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Presentation of Full Year Results22 August 2001
www.commbank.com.au
1
The material that follows is a presentation of
general background information about the Bank’s
activities current at the date of the presentation,
22 August 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.
Disclaimer
2
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.”
3
Overview
• Retail Integration completed ahead of time & to business case
• Additional $70 million of integration synergies identified
• $800 million added to value of wealth management businesses
• Strong net interest income with stable net interest margin
• Positive contribution from other banking income
• Home lending market share beginning to stabilise
• Weaker life insurance operating margins & investment earnings
below long term expectations
• Operating expenses increased above plan
4
• Performance Highlights
• Income and Expenditure
• Balance Sheet
• Colonial Merger
• Funding and Capital
Agenda
Performance Highlights
Commonwealth Bank GroupSet 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].
6
Managing Integration: Scale & Complexity
RETAIL
INTEGRATION
• Transaction bridge designed and
built for testing in 90 days
• 1.3 million accounts converted
• Internet Protocol Network roll out to 500
branches aligned with integration programme
• 3.5 million Colonial ATM transactions / month
redirected to CBA ATM network
• 279 branch
amalgamations and 89
Colonial branch sites
rebadged over 8
weekends
• 500 ATM movements
• 5,100 pieces of
equipment deployed in
network
• 6000+ staff involved
• 200+ dedicated full time
staff
• 1,950 staff completed
Orientation workshops
• 39,600 hours of call centre
staff training
• 1083 branches completed
Product & System
Conversion training
• Customer
mailout
programme
• Customer Care
programme
• Queue Walkers
• Additional
service
consultantsPEOPLE
CUSTOMER
TIME
PLANNING &
LOGISTICSTECHNOLOGY
7
792 802 875 918
193 170156
16448 6378
71
0
200
400
600
800
1,000
1,200
Dec 1999** Jun 2000** Dec 2000 Jun 2001
Banking Life & Super Funds Management
Net Operating Profit*
* * Proforma
* Net Profit after tax and outside equity interest - cash basis.
Excludes abnormal items, appraisal value uplift and goodwill amortisation.
1,033 1,035
1,109 1,153
Full Year = 2,262
8
67 71 72 73
3441 42 43
8 9 8 8
40373635
29313029
34292518
24242324
0
50
100
150
200
250
300
Dec 1999* Jun 2000 Dec 2000 Jun 2001
Lending Assets**:
* Proforma
** Excludes securitised housing loan balances $6.8b (Jun 01), $4.7b (Dec 00), $3b (Jun 00), $1.7b (Dec 99).
215235 243
251
Housing Personal Business Corporate
Life & SuperFunds Management: Retail Wholesale
Total Lending Assets & Funds Under
Management
$77 billion
$150 billion
9
Australian Market Share
Jun 2000^ Dec 2000 Jun 2001
Home Loans(Residentially Secured)
21.4% 20.8% 20.3%
Credit Cards 27.8% 26.5% 26.3%*
Retail Deposits 25.3% 24.6% 24.0%
Retail FUM 19.2% 19.6% 20.4%
Superannuation/Annuities 22.0% 22.0% 22.3%**
Retail Broking 9.0% 8.5% 8.7%
* Market share as at 31 May 2001
** Market share as at 31 March 2001 ^ Commonwealth and Colonial combined
10
Home Loan Market Share
• Maintained 30%+ market share in proprietary channels
• Doubled market share in mortgage broker channel
• Increased mobile lenders and field staff
• Market share beginning to stabilise
• Broker channels less profitable than proprietary
channels
• Owner occupied mortgage balances grew by $750
million in June 2001
11
Jun 2000 Dec 2000 Jun 2001
Retail Lending 15.0% 14.0% 14.0%*
Retail Deposits 14.2% 14.5% 14.5%
Credit Cards 14.4% 13.8% 14.1%*
Retail Funds Management 3.8% 4.7% 5.9%*
Main Bank Share 16.8% 17.7% 16.4%*
New Zealand
New Zealand Market Share ASB Group
* As at 31 March 2001
12
2.75
3.00
3.25
3.50
Mar
-99
Jun-9
9
Sep
-99
Dec
-99
Mar
-00
Jun-0
0
Sep
-00
Dec
-00
Mar
-01
Jun-0
1
NAB WBC ANZ Commonwealth Bank Group*
Domestic Net Interest Margins
%
* Proforma
Net interest margin for Commonwealth Bank Group refers to half-yearly reporting periods ending
June and December. The ANZ, NAB and WBC net interest margin refers to the half-yearly
reporting periods ending March and September.
