presentation of full year results

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


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


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.


Banking performance drives a 9% underlying growth

2200

2300

2400

2500

2600

2700

2800

2900

J un-02 Banking LifeInsurance

Funds UnderlyingDec 02

Firs t time InvestEarn

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)


2,687


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


Another record dividend

20 2436 38

45 46 4958 61

68 69

22

36

4652

57 5866

72

82 85

75

0

20

40

60

80

100

120

140

160

1993 1995 1997 1999 2001 2003

Cents

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


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


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


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 Prof itDec 2001

InterestIncome

Other BankIncome

Expenses BDD Taxation UnderlyingDec 02

One offexpense

Cash ProfitDec 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



Cash ProfitJun-03


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

LendingFees34

TradingIncome

13

Other*(83)

$m

*Sale of strategic asset in 2002


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


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

lli on

161175

Lending Assets** Housing Personal Business & Corporate

Bank Acceptances


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 LoansBusiness Lending

New Zealand LendingNew 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%


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%


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

LeasingEnergy Telcos Technology

Aviation

A High Quality Portfolio

Well Diversified Portfolio by Industry

Committed Exposure ($m) 30 June 2003

S&P

Rat

ing

or E

quiv

alen

t

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 ^


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


* Includes Colonial

$mill

ions

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


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


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


Underlying expenses increased by $46m

% $bn

Und

erly

ing

Exp

ense

s/A

vera

ge F

UM

(%)

Average FU

M ($bn)

85 bps

73 bps

81 bps

0

0.2

0.4

0.6

0.8

1

Jun-01 Jun-02 Jun-0360

70

80

90

100

110

Average FUM Underlying Expenses/Average FUM


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


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*


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%


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

CFSThird Party

Segment Results: Life Insurance


Life Insurance

85% growth in net profit after tax Improved shareholder investment returns Lower operating costs #1 market share in Australia and New Zealand


Steady operating margins and improving investment returns

0

20

40

60

80

100

120


Asia NZ Australia UnderlyingProfit Jun-03

S'holderInvest

Returns

Cash ProfitJun-03

41

(30)41

6

58

64 12241% increase from underlying business

$m


Operating expense to average inforce premiums is improving

% $m

Ope

ratin

g E

xpen

ses/

Ave

rage

Info

rce

Pre

miu

ms

(%) A

verage Inforce Prem

iums ($m

)

57.3

68.8

40

50

60

70

80

Jun-02 Jun-03500

600

700

800

900

Average Inforce PremiumsOperating Expense/Average Inforce Premiums


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


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


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


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


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


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


Wealth management valuations - movement analysis

5000

6000

7000

8000

9000

Directors’Valuation

Jun-02


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


Dec-02

Net appraisal value increase of$188m

Total

Profit 330

Capital (119)

Value (245)

Net (34)

Capital


Capital ratios remain strongCredit 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 2003Tier 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 %


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


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


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

Ce

nts

pe

r S

ha

re


Corporate BondsGlobal 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


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 79,745Arrears rate % 0.16% 0.15% 0.21% 0.21%


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


New Zealand International Australia

Offshore credit risk concentration

Other Commercial

Government Agriculture

Finance

International breakdown by Industry*

Australia

New Zealand

InternationalConstruction LeasingEnergyTelcosTechnologyAviation

*Excludes Mortgage and Personal


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


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

20002500

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


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


1%

2%11%

$1,042m

124

196

411

311

$m


Credit Exposure - Technology Sector

0100200300400500600700800900

1000

AAA to A-BBB+ to BBB-BB+ to BB-<B

78%

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)


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


Credit Exposure - Aviation Sector

0

500

1000

1500

2000

2500


10%

6%

Other (100% investment grade)

Australia (69% investment grade)Europe ( 19 % investment grade)

$1,975m

61

607

1,136

171

$m


Funds under management

46

31 27

4441

32

1621236 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


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


Opening Sales/New Lapses Other ClosingBalance Business Movements Balance30/06/02 30/06/03

$m $m $m $m $m

Personal 581 128 (78) (6) 625Group 229 59 (30) (3) 255Total 810 187 (108) (9) 880

Australia 527 128 (80) - 575New Zealand 187 43 (16) 7 221Asia 96 16 (12) (16) 84Total 810 187 (108) (9) 880

9% growth in annual premiums


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


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


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


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

presentation of full year results

Documents

disclaimerfull year

bankingfull year results

overviewfull year results

mfull year

segment results

cash profit

underlying profit growth

taxnet profit