Michael Cameron Group Executive, Retail Banking Services. Mark Jones Regional General Manager, South & Western Australia

Transcription

1 Michael Cameron Group Executive, Retail Banking Services Mark Jones Regional General Manager, South & Western Australia Fred Pollock Executive General Manager, Group Sales & Service Geoff Austin Executive General Manager, Lending Products Michael Cant Executive General Manager, Trans. & Deposit Products Vittoria Shortt General Manager, Strategy Development David Grafton Executive General Manager, Credit Risk Commonwealth Bank of Australia ACN Retail Banking Services Update 28 September 2006

2 Disclaimer The material that follows is a presentation of general background information about the Bank s activities current at the date of the presentation, 28 September 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. 2

3 Today Strategy Michael Cameron Sales and Service Mark Jones and Fred Pollock Products Geoff Austin and Michael Cant Panel Questions Including Vittoria Shortt and David Grafton 3

4 Notes 4

5 45% of Australians have a relationship with us 5

6 Notes 6

7 Huge scale of interactions Branches ATMs EFTPOS NetBank Australia Post Call Centre Brokers 1,007 sites 3,173 terminals 130,000 machines 1.2m active customers 3,730 agencies 7.5m passwords 6,200 brokers 7

8 Notes 8

9 Today Results Strategy and Priorities Structure Progress Collaboration 9

10 Notes 10

11 Well positioned to grow 2,700 2,600 2,500 Income vs. same period last year ($m)* +11.5% 1,200 1,100 Costs vs. same period last year ($m) +7.5% +6.1% +0.6% 2,400 2,300 2, ,297 2,562 2,396 2,576 1, ,067 1,132 1,101 1,108 2,000 Dec 04 Dec 05 Jun 05 Jun Dec 04 Dec 05 Jun 05 Jun 06 1, Profit After Tax vs. same period last year ($m) +15.8% +10.2% 47.00% 46.00% 45.00% Cost-to-Income half yearly 46.5% 46.0% % 43.00% 44.2% 43.0% 700 Dec 04 Dec 05 Jun 05 Jun % Dec 04 Jun 05 Dec 05 Jun 06 * All figures reflect Retail Product costs and income only 11

12 Notes 12

13 To be Australia s finest financial services organisation through excelling in customer service Retail Bank Strategy Invest in the capabilities of our frontline people to improve customer experience Offer competitive and value-for-money products Leverage our natural advantage of convenience Build a culture of service and operational excellence 13

14 Notes 14

15 Delivering Service SALES DIRECT CHANNELS Vacant GROUP SALES & SERVICE Fred Pollock BRANCH NETWORK David Marshall STRATEGIC DEVELOPMENT Vittoria Shortt RETAIL OPERATIONS Peter Abbott CREDIT RISK MANAGEMENT David Grafton LENDING PRODUCTS Geoff Austin TRANSACTION & DEPOSIT PRODUCTS Michael Cant CHIEF FINANCIAL OFFICER Gary Thursby PRODUCTS GROUP FUNCTIONS COMMUNICATIONS Stephanie Barry MARKETING Mark Buckman PEOPLE Robyn Worthington TECHNOLOGY Dave Curran SUPPORT 15

16 Notes 16

17 Clear Priorities People engagement Customer satisfaction Product competitiveness Service efficiency 17

18 Notes 18

19 Frontline people now more passionate (max) Gallup Workplace Survey Lost Time Injury Frequency Rate Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 50% 40% 30% 20% 10% Internal Customer Service [strongly agree] 44% 47% 36% 37% 31% 23% Absenteeism 0% Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 19

20 Notes 20

21 Happier Customers 52% reduction in number of complaints since July Customer Complaints Jul 05 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 06 Jul 21

22 Notes 22

23 Happier Customers Trend matches major banks since July % increase in July 2006, second highest improvement among majors 100% 90% 80% 70% 60% Satisfaction Surveys AC Nielsen* Roy Morgan^ 50% Sep 05 Oct Nov Dec Jan 06 Feb Mar Apr May Jun Jul * Nielsen Media Research Percentage of customers very or quite satisfied with their MFI ^ Roy Morgan Research Percentage of customers very or fairly satisfied with their MFI 23

