UBS Warburg 2003 Global Financial Services Conference

1
UBS Warburg2003 Global Financial Services
Conference

• Michael Cameron
• Chief Financial Officer
• 28-30 April 2003

www.commbank.com.au
2
Disclaimer

• 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.

3
Speakers 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.

4
Agenda

• Current Environment
• Focus
• Platforms for Growth

5
Current Environment
6
Australias Economy has been relatively
resilient given global conditions
Source Commonwealth Research
7
Domestic 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
8
Business confidence has been subdued, but is
expected to gain momentum
Source Commonwealth Research
9
While 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)
10
Commonwealth 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.
11
The 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
12
The 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
13
Meeting 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

14
Focus
15
Immediate 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
16
The 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
18
Australias 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
19
Platforms for Growth Banking
20
Several 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
21
Share 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
22
Youth 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
23
Premium 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
24
Republic Providing a comprehensive view of
premium customers
Please note information on these data screens has
been scrambled for privacy purposes
25
Republic Providing a comprehensive view of
premium customers
Please note information on these data screens has
been scrambled for privacy purposes
26
Transforming 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
27
No 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
28
Platforms for Growth Funds Management
29
The 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
30
Several 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)
31
FirstChoice 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

32
Platforms for Growth Life Insurance
33
The 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
34
Focus 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

35
Key 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

36
UBS Warburg2003 Global Financial Services
Conference

• Michael Cameron
• Chief Financial Officer
• 28-30 April 2003

www.commbank.com.au
37
9 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).
38
A 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
39
Shareholder 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.
40
Continuing sound asset quality
41
The Bank remains well provisioned
millions
Includes Colonial
42
Arrears 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

43
Commercial 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
44
Credit Exposure - Energy Sector
m
10
3
643
7
1,981
80
509
278
3,411m
45
Credit Exposure - Telcos Sector
m
11
4
410
13
738
72
186
175
1,509m
46
Credit 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)
47
Credit Exposure - Agriculture Sector
m
310
254
1,540
26
5,569
74
Australia (10 investment grade)
7,673m
New Zealand (3 investment grade)