Presentation of Half Year Results 13 February 2001 www.commbank.com.au
Disclaimer The material that follows is a presentation of general background information about the Bank s activities current at the date of the presentation, 13 February 2001. 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. 1
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. 2
Overview Significant progress on the integration Strong interest earnings with improved margin Good growth in other banking income Strong new business growth in funds management Good inflows of insurance new business Actions taken to address market share Lower insurance earnings due to weak equity markets Costs reflect volume growth and new businesses $700m off-market share buy-back 3
Agenda Performance Highlights Income and Expenditure Balance Sheet Colonial Merger Funding and Capital 4
Performance Highlights Commonwealth Bank Group Set out in this presentation are unaudited proforma graphs and tables which comprise the profit and loss, balance sheet and life insurance and funds management statistics for the Commonwealth Bank Group and Colonial Limited for the half years ending December 1999 and June 2000. These have been prepared to illustrate the proforma consolidated position of Commonwealth Bank and Colonial as if Colonial had been merged with Commonwealth Bank as at 31 December 1999 for balance sheet purposes and from 1 July 1999 to 30 June 2000 for profit and loss purposes. The proformas do not include goodwill amortisation or life insurance appraisal value uplift. The results included within the profit and loss have been adjusted for abnormal items and other items not considered part of the ongoing operations, such as the effect of Colonial s UK life insurance business which was sold during the year and specific payments made by Colonial in relation to the merger with Commonwealth Bank. [No adjustments have been made for inconsistencies in accounting policies between Colonial and Commonwealth].
Net Operating Profit* 1,200 1,000 800 1,033 1,035 1,109 $m 600 400 200 0 Dec 1999** Jun 2000** Dec 2000 * Net Profit after tax and outside equity interest - cash basis. Excludes abnormal items, appraisal value uplift and goodwill amortisation. * * Proforma 6
Lending Assets Growth 150 125 139,092 145.159 147,759 29 30 31 100 35 36 37 $b 75 8 9 8 50 25 0 67 71 72 Dec 1999* Jun 2000 Dec 2000 Housing** Personal Business Corporate * Proforma ** Excludes securitised housing loan balances $4.7b (Dec 2000), $3b (June 2000), $1.7b (Dec 1999). 7
Australian Market Share Jun 2000 Dec 2000 Home loans n/a 23.30%* Credit Cards 29.00% 29.00% Personal Loans 24.97% 24.93%* Retail Deposits 25.29% 24.61% Retail FUM 16.00% 16.77%** Retail Broking 9.00% 8.50% * As at 30 November 2000 ** As at 30 September 2000 8
Home Loan Market Share 31.00% 29.00% Commonwealth Bank Group Market Share (all lenders) January - November 2000 Owner Occupied Approvals * 27.00% 25.00% 23.00% 21.00% 19.00% 17.00% 15.00% Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Owner Occupied Balances * Residentially Secured Approvals ** Residentially Secured Balances ** * Since September APRA all lenders includes home loan reclassification (ie home equity and similar facilities). Figures have been adjusted for HEF proforma back to January 2000. ** APRA data includes owner occupied loans, home equity and similar facilities and investment home loans. 9
New Zealand Market Share ASB Group New Zealand Jun 2000 Dec 2000 Retail Lending 15% 16% Retail Deposits 18% 18.5% Credit Cards 12% 13.8% Retail Funds Management 3.75% 4.7% est. Main Bank Share 15% 16% 10
