n d in v e s tm e n t re tu rn s
1 9 5
B a n k in g2 6
L ifeIn s u ra n c e
1
2 1 1
2 0 3
F ir s t - t im ec o s ts(1 4 )
In v e s tm e n tre tu rn s
6F u n d sM a n a g e m e n t
(1 1 )
J u n -0 2U n d e r ly in g
E P S
J u n -0 3U n d e r ly in g
E P S
J u n -0 3 E P Sc a s h b a s is
Cen
ts p
er S
hare
Full Year Results 20 August 2003 50
Corporate Bonds
Global Loans
FX Overall
Interest Rate Derivatives
Commercial Bills (Investment)
Term Loans (Debt)
Interest Rate Swaps
FX Options
Strong market share position
Source: Insto Public Domestic Non Govt. Bond League Table, Bloomberg Global Loans League Table, Greenwich and Associates, East and Partners
Global Markets Shares
Notes:(1) - 6 mths ended 30 June 2003(2) - December 2002 Data(3) - January 2003 Data(4) - July 2002 Data
Corporate
0% 10% 20% 30%
9.4%1
10.2%
10.9%2
13.2%3
25.6%3
16.0%3
13.4%2
2003 2002June
12.9%2
12.2%
8.4%
11.6%4
24.9%4
14.9%4
10.9%
Institutional
12.1%3 11.5%4
Full Year Results 20 August 2003 51
Arrears in consumer book remain at low levels
Loans Accruing past 90 days or more30/06/03 31/12/02 30/06/02 31/12/01
$m $m $m $mHousing Loans 157 136 176 168Other Loans 91 75 73 79Total 248 211 249 247
Housing loans arrears rate30/06/03 31/12/02 30/06/02 31/12/01
Housing Loans accruing 90 days or more $m 157 136 176 168Housing Loan Balances $m 100,203 93,545 85,839 79,745
Arrears rate % 0.16% 0.15% 0.21% 0.21%
Full Year Results 20 August 2003 52
CBA ANZ NAB WBC
Credit ratios are in line with peers
Bad Debt Expense to RWA
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
% RWA
General Provision to RWA
0.70%
0.80%
0.90%
1.00%
1.10%
1.20%
% RWA
Full Year Results 20 August 2003 53
New Zealand International Australia
Offshore credit risk concentration
Other Commercial
Government
Agriculture
Finance
International breakdown by Industry*
Australia
New Zealand
InternationalConstruction
Leasing
EnergyTelcosTechnologyAviation
*Excludes Mortgage and Personal
Full Year Results 20 August 2003 54
Bad debt charge as annualised % of secured lending balances
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
Dec-01 Jun-02 Dec-02 Jun-03
Full Year Results 20 August 2003 55
Credit Exposure - Energy Sector
Australia (771 % investment grade)Asia ( 87 % investment grade)North America (61% investment grade)Other (100% investment grade)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
AAA to A-
BBB+ to BBB-
BB+ to BB-
<B 76%
8%
2%
14%
$3,885m
297
638
1,807
1,143
$m
Full Year Results 20 August 2003 56
Credit Exposure - Telcos Sector
Australia (74 % investment grade)Asia (100% investment grade)Europe (18% investment grade)Other (100% investment grade)
0
200
400
600
800
1000
1200
AAA to A-
BBB+ to BBB-
BB+ to BB-
<B 86%
1%
2%11%
$1,042m
124
196
411
311
$m
Full Year Results 20 August 2003 57
Credit Exposure - Technology Sector
0
100
200
300
400
500
600
700
800
900
1000
AAA to A-
BBB+ to BBB-
BB+ to BB-
<B78%
8%5%
$895m
273
73
387
162
$m
9%
Australia (56 % investment grade)North America (100% investment grade)Europe (72% investment grade)Other ( 57 % investment grade)
Full Year Results 20 August 2003 58
Credit Exposure - Agriculture Sector
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
AAA to A-
BBB+ to BBB-
BB+ to BB-
<B
72%
28%
$8,042m
1,500
6,049
$m
Australia (8.5% investment grade)New Zealand (0.3% investment grade)
219
274
Full Year Results 20 August 2003 59
Credit Exposure - Aviation Sector
0
500
1000
1500
2000
2500
AAA to A-
BBB+ to BBB-
BB+ to BB-
<B 84%
10%
6%
Other (100% investment grade)
Australia (69% investment grade)Europe ( 19 % investment grade)
$1,975m
61
607
1,136
171
$m
Full Year Results 20 August 2003 60
Funds under management
46
31 27
4441
32
162123
6 6 5
0
20
40
60
80
100
Jun 2001 Jun 2002 Jun 2003
$bill
ions
Australian Retail Funds Australian Wholesale Funds
International Funds Cash Management Trusts
Average FUM
$94bn
Full Year Results 20 August 2003 61
Opening Inflows Outflows Investment Acquisitions Other Closing
Balance Income & Movements Balance
30/06/02 Disposals & Transfers 30/06/03
$m $m $m $m $m $m $m
Retail 51,089 11,052 (12,630) (562) 2,158 (638) 50,469
FirstChoice 561 3,206 (578) 22 - - 3,211
Wholesale 45,554 12,580 (16,506) (501) (5,000) (563) 35,564
CMTs* 5,634 1,121 (1,970) 178 - - 4,963
Total FUM 102,838 27,959 (31,684) (863) (2,842) (1,201) 94,207
*Cash Management Trusts
Movement of funds by product category
Full Year Results 20 August 2003 62
Opening Sales/New Lapses Other Closing
Balance Business Movements Balance
30/06/02 30/06/03
$m $m $m $m $m
Personal 581 128 (78) (6) 625
Group 229 59 (30) (3) 255
Total 810 187 (108) (9) 880
Australia 527 128 (80) - 575
New Zealand 187 43 (16) 7 221
Asia 96 16 (12) (16) 84
Total 810 187 (108) (9) 880
9% growth in annual premiums
Full Year Results 20 August 2003 63
Capital to protect policyholders’ interests
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Australia (Life Insurance)
NZ Asia Other Total
Capital Required Actual Capital
$m30 June 2003
Total Excess OverCapital Adequacy of$766m represented by:
Australia $438m(Life Insurance)
New Zealand $61m
Asia $87m
Other $180m
Full Year Results 20 August 2003 64
Generation and use of capital (2nd half 2003)
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
Tier 1 Cash earnings Dividend Growth inRWA
Currency &Other
Movements
Tier 1
7.06
0.95 (0.74)
(0.14)(0.17)
6.96
7bps of Capital GeneratedCurrency & Other
Movements
Dec-02 Jun-03
Full Year Results 20 August 2003 65
Generation and use of capital (1st half 2003)
6.0%
6.5%
7.0%
7.5%
8.0%
Tier 1 Cashearning s
D ividend Growth inRW A
A S B Prefs Currency &Other
Movements
Tier 1
6.78
0.82 (0.61)
(0.13) 0.130.07 7.06
8bps of Capital Generated
Tier 1Issue
(Oct ‘02)
Currency &Other
Movements
Jun-02 Dec-02
Full Year Results 20 August 2003 66
Funds Management
12%
Retail Banking
45%
Institutional & Business
29%
Life Insurance
7%
Asia Pacific7%
$M %
Retail Banking 4,231 45%
Institutional & Business 2,793 29%
Asia Pacific 699 7%
Total Banking Income 7,723 81%
Funds Management 1,104 12%
Life Insurance 630 7%
Total Income 9,457 100%
Total income segmentation
at 30 June 2003
(1)
(1) (2)
(1) Excludes policyholder tax
(2) Excludes internal funds management income