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
1,109
1,000
1,033
1,035
Dec 1999**
Jun 2000**
800
$m 600
400
200
0
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
139,092
125
29
100
35
$b 75
145.159
147,759
30
31
36
37
8
9
8
50
67
71
72
Dec 1999*
Jun 2000
Dec 2000
25
0
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
Home loans
Jun
2000
Dec
2000
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%**
9.00%
8.50%
Retail Broking
* As at 30 November 2000
** As at 30 September 2000
8
Home Loan Market Share
Commonwealth Bank Group Market Share
(all lenders)
January - November 2000
Owner
Occupied
Approvals
31.00%
29.00%
Owner
Occupied
Balances
27.00%
25.00%
23.00%
*
*
Residentially
Secured
Approvals
21.00%
**
19.00%
Residentially
Secured
Balances
17.00%
**
00
N
ov
-
0
-0
O
ct
Se
p0
0
0
ug
-0
A
Ju
l-0
0
0
Ju
n0
0
ay
-0
M
00
A
pr
-
0
M
ar
-0
0
Fe
b0
Ja
n-
00
15.00%
* 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
Main Bank Share
3.75%
15%
4.7% est.
16%
10
Domestic Net Interest Margins
%
3.50
3.25
NAB
WBC
* Proforma
ANZ
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
Jun-99
2.75
Mar-99
3.00
Commonwealth Bank Group*
11
Income and Expenditure
Operating Income
5,000
4,500
4,000
3,500
3,000
$m 2,500
2,000
1,500
1,000
500
0
4,201
4,231
19%
18%
26%
26%
49%
49%
Net Interest Income
Funds Management Income
* Proforma
15%
7%
7%
6%
Dec 1999*
4,401
Jun 2000*
27%
51%
Dec 2000
Other Banking Operating Income
Life Insurance Income
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
140
115
120
100
80
$b
60
40
20
0
107
12
92
10
8
23
24
22
21
28
32
35
18
20
23
Dec 1999*
Jun 2000
Dec 2000
24
14
Australian Retail Funds**
International Funds
Australian Wholesale Funds
Australian Life Assets
Other Life Assets
* Proforma ** Includes listed property trusts
16
Life Insurance
Sources of life insurance operating profit (excluding abnormals)
31/12/99*
$M
30/6/00*
$M
31/12/00
$M
103
(12)
11
122
(8)
2
128
(33)
(3)
102
91
116
52
92
68
193
2
170
(4)
156
The Margin on Services operating profit after tax
is represented by :
Planned profit margins
Experience Variation
New business / losses reversal of
capitalised losses
Operating margins
Investment earnings on assets in excess
of policy liabilities
Other
Operating profit after income tax
* Proforma
17
Life Insurance
Investment Earnings
18
Appraisal Value Uplift
Life Business
Australia
New Zealand
Asia
Funds Management
Appraisal Value Uplift
$m
62
12
115
189
As at 31 December 2000
19
Operating Expense Analysis
$m
3,000
2,473
2,500
2,585
115
46
2,000
1,500
2,349
2,427
2,470
Dec 1999*
Jun 2000*
Dec 2000
1,000
500
0
Existing Operations
* Proforma
Business acquisitions and GST
20
Cost Ratios
58.4
58.7
55.9
Cost/Assets
2.5
2
1.5
60
55
2.38
2.33
2.32
50
1.81
1.77
1.73
45
1
40
0.5
35
0
30
Dec 1999*
Jun 2000*
Cost/Income
3
Dec 2000
Cost to Average Balance Sheet Assets
Cost to Avg. Balance Sheet Assets & FUM
Cost to Income
* Proforma
21
Goodwill
Asset Quality
Goodwill
Goodwill amortisation
Colonial Acquisition
ASB Group – Acquisition of Minority
State Bank Victoria
Other Group Entities
Total
HY
31/12/00
$m
136
3
20
4
163
23
Credit Risk
Total Risk Rated Exposures
% of Exposure
100%
80%
60%
40%
20%
0%
30 June 2000
31 December 2000
Other
A
BBB
AAA/AA
24