3.09
2.972.98
2.82
Income and Expenditure
14
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Dec 1999* Jun 2000* Dec 2000 Jun 2001
$m
illi
on
s
Net Interest Income Other Banking Operating Income
Funds Management Income Life & Super Income
Operating Income
49%
26%
* Proforma
19%
49%
26%
18%
51%
27%
15%
7%7%6%
14%
8%
27%
51%
Full Year = 8,824
4,201 4,231 4,401 4,423
15
Banking
• 8% growth in Banking total operating income
• 8% growth in Banking net interest income
• Other Banking operating income up 9%
– Commission and other fees, up 10%
– Trading Income, up 30%
– Lending Fees, down 3%
16
Funds Management
Half Year Full Year
31/12/99*$M
30/06/00*$M
31/12/00$M
30/06/01$M
30/06/01$M
Operating income 255 318 340 399 739
Operatingexpenses
186 224 224 272 496
Operating profitbefore tax
69 94 116 127 243
Income taxexpense
21 31 38 56 94
Operating profitafter tax
48 63 78 71 149
* Proforma
17
Funds Management
23 27
20 24 2731
1924
2324
24
18 20
1422
21
0
20
40
60
80
100
120
Dec 1999* Jun 2000* Dec 2000 Jun 2001
$b
illi
on
s
Australian Retail Funds** Australian Wholesale Funds
International Funds Australian Life Assets
** Includes listed property trusts* Proforma
7689
95101
18
Funds Management: ASSIRT Reconciliation
Group
Total
$m
Funds Under Management (external funds) 76,953
add life & super assets held in FUM (internal funds) 24,527
Total Funds Under Management per June 2001 Profit Announcement 101,480
less ASB Group funds under management (2,340)
Other (272)
Funds Under Management per ASSIRT June 2001 Report 98,868
19
Life & Super
Half Year Full Year31/12/99*
$M30/6/00*
$M31/12/00
$M30/06/01
$M30/06/01
$MThe Margin on Services operatingprofit after tax is represented by :
Planned profit margins 103 122 128 129 257Experience variation (12) (8) (33) (30) (63)New business / losses reversal ofcapitalised losses
11 2 (3) 1 (2)
Operating margins 102 116 92 100 192Investment earnings on assets inexcess of policy liabilities
91 52 68 58 126
Other - 2 (4) 6 2Operating profit after income tax 193 170 156 164 320
* Proforma
Sources of life & super operating profit (excluding abnormals)
20
Life & Super
Investment Earnings
Net Earnings on Shareholders Assets
($m):
Year ending - 30/6/00 30/6/01
Australia 112 83
New Zealand 15 (5)
Asia 16 2
Total 143 80
Market Returns & Group Exposure
(%):
Market Movement Exposure*
Index for Year at 30/6/01
All Ords 5% 50%
Dow Jones 0% 20%
Euro Top 300 (11%) 10%
MSCI (21%) 10%
* % of total Group equity exposure
21
Business Value: Movement Analysis
$m
Business Value as at 30 June 2000 6,736
Analysis of Movement since 30 June 2000
MoS / Cash Profits 423
Synergies Credited Against Goodwill 332
Net Appraisal Value Uplift 474
Other 38
Increase to 30 June 2001 1,267
Business Value as at 30 June 2001 8,003
22
Appraisal Value Uplift (full year to 30 June 2001)
Funds Management 596
Life & Super
Australia (33)
New Zealand (26)
Asia (63)
(122)
Appraisal Value Uplift through Profit and Loss Account 474
Goodwill Amortisation (full year to 30 June 2001)
Colonial Acquisition 285
ASB Group - Acquisition of Minority 10
State Bank Victoria 39
Other Group Entities 4
Goodwill Amortisation through Profit and Loss Account338
Accelerated Goodwill realised as Appraisal Value 332
Goodwill & Appraisal Value Uplift
$m
23
0
500
1,000
1,500
2,000
2,500
Dec 1999** Jun 2000** Dec 2000 Jun 2001
$mil
lio
ns
Existing Operations
Operating Expense Analysis
** Proforma
2,349 2,473 2,470 2,619
Full Year = 5,089*
*Total operating expenses excluding $81 million attributable to Business Acquisitions
and GST (net of synergies).