24 Notes 24

25 We re listening Products NetBank saver Yellow card Removal of NetBank fees New streamline accounts Travel Plus NetBank saver fast start (youth) Business online saver Know Your Money 25

26 Notes 26

27 We re listening Service 550 additional frontline people 65 branches open on Saturdays Extended operating hours New branches Shorter queue times New Customer Service Measurement program Auto coin counting machines 27

28 Notes 28

29 Delinquency % (30+ days) Probability of default index Credit Growth % Positive momentum Credit growth Total credit growth steady at 1.2% (monthly) since 01/2006 Housing credit growth for June at a two year high of 1.4% Credit quality Arrears stable or decreasing Quality improving for new personal loans CBA Credit Growth Dec Total Credit Housing Credit CBA Arrears & Probability of Default Dec 05 Jan 06 Feb Mar Jan Feb Mar 06 Personal Loans Credit Cards Apr Apr May May Jun Jun Home Loans Jul Jul Aug PL probability of default (RHS) 29

30 Other Key Information Notes 30

31 Collaboration we re all talking Sales & Service Reinvigoration of Cohen Brown Insurance specialists in branches Business Bankers in branches People Standardised approach to leadership, talent management, safety and learning Trust and Team Spirit Operational Efficiency CommWay bank-wide approach Co-ordinated purchasing Systems stability 31

32 Notes 32

33 Key Messages 1. Business indicators support positive momentum going forward 2. Positive people measures will result in a continuing uplift in engagement 3. Greater understanding of customers will increase our ability to satisfy their needs 4. Service metrics will translate into improved customer satisfaction 5. Aligning processes around the customer experience will drive operational excellence 33

34 Notes 34

35 Mark Jones Regional General Manager South & Western Australia 35

36 Notes 36

37 Sales and Service Customer Service Integration of Channels Branch Actions Empowerment 37

38 Notes 38

39 Customer Service - taking it seriously We re asking the customer Independently measuring queue times and customer experience Results linked to performance Being there when the customer needs us Staff recruitment and induction programs re-built to focus on core sales and service competencies 39

40 Notes 40

41 Integration of channels - convenience Convenient access supports channel choice CommSee single view of customers One Team Referral Increased focus on in-branch general insurance sales, with 25% increase from August 2005 to August 2006 Alignment of KPIs to encourage channel integration 41

42 Notes 42

43 Branch actions look and feel 388 branches refurbished over the last three years Three branches in new markets opened in the last nine months Rolling out open-plan branch designs in suitable locations Rolling out auto coin counting technology New corporate wardrobe introduced February

44 Notes 44

45 Empowerment trial local ownership Trial commenced on Sunshine Coast in March 2006 with positive trends in sales and service outcomes Connecting with local communities Business ownership mindset and culture emerging Greater flexibility around Local area marketing Staffing Campaigns Opening hours Uncapped bonus scheme for branch managers aligned to profit and customer experience targets Business Bankers in branches 45

46 Notes 46

47 Key messages 1. Customer Service 2. Integration of channels More relevant and regular measurement linked to rewards Giving the customer the choice supported by technology 3. Branch actions Improving our look and feel 4. Empowerment Local ownership 47

48 Notes 48

49 Fred Pollock Executive General Manager Group Sales and Service 49

50 Notes 50

51 Sales and Service Objective How will we go about it? What can we learn from Group? What are our critical success factors? 51

52 Notes 52

53 Our objective To support the Bank s vision by creating a world standard sales and service culture 53

54 Notes 54

55 How will we support execution? Significant investment State-based support model Partnership with Cohen Brown Consistent and group-wide focus 55

56 Notes 56

57 Service Advantage 491 What drove the change at ASB? extended to support units for internal customers putting the right specialist in front of the customer at the right time.harnessing the power of an integrated network One Team Creation of a sales & service engine Breakt hrough Se rvi ce One Team Breakt hrough Se rvi ce Cohen Brown SUCES Cohen Brown SUCES Concur r ent Ti me 57