Aggregate Provisions
2,000
1,800
1,600
1,400
1,200
$m1,000
800
600
400
200
0
300
250
200
150
%
100
50
0
Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec
94 94 95 95 96 96 97 97 98 98 99 99 00* 00*
General Provision
Specific Provision
Total Provisions/Gross Impaired Assets (axis on right)
* Includes Colonial
25
Net Impaired Assets
600
8
500
6
400
$m 300
4
%
200
2
100
0
0
Dec 1999*
Jun 2000
Dec 2000
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
Restructuring Costs
Colonial
Commonwealth Bank
Total restructuring costs (pre tax)
294
106
400
Expenditure
Half Year Ended Provision
31/12/00 31/12/00
$m
$m
62
41
103
232
65
297
28
Integration Related Staff Movements
Business
Case
Total Staff
Movement
Merger
Jan-00
Jun-00
Dec-00
Jan to Dec
40,018
39,575
38,028
(1,990)
Total Integration Mvt
(178)
(1,003)
(1,181)
Retrenchments
(129)
(441)
(570)
Franchise Staff
(56)
(51)
(107)
7
(183)
(176)
Other Colonial Net Change
(853)
EDS Migration
(328)
(328)
(1,181)
29
Retrenchment Costs and Estimated Staff
Synergies
Commonwealth Group*
Total
$m
One-off
Retrenchment Costs
50
Annualised
Synergies
75
FY2000-2001 Staff
Synergies (estimate)
60
* As at 31 December 2000
30
Funding and Capital
Funding Sources
Retail
A$b
Wholesale
%
100
At 31 December 2000
100
$3.6b
$5.5b
$3.2b
80
Total $30bn
75
$3.2b
60
50
40
$6.8b
$1.5b
20
25
0
0
Jun-99 Dec-99 Jun-00 Dec-00
Total Retail Deposits (LHS)
Market Share of Retail Deposits (RHS)
Retail Funding % (RHS)
Long
Term
54%
$6.4b
Offshore - Public
Offshore - Private
Domestic - Public
Domestic - Private
Short
Term
USCP
46%
NCD
ECP
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
Global Mortgage
Backed Security
• A$450m of retail issues
over the last 12 months
• Two Global deals
totalling A$4b 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
• SEC registered
regular global
benchmark issuance
• Benchmark for other
Aust. MBS issues
• Further Global MBS
expected during 2001
33
Capital Adequacy
30 Jun 00
Gross Tier I
Less Goodwill
Preference Shares
intangible component of investment
in non- consolidated subsidiaries
Net Tier 1
Tier 1 Ratio
Upper Tier 2
Lower Tier 2
Total Tier 1 and Tier 2
Less Investment in non consolidated
subsidiaries net of intangible component
deducted from Tier 1
Other
Total Capital
Total Capital Ratio
31 Dec 00
18,265
(5,905)
(86)
18,409
(6,007)
(39)
(2,656)
9,618
7.49%
1,292
4,805
15,715
(3,449)
8,914
6.71%
1,346
4,456
14,716
(2,528)
(669)
12,518
9.75%
(2,169)
(109)
12,438
9.37%
34
ROE and EPS
ROE
EPS
25
100
20
75
15
50
10
25
5
0
0
Dec 1999*
ROE - Cash Basis
Jun 2000*
Dec 2000
EPS ("Cash" Earnings)
* As reported in prior profit announcements (i.e. not proforma)
35
Annual Dividends
150
100
90
125
72
80
66
57
70
58
60
52
75
46
50
36
50
20
22
20
20
58
45
36
25
46
61
49
38
%
Cents
100
40
30
20
24
10
0
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
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
Summary
40
30
30
Share price $
25
20
20
15
10
10
Total Shareholder Return %
35
5
0
0
Dec
1996
Jun
1997
Dec
1997
Jun
1998
Closing share price at half years ($)
Average TSR (ANZ, NAB, Westpac)
Dec
1998
Jun
1999
Dec
1999
Jun
2000
Dec
2000
Total Shareholder Return for 5 years (%)
39
Presentation of Half Year Results
13 February 2001
www.commbank.com.au