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Domestic Net Interest Margins % 3.50 3.25 3.00 2.75 NAB WBC ANZ Commonwealth Bank Group* * Proforma 11
Income and Expenditure
Operating Income $m 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 4,201 4,231 4,401 19% 15% 18% 6% 7% 7% 26% 26% 27% 49% 49% 51% Dec 1999* Jun 2000* Dec 2000 Net Interest Income Funds Management Income Other Banking Operating Income Life Insurance Income * Proforma 13
Banking Strong growth in interest income Other Banking Operating Income Commission and other fees, up 14% Trading Income, up 22% Lending Fees, up 4% 14
Funds Management 31/12/99* $M 30/06/00* $M 31/12/00 $M Operating income 255 318 340 Operating expenses 186 224 224 Operating profit before tax 69 94 116 Income tax expense 21 31 38 Operating profit after tax 48 63 78 * Proforma 15
Funds Management $b 140 120 100 80 60 40 20 0 92 8 24 14 107 10 115 12 23 24 22 21 28 32 35 18 20 23 Dec 1999* Jun 2000 Dec 2000 Australian Retail Funds** Australian Wholesale Funds International Funds Australian Life Assets Other Life Assets * Proforma ** Includes listed property trusts 16
Life Insurance Sources of life insurance operating profit (excluding abnormals) The Margin on Services operating profit after tax is represented by : 31/12/99* $M 30/6/00* $M 31/12/00 $M Planned profit margins 103 122 128 Experience Variation (12) (8) (33) New business / losses reversal of capitalised losses 11 2 (3) Operating margins 102 116 92 Investment earnings on assets in excess 91 52 68 of policy liabilities Other - 2 (4) Operating profit after income tax 193 170 156 * Proforma 17
Life Insurance Investment Earnings 18
Appraisal Value Uplift Life Business $m Australia 62 New Zealand 12 Asia - Funds Management 115 Appraisal Value Uplift 189 As at 31 December 2000 19
Operating Expense Analysis $m 3,000 2,500 2,473 46 2,585 115 2,000 1,500 1,000 2,349 2,427 2,470 500 0 Dec 1999* Jun 2000* Dec 2000 Existing Operations * Proforma Business acquisitions and GST 20
Cost/Assets Cost/Income Cost Ratios 3 55.9 58.4 58.7 60 2.5 55 2 2.38 2.33 2.32 50 1.5 1.81 1.77 1.73 45 1 40 0.5 35 0 Dec 1999* Jun 2000* Dec 2000 30 Cost to Average Balance Sheet Assets Cost to Avg. Balance Sheet Assets & FUM Cost to Income * Proforma 21
Goodwill Asset Quality
Goodwill Goodwill amortisation HY 31/12/00 $m Colonial Acquisition 136 ASB Group Acquisition of Minority 3 State Bank Victoria 20 Other Group Entities 4 Total 163 23
% of Exposure Credit Risk Total Risk Rated Exposures 100% 80% 60% 40% 20% 0% 30 June 2000 31 December 2000 Other BBB A AAA/AA 24
Aggregate Provisions 2,000 300 1,800 1,600 250 1,400 1,200 200 $m1,000 150 % 800 600 100 400 200 50 0 0 Jun 94 Dec 94 Jun 95 Dec 95 Jun 96 Dec 96 Jun 97 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00* Dec 00* General Provision Specific Provision Total Provisions/Gross Impaired Assets (axis on right) * Includes Colonial 25
Net Impaired Assets 600 8 500 400 6 $m 300 4 % 200 100 2 0 Dec 1999* Jun 2000 Dec 2000 0 Commowealth Bank Group (Other Countries) Commonwealth Bank Group (Australia) Net Impaired assets as % of Total Shareholder Equity (axis on right) * Commonwealth Bank Group excluding Colonial 26
Colonial Merger
Integration Expenditure Restructure Provision Provision 30/06/00 $m Expenditure Half Year Ended 31/12/00 $m Provision 31/12/00 $m Restructuring Costs Colonial 294 62 232 Commonwealth Bank 106 41 65 Total restructuring costs (pre tax) 400 103 297 28
Integration Related Staff Movements Business Case Merger Movement Jan-00 Jun-00 Dec-00 Jan to Dec Total Staff 40,018 39,575 38,028 (1,990) Total Integration Mvt (178) (1,003) (1,181) Retrenchments (129) Franchise Staff (56) Other Colonial Net Change 7 EDS Migration (441) (51) (183) (328) (570) (107) (176) (853) (328) (1,181) 29
