Deutsche Bank - Asia-Pacific

Financial Institutions Conference

Stuart Grimshaw

Group Executive Financial and Risk Management

www.commbank.com.au

8 July 2002

2

The material that follows is a presentation of general

background information about the Bank‟s activities

current at the date of the presentation, 8 July 2002. 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

3

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.”

4

Agenda

Introduction

Australian Economy & Commonwealth Bank Group

Strategy

Strategic issues

Competitive advantage

Strategic imperatives

Looking Forward

Strategic plan

Introduction

Australian Economy &

Commonwealth Bank Group

Credit Growth

Current position

Housing market

Commonwealth Bank Group

Asset quality

7

Australian Economy:

Credit Growth

Source: Commonwealth Research

CREDIT(3 month-ended annual rates)

-10

0

10

20

30

Jul-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02

-10

0

10

20

30

Business Household

Housing Other personal

% %

8

HOUSE PRICES

0

100

200

300

400

Mar-60 Mar-68 Mar-76 Mar-84 Mar-92 Mar-00

-20

0

20

40

60$'000 %pa

Real

growth

(rhs)

Level

(lhs)Source: CBA, Treasury

PRINCIPAL REPAYMENTS

0

10

20

30

Sep-97 Sep-99 Sep-01

0

4

8

12

% $bn

Cumulative

overpayment

of principal*

(rhs)

Principal

(% of motgage payment)

(lhs)

*assumes prinipal repayment ratio fixed at 1997/98 level

DEBT REPAYMENT LEVELS

(% of h/hold income, Mar'02)

5

10

15

20

<30 31-50 51-70 71-100 >100Income ($'000pa)

5

10

15

20

% %

Source: Melbourne Institute

Housing Market

Source: Commonwealth Research

SYDNEY HOUSE PRICES

(deflated by the CPI)

-40

-20

0

20

40

60

1900 1912 1924 1936 1948 1960 1972 1984 1996

-40

-20

0

20

40

60

%pa %pa

Source: Residex

QI 2002

at annual

rate

*

* estimate

9

Commonwealth Bank Group:

Low Credit Risk Profile

Housing Loans

48% of total loan book*

Loan loss rate of < 3bps in 17 of last 20 years

55% average loan to valuation ratio

Conditional acceptance of First Home Owners Grant as deposit

Asset Quality

Impaired assets to risk weighted assets of less than 1%

in line with domestic peers

Relatively low bad debt expense

Well provisioned

* Excluding securitisation (or 52% including securitisation)

10

Credit Risk: Historical P&L Charge

* Excludes Colonial

% C

harg

e P

er

Half

Bad Debt Expense / RWA

0.00%

0.10%

0.20%

0.30%

CBA Other Major Australian Banks (Average)

11

Aggregate Provisions

* Includes Colonial

$m

illio

ns

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

50

100

150

200

250

300

%

General Provision (Left Axis)

Specific Provision (Left Axis)

Other Major Australian Banks (Average): Total Provisions/Gross Impaired Assets (%)

CBA: Total Provisions/Gross Impaired Assets (%)

Strategy

Strategic Issues

Competitive Advantage

Strategic Imperatives

13

Strategic Issues

Domestic Growth

Wealth Management

Distribution

Technology & Productivity

14

Competitive Advantage

Brand

Scale

Innovation

15

Brand : Commonwealth Bank

Share of Mind*

• CBA’s share of mind remains at a consistent level, leading the Big Four.

• Share of mind for Westpac, ANZ and NAB continue to measure at similar

levels.

* Research International November 2001

68 71 6863

7065 63 66 65 64

68 6965 63 66

0

25

50

75

Sept Nov Jan

'01

Mar May Jul Sep Nov

(%)

CBA

Westpac

ANZ

NAB

16Source: ASSIRT Service Level Survey - 2001

Adviser brand awareness - overall opinion of organisation

Brand : Colonial First State

Rank Company

1

2

3

4

5

7.28

7.52

7.81

7.85

7.98

8.16

5 6 7 8 9 10

Industry

Average

AMP

AMP Financial

Services

Perpetual

Navigator

Colonial FirstState

17

Australia’s Most Accessible Bank

10 million customers

$

Personal

Lenders

over 700

staff

Direct

Banking

over 62 million

calls *

Branches

1,045

branches

ATMs

nearly

4,000

Premium

Banking

13 Centres

Ezy Banking

over 700 Stores

NetBank

1.5 million

registered

customers

Business Banking

80 centres

Agencies

(Postal &

Private)

over 3,900

Mobile

Bankers

over 180

* for 6 months to Dec „01

EFTPOS

over 120,000

merchant

terminals

Financial

Planners^

over 600

Third Party Distribution

over 15,000 individual

advisers, brokers and

agents

^ Also includes financial consultants and personal client advisers

18

^ Colonial data captured as part of market share calculation from June 2001

Australian Market Share

Scale : Strong Market Share Positioning

RankDec 2000 Jun 2001 Dec 2001 Mar 2002

Home Loans 20.8% 20.4% 20.1% 20.1%

(Residentially Secured)