24
Cost Ratios
55.9
58.8 58.1 57.4
2.12 2.11 2.11 2.10
1.85 1.83 1.78 1.73
35
40
45
50
55
60
65
Dec 1999* Jun 2000* Dec 2000 Jun 2001
1
1.5
2
2.5
3
3.5
Banking Cost to Income
Banking Cost to Avg. Balance Sheet Assets
Total Cost to Total Controllable Assets**
* Proforma ** Costs to assets held and funds under management
Asset Quality
26
Total Risk Rated Exposures
Credit Risk
0%
20%
40%
60%
80%
100%
Dec 1999 June 2000 Dec 2000 June 2001
Other BBB A AAA/AA
27
0
100
200
300
400
500
600
Dec 1999* Jun 2000 Dec 2000 Jun 2001
0
2
4
6
8
%
Commowealth Bank Group (Other Countries)
Commonwealth Bank Group (Australia)
Net Impaired assets as % of Total Shareholder Equity (axis on right)
Net Impaired Assets
* Commonwealth Bank Group excluding Colonial
28
Arrears
Loans Accruing past 90 days or more
30/06/00 31/12/00 30/06/01
$m $m $m
Housing Loans 211 247 218
Other Loans 64 66 90
Total 275 313 308
Housing loans arrears rate
30/6/98 30/6/99 30/6/00* 31/12/00* 30/06/01
Housing Loans accruing
but past 90 days or more $m 249 182 211 247 218
Housing loan balances $m 47,471 52,646 70,738 71,505 73,511
Arrears rate % 0.53% 0.35% 0.30% 0.35% 0.30%
*Housing loan balances net of securitisation and includes Colonial and home equity and similar
facilities. See Profit Announcement for the full year ended 30 June 2001 (p.13)
29
Credit Risk: Historical P&L Charge
0.00%
0.05%
0.10%
0.15%
0.20%
Dec-98* Jun-99* Dec-99 Jun-00 Dec-00 Jun-01
Bad Debt Expense / RWA
* Excludes Colonial
Basis
Poin
t C
harg
e P
er
Half
30
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
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*
Jun
01*
0
50
100
150
200
250
300
%
General Provision
Specific Provision
Total Provisions/Gross Impaired Assets (axis on right)
Aggregate Provisions
* Includes Colonial
$m
illio
ns
Colonial Merger
32
$m
Base case synergy target 380
Additional synergies:
- Staff costs
- Property savings 70
- Other (net)
Total anticipated integration synergies
by end of year 3 (June 2003) 450
Overall Synergies
Additional integration synergies:
33
Integration Expenditure
Restructuring Provision
Provision30/06/00
$m
ExpenditureFull Year
Ended30/06/01
$m
Adjustmentsto Opening
Balance$m
ClosingBalance30/06/01
$mRestructuring Costs
- Colonial 294 244 145 195
- Commonwealth 106 100 - 6
Total RestructuringCosts (pre tax)
400 344 145 201
Net of Tax 330 275 87 142
Fair Value Adjustments(pre tax)
475 n/a 162 637
Net of Tax 327 n/a 151 478
34
Integration Related Staff Movements
BusinessCase
Merger
Jan-00 Jun-00
Total Staff 40,018 37,205
EDS Migration &
Technology Net Exits
(113)Other Net Reduction
Retrenchments (110)
(269)
Movement
Jan to JunJun-01
34,960 (5,058)
(459)
(1,196)
(1,469)
(3,124)Total Integration Mvt
(1,083)
(1,359)
(2,855)
(413)
(3,124)
(46)
Funding and Capital
36
0
20
40
60
80
100
Dec-99 Jun-00 Dec-00 Jun-01
0
25
50
75
100
Total Retail Deposits (LHS)
Market Share of Retail Deposits (RHS)
Retail Funding % (RHS)
A$bRetail
%
Funding Sources
37
Capital Adequacy
31 Dec 99 30 Jun 00 31 Dec 00 30 June 01
Total Tier One Capital 7,336 9,618 8,914 9,015
Total Tier Two Capital 3,945 6,097 5,802 5,784
Tier One and Tier Two Capital 11,281 15,715 14,716 14,799
Deductions (1,389) (3,197) (2,278) (2,119)
Total Regulatory Capital 9,892 12,518 12,438 12,680
Risk Weighted Capital Ratios (%)
Tier one 6.76 7.49 6.71 6.51
Tier two 3.63 4.75 4.37 4.18
Less Deductions (1.28) (2.49) (1.71) (1.53)
Total 9.11 9.75 9.37 9.16
38
ROE and EPS
* As reported in prior profit announcements (i.e. not proforma)
8890 91 91
22.58%
20.78%
12.46%13.10%
23.07%
12.74% 14.26%
21.19%
0
25
50
75
100
Dec-99 Jun-00 Dec-00 Jun-01
EPS
0%
5%
10%
15%
20%
25%
ROE
Earnings per share - cash basis ROE - cash basis ROE - before abnormals
39
Annual Dividends
20 2024
36 3845 46 49
58 61
20 22
36
4652
57 58
66
7572
0
25
50
75
100
125
150
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Ce
nts
0
10
20
30
40
50
60
70
80
90
100
%
First Half Second Half Payout Ratio
40
Overview
• Retail Integration completed ahead of time & to business case
• Additional $70 million of integration synergies identified
• $800 million added to value of wealth management businesses
• Strong net interest income with stable net interest margin
• Positive contribution from other banking income
• Home lending market share beginning to stabilise
• Weaker life insurance operating margins & investment earnings
below long term expectations
• Operating expenses increased above plan
Presentation of Full Year Results22 August 2001
www.commbank.com.au
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