Retrenchment Costs and Estimated Staff Synergies Commonwealth Group* One-off Retrenchment Costs Total $m 50 Annualised Synergies FY2000-2001 Staff Synergies (estimate) 75 60 * As at 31 December 2000 30
Funding and Capital
100 80 60 40 20 0 Retail A$b % Jun-99 Dec-99 Jun-00 Dec-00 Funding Sources 100 75 50 25 Total Retail Deposits (LHS) Market Share of Retail Deposits (RHS) Retail Funding % (RHS) 0 $3.2b $6.8b Long Term 54% Short Term 46% Wholesale At 31 December 2000 $3.6b Total $30bn $1.5b $5.5b $6.4b Offshore - Public Offshore - Private Domestic - Public Domestic - Private USCP ECP NCD $3.2b 32
Funding Initiatives Commets Issue A$750 m Fixed Rate Bonds The Group s first integrated wholesale & retail transaction launched in Aust mkt Orders taken online via ComSec Minimum parcel size $5000 ASX listing & quotation Japanese Retail Bond Issues A$450m of retail issues over the last 12 months Participation by over 30,000 retail investors Registered with the Japanese Ministry of Finance Most cost-effective source of long term AUD borrowings Global Mortgage Backed Security Two Global deals totalling A$4b over the last 12 months SEC registered regular global benchmark issuance Benchmark for other Aust. MBS issues Further Global MBS expected during 2001 33
Capital Adequacy 30 Jun 00 31 Dec 00 Gross Tier I 18,265 18,409 Less Goodwill (5,905) (6,007) Preference Shares (86) (39) intangible component of investment in non- consolidated subsidiaries (2,656) (3,449) Net Tier 1 9,618 8,914 Tier 1 Ratio 7.49% 6.71% Upper Tier 2 1,292 1,346 Lower Tier 2 4,805 4,456 Total Tier 1 and Tier 2 15,715 14,716 Less Investment in non consolidated subsidiaries net of intangible component deducted from Tier 1 (2,528) (2,169) Other (669) (109) Total Capital 12,518 12,438 Total Capital Ratio 9.75% 9.37% 34
ROE and EPS ROE 25 20 15 10 5 0 Dec 1999* Jun 2000* Dec 2000 EPS 100 75 50 25 0 ROE - Cash Basis EPS ("Cash" Earnings) * As reported in prior profit announcements (i.e. not proforma) 35
Cents % Annual Dividends 150 100 125 72 90 80 100 75 46 52 57 58 66 70 60 50 50 25 0 36 58 61 20 22 45 46 49 36 38 20 20 24 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 40 30 20 10 0 First Half Second Half Payout Ratio 36
Capital Management Strategy $200 million on market share buy-back announced 24 October 2000 785,173 shares acquired for $23.4 million (weighted average buy-back price $29.86) Programme deferred January 2001 Off market share buy-back of up to $700 million March 2001 Final size of the buy-back subject to take up of new preference share issue* Scale back if value of shares offered exceed $700 million Will reduce shares on issue by approximately 23 million Allows distribution of surplus franking and enhances EPS The buy-back price has a capital component of $10 with the balance to be a fully franked dividend * See next slide 37
Capital Management Strategy Preference Share Issue of $700 million in April 2001 Qualifies as Tier 1 capital Listed on the ASX Non-cumulative floating rate dividend for the first five years based off the Bank Bill rate Expected to be fully franked Dividends payable quarterly Investor flexibility to exit their investment at the Issue Price on each Rollover date from the fifth year Rated A- / a1 / A+ (Standard & Poor s / Moody s / Fitch IBCA) 38
Share price $ Total Shareholder Return % Summary 35 40 30 25 30 20 15 20 10 10 5 0 Dec 1996 Jun 1997 Dec 1997 Jun 1998 Dec 1998 Jun 1999 Dec 1999 Jun 2000 Dec 2000 Closing share price at half years ($) Total Shareholder Return for 5 years (%) Average TSR (ANZ, NAB, Westpac) 0 39
Presentation of Half Year Results 13 February 2001 www.commbank.com.au