Credit Cards^ 21.9% 21.4% 21.4% 21.8%

Retail Deposits 24.6% 24.0% 24.1% 24.2%

Retail FUM (Plan for Life) 16.0% 16.3% 16.4% 16.3%

Superannuation/Annuities 15.7% 16.3% 16.4% 16.4%

Retail Broking 8.5% 9.0% 8.5% 9.2%

Inforce Premiums 14.6% 14.4% 14.5% 14.5%

1

1

1

1

1

2

2

*

*

* Dec 2001 Data

19

Market Share of ASX Transactions

0%

2%

4%

6%

8%

10%

1997 1998 1999 2000 2001

0

5,000

10,000

15,000

20,000

($ 000)

1997 1998 1999 2000 2001

Profitability of CommSec

Innovation : Commsec & NetBank

0

300

600

900

1200

(000's

)

1997 1998 1999 2000 2001

Growth in Customer Numbers

0

40

80

120

160

mil

lio

ns

of

tran

sacti

on

1997 1998 1999 2000 2001

Growth in Transaction Volumes

20

Strategic Imperatives

Segmentation

Productivity

Strategic Issues

Domestic Growth

Wealth Management

Distribution

Technology & Productivity

21

Segmentation: Aligned Domestic

Structure with Customer Needs

Retail BankingServices

PremiumFinancialServices

Investment &InsuranceServices

Institutional &BusinessServices

CustomerGroup

Personalbankingcustomers,Small businessbankingcustomers

Premium clientsincludingprofessionalsand business

Agents, Brokers,Financial Advisers

Institutional,Corporate,Commercialbusinesscustomers

Channels Branch, Ezy-Banking, ATM,EFTPOS,Phone, On-line,Mortgagebrokers

Relationshipmanagers,Premiuminvestmentcentres, phone,on-line.

Agents, Branches,Brokers, FinancialAdvisers, Premiuminvestment centresDirectDealerships

Relationshipmanagers,Business centres

Services Group Technology, Back Office Operations, Procurement, Shared Services

Support Finance, Risk Management, Human Resources, Strategy, Legal, Secretariat

22

Youth: Age of Acquisition

Source: Customer Tenure Analysis - Customer Strategy and Market Research

Key

acquisition

period for

other banks -

Retention by

CBA vital

Under 18

acquisition

important

to CBA

Lower relative

CBA

acquisition

after age 24

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CBA NAB WBC ANZ Credit Union

Under 18 18-24 Over 24

23

Banking Needs

0 5 12 18 24 30

Lo

we

r in

vo

lve

me

nt p

rod

ucts

Hig

he

r va

lue

pro

du

cts

Age of Customer

Savings needs

Transacting needs

Credit Card needs

Banking needs change and grow as customers age and pass through

different lifestages

24

Premium and Business Opportunity

Business (Middle Market)

Premium Customers

Source : Commonwealth Bank illustration

Current market share

Natural market share

Current number of premium customers

Potential number of premium customers

25

Business: Increasing Cross-sell

Corporate Segment Example Example Bundled Products

Working

Capital

Services

26%

17%26% 8%

8%

6%8%

26% of this segment use

products from all three areas

Financial

Markets

Corporate

Finance

Business Banking

Financial

Markets

Working

Capital

Services

Interest rate risk

management

FX products

Investments

Bill financing

Cash funded loans

Overdrafts

Transaction services

26

Funds Management Opportunity

Source: Plan for Life, CBA

Retail Funds Management

(Non-Life & Life)

0

100

200

300

400

500

600

1997 1999 2001 2003 2005 2007

$B

illio

n

Retail FUM (Commonwealth Bank Group)

Retail FUM (Industry)

27

Growth through Retail Masterfunds

28

Underlying Investment structure

Superior service standards

Value for money

Simplicity

What is different about FirstChoice?

29

Segmentation : premium banking

Simplified transaction accounts

Browser based workflow enabled systems

Credit risk architecture

7 level organisation structure

Shared services : HR and finance

Productivity

Looking Forward

31

Business Driver Profile 5 Year Plan

Growth in Market Share

Funds under managementHome LoansCredit CardsLife InsuranceCredit ProductsBusiness FinancingRetail Deposits

At or above market

Margins Comparable for business mix Continuing decline

Sources of Income Comparable Financial Institutions Rebalance toward non-interest income

Costs Reduction in cost/income – Bestpractice

3%-6% p.a. productivitychange

Capital ManagementOptimise regulatory capital andmaintain rating.

Rating AA-

Total Shareholder Return Top quartile Deliver top quartile TSR.

Strategic Plan to June 2006 is

Underpinned by Growth Assumptions

Deutsche Bank - Asia-Pacific

Financial Institutions Conference

Stuart Grimshaw

Group Executive Financial and Risk Management

www.commbank.com.au

8 July 2002