58 Notes 58

59 Customer Satisfaction % & Assets $bn ASB Superior Customer Satisfaction and Significant Asset Growth ANZ takeover of NBNZ Dec 97 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 ANZ Assets NBNZ Assets ASB Assets BNZ Assets Westpac Assets ASB Satisfaction* Other Major Banks Satisfaction* * Source: Auckland Business School 59

60 Notes 60

61 Average inforce + new market share Sovereign Insurance The positive impact of service culture 35% Sovereign 31% 27% 23% 19% Breakthrough Service Performance launched In Support Areas Next two largest 15% Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 61

62 Notes 62

63 What are the critical success factors? Passionate leadership from the top down. Line driven training and mastery of the process. Rewards and recognition linked directly to sales and service outcomes. Smart use of technology. Clear expectations and effective follow up. 63

64 Notes 64

65 Geoff Austin Executive General Manager Lending Products 65

66 Notes 66

67 Lending Products Home Loan book in good shape. Significant improvement in personal loans new business quality. Some credit card market share appears value destroying. 67

68 Notes 68

69 Revenue and Profit Focus Home Lending Revenue and profit growth more important than balance growth +11.4% +16.4% Avoid chasing unprofitable balance & share growth e.g. 0% card balance transfers Effective margin management +3.5% Consumer Finance* +11.2% * Personal Loans and Credit Cards. DEET (student loan) balances added back for comparative purposes 69

70 Notes 70

71 Home Loan Book: well positioned to withstand stress LVR Profile Strong LVR profile Majority of loans <60% LVR Mortgage insurance in place for most loans >80% LVR Mortgage Portfolio Stress Testing Testing on conditions similar to 80 s/90 s UK recession shows losses < 3 months Home Loan revenue Additional insured losses of $175m covered by LMI in most extreme scenario shown 80% 60% 40% 20% LVR on original security value* LVR at current market value* Property Value Potential Loss $m Expected Default Rate (PD) PD x2 x4 x6 No decrease % decrease % decrease % decrease * Australian Owner Occupied and Investment Housing only, excludes Lines of Credit. Number of loans as at 30 June 06 and market value as at 31 Mar 06. Market value marked against the APM or Residex database 71

72 Other Key Information Notes Underwriting Low Doc criteria All Low-Doc loans must have manual decisioning (through specialist credit cell) Credit cell does reasonableness test on declared income vs. stated occupation and on asset holdings relative to income declared All Low Docs require external valuations Applicant must have been self employed for at least two years Must be able to service loan according to Income Serviceability test Refinancing customers must provide satisfactory evidence of repayment over last 6 months (aimed at avoiding problem debts being recycled through industry) Credit Bureau checks are conducted on all Low Doc facilities regardless of LVR No Credit Underwriting Standard exceptions apply to Low Doc loans 72

73 Low Doc Loans Prudently Managed Low Doc pricing changes have seen new business mix settle at 3% - 4% of new approvals Low Doc specific credit criteria in place to ensure risks are minimised Extra LMI protection ensures risk profile remains low 4.0% 3.0% 2.0% 1.0% CBA Low Doc Loans by month as a percentage of total mortgage approvals 0.7% Jul 05 Jan 06 LVR for Low-Doc Loans 4.0% 3.8% Jun 06 0% 60% 80% 100% Pooled LMI coverage arranged by CBA LMI at customer cost Low Doc not available 73

74 Notes 74

75 Home Loan Initiatives: focus on risk Valuation fraud risk is an increasing industry issue. Systems and decision rules introduced to manage a significant expense. Decision rules upgraded for new fraud environment. Recent review of LMI arrangements confirmed continuation of external insurer rather than partial / full captive. New APRA capital requirements inhibit acceptable riskadjusted return on capital-intensive business. LMI investment underway to deliver B2B solution. Delivers efficiencies and improved operational controls. 75

76 Notes 76

77 Indexed Arrears Rate Indexed Acquisition Quality (PD risk %) Personal Loans: New Business Quality Improved A number of initiatives taken Significant improvements in the expected Probability of Default (PD) 120% Higher 100% Risk 80% 60% 40% Aug 05 Jan 06 May 06 Aug 06 Lower Risk This translates into lower arrears levels for more recently approved loans 2.50% 2.00% 1.50% 1.00% 0.50% Month on Book = 3 Month on Book = 2 Jun 04 Oct 04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 77

78 Notes 78

79 Why we don t offer zero percent balance transfers 0% offers appear value destroying with roll-over to low-rate card margins $ Monthly Cash Flow per Card* $ On marginal cost basis, customer break-even for genuine customers between months (est.) Significant risks of obtaining transient, expensive balances -30 Month Funding Cost Fraud Bad Debt Interest Income Fee Income Cumulative^ (RHS) -90 ^ Balance Transfer 0% for 6 Months then 50% retained at 10.99% Spend $750 per month with 95% repaid each following month * Cumulative costs at month 16 - ignores operating costs of card establishment/maintenance 79

80 Notes 80

81 Key messages 1. Home Loan book in good shape Well positioned to withstand stressed conditions 2. Significant improvement in personal loans new business quality Bad and doubtful debt profile expected to improve over time 3. Some credit card market share appears value destroying Focus on profit and riskadjusted returns is also good risk management 81

82 Notes 82

83 Michael Cant Executive General Manager Transaction and Deposit Products 83

84 Notes 84

85 Transaction and Deposit Products Competitive position and strategy Managing the back book Update on recent product initiatives 85

86 Key Information Notes 86

87 Share of Balance Growth % Well placed in a competitive market No. 1 Branch Footprint No. 1 ATM Network Convenience CBA Nearest major Large retail customer base Award winning product set Branches Branded ATMs Most to gain in a rising interest rate environment Solid recent financial performance Number one share of industry growth Market Share: Balance vs. Balance Growth Market Share - Balance v Balance Growth 35% 30% 25% NAB CBA 20% WBC 15% 10% ANZ STG 5% 0% 0% 5% 10% 15% 20% 25% 30% 35% Share of Balance % 87

88 Notes 88

89 Key elements of deposits strategy Customer segmentation Understand customer preferences and propensity Targeted offerings by segment Distribution Leveraging convenience Outbound retention contact Product and pricing Competitive products Differentiated pricing strategies Sales & Service roll-out will underpin success 89

90 Notes 90

91 Effectively managing back book substitution Modest substitution to date 1.8% NetBank Saver 3.5% Streamline Significant number of passive customers Product eligibility criteria Use of targeted offerings by segment Overall deposits margin is holding up % 80% 60% 40% 20% Deposit Revenue $M +6% 2004/ /06 Product Mix % NetBank Saver Term Deposits Transactions All other 2004/ /06 91

92 Notes 92

93 At Risk of External Attrition Understanding of customer is key Smart analytics High Predictive models Create awareness Proactive upsell Event based triggers Retention focus Targeted retention and upsell activity Low Passive Facilitate transfers At Risk of Internal Migration High 93

94 Notes 94

95 NetBank Saver: growth with modest substitution Significant improvement in deposit balances growth 63% funds from external sources Only 1.8% of existing customer balances have switched into NetBank Saver (at June 06) Cost of internal churn for 2006 approximately $15m (2bp) Accompanied by an increase in Streamline balances RBS Deposit Balances ($B) Jul 04 Oct Jan 05 Apr Jul Oct Jan 06 NetBank Saver All other 7.6% growth Apr 95

96 Notes 96

97 New Streamline: another success 7% increase in new accounts per month vs. last year 55% of accounts are from external sources Number New Transaction Accounts Average 7% increase 60,000 40,000 Fee revenue for many customers not impacted by all you can eat fee structure 20,000 May June July August

98 Notes 98

99 Key messages 1. We have improved our competitive position Leading to good growth in balances and revenue 2. Management of the back book remains a key Smart customer analytics and segmentation will help in managing the volume / margins trade off 3. Substitution has been modest Margins are holding up 99

100 Notes 100

101 101

102 Michael Cameron Group Executive, Retail Banking Services Mark Jones Regional General Manager, South & Western Australia Fred Pollock Executive General Manager, Group Sales & Service Geoff Austin Executive General Manager, Lending Products Michael Cant Executive General Manager, Trans. & Deposit Products Vittoria Shortt General Manager, Strategy Development David Grafton Executive General Manager, Credit Risk Commonwealth Bank of Australia ACN Retail Banking Services Update 28 September 2006