deutsche bank asia pacific financial institutions conference 9 july 2001
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Deutsche BankDeutsche BankAsia Pacific Financial Institutions Conference Asia Pacific Financial Institutions Conference
9 July 2001 9 July 2001www.commbank.com.auwww.commbank.com.au
Deutsche BankDeutsche BankAsia Pacific Financial Institutions Conference Asia Pacific Financial Institutions Conference
9 July 2001 9 July 2001www.commbank.com.auwww.commbank.com.au
2
The material that follows is a presentation of The material that follows is a presentation of general background information about the Bank’s general background information about the Bank’s activities current at the date of the presentation, 9 activities current at the date of the presentation, 9 July 2001. It is information given in summary form July 2001. It is information given in summary form and does not purport to be complete. It is not and does not purport to be complete. It is not intended to be relied upon as advice to investors or intended to be relied upon as advice to investors or potential investors and does not take into account potential investors and does not take into account the investment objectives, financial situation or the investment objectives, financial situation or needs of any particular investor. These should be needs of any particular investor. These should be considered, with or without professional advice considered, with or without professional advice when deciding if an investment is appropriate.when deciding if an investment is appropriate.
DisclaimerDisclaimer
3
Speaker’s NotesSpeaker’s Notes
• Speaker’s notes for this presentation Speaker’s notes for this presentation are attached below each slide.are attached below each slide.
• To access them, you may need to To access them, you may need to save the slides in PowerPoint and save the slides in PowerPoint and view/print in “notes view.”view/print in “notes view.”
4
• Australian financial services environmentAustralian financial services environment
• Our starting positionOur starting position
• Recent and future developmentsRecent and future developments
• Summing upSumming up
• Australian financial services environmentAustralian financial services environment
• Our starting positionOur starting position
• Recent and future developmentsRecent and future developments
• Summing upSumming up
AgendaAgenda
5
Is the media overusing the ‘R’ word?
(use of "recessions" in newspapers)
0
250
500
750
1000
Jan-00 Jul-00 Jan-01 Jul-010
250
500
750
1000No.
No.
*Survey covers 19 major Australian newspapers
Australian Economic EnvironmentAustralian Economic Environment
Vs
Source : Commonwealth Bank Group illustration
GDP
(quarterly % change)
-1
0
1
2
3
Sep-89 Sep-92 Sep- 95 Sep-98-1
0
1
2
3% %
Mar-01
6
Australian Economic EnvironmentAustralian Economic Environment
AUD - "FAIR VALUE"
Source : Commonwealth Bank Group illustration
CURRENT ACCOUNT
(% of GDP)
-8
-6
-4
-2
0
Sep-78 Sep-84 Sep-90 Sep-96 Sep-02-8
-6
-4
-2
0% %
CBA (f)
0.50
0.60
0.70
0.80
0.90
1986 1989 1992 1995 19980.50
0.60
0.70
0.80
0.90
Actual
Traditional Fair ValueCalculation
USDUSD
2001
Vs
7
Australian Economic EnvironmentAustralian Economic Environment
0
2
3
4
CONSUMER PRICES(% change)
1
Sep-89 Sep-92 Sep-95 Sep-980
1
2
3
4% %
GSTeffect
HOUSING AFFORDABILITY^
^ Commonwealth Bank Group / Housing Industry Association measure
100
125
150
175
200
Sep-89 Sep-92 Sep-95 Sep-98 Sep-01100
125
150
175
200Index Index
(e)
12
HOUSEHOLD INTEREST PAYMENTS(% of disposable income)
0
3
6
9
12
Sep-89 Sep-92 Sep-95 Sep-980
3
6
9
% %
Consumer debt
Total
Dwelling & other
Mar-01 Mar-01
8
Wealth Distribution and AgeingWealth Distribution and AgeingUnited Kingdom
20%
35%
30%
2000 20502010 2020 20402030
25%
10%
30%
20%
United States
1950 20501970 1990 20302010
15%
40%
25%
20%
35%
30%
Japan
1990 20502010 2020 204020302000
Australia
15%
35%
25%
1990 20502010 2020 204020302000
China
5%
35%
15%
25%
1990 20502010 2020 204020302000
Source: US Census Bureau
Prime Savers and Dissavers - % of total population
Prime Savers (40-59 yrs)
Dissavers (60+ yrs)
This marks the current decade
9
RegulationRegulation
• Policy driven by populist politicsPolicy driven by populist politics
• More than 25 inquiries currently underwayMore than 25 inquiries currently underway
• Declining understanding of industry’s role and Declining understanding of industry’s role and operationoperation
• Increasing trend to micro regulation Increasing trend to micro regulation
Increased regulation seems inevitable and is no Increased regulation seems inevitable and is no different to every other developed economydifferent to every other developed economy
10
Sector GrowthSector GrowthCredit Growth
0
100
200
300
400
500
600
700
800
900
1000
1997 1999 2001 2003
$B
illi
on
0%
2%
4%
6%
8%
10%
12%
14%
Total Credit (Commonw ealth Bank Group )
Total Credit (Industry)
Annual Grow th (%)
Retail Deposit Growth
0
50
100
150
200
250
300
350
400
450
1997 1999 2001 2003 2005 2007
$B
illio
n
0%
1%
2%
3%
4%
5%
6%
7%
8%
Retail Deposits (Commonwealth Bank Group)
Retail Deposits (Industry)
Annual Growth (%)
Retail Funds Management (Non-Life & Life)
0
100
200
300
400
500
600
700
1997 1999 2001 2003 2005 2007
$Bil
lio
n
0%
5%
10%
15%
20%
Retail FUM (Commonw ealth Bank Group)
Retail FUM (Industry)
Annual Grow th (%)
Life Insurance (Risk Products)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
1997 1999 2001 2003 2005 2007
$B
illio
n
-5%
0%
5%
10%
15%
Annual Premium Inforce (Commonwealth Bank Group)
Annual Premium Inforce (Industry)
Annual Growth (%)
Source: ABS, Commonwealth Bank Source: Salomon Smith Barney Estimates, APRA, Commonwealth Bank
Source: Salomon Smith Barney Estimates, ASSIRT, Commonwealth Bank
Source: Plan for Life, Commonwealth Bank
Our Starting PositionOur Starting Position
12
Commonwealth Bank GroupCommonwealth Bank Group
Net Operating Profit
1,033 1,0351,109
0
200
400
600
800
1,000
1,200
Dec 1999** Jun 2000** Dec 2000
$m
* Net Profit after tax and outside equity interest - cash basis. Excludes abnormal items, appraisal value uplift and goodwill amortisation
** Proforma
Operating Income
2,070 2,086 2,221
1,072 1,106 1,196
739664320
300241
818
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
$m
Net Interest Income Other Banking Operating Income
Funds Management Income Life Insurance Income
* Proforma
Funds Under Management
23 25
28 32 35 36
202423 24 26
10
2018
2122
14
1210
8
0
20
40
60
80
100
120
140
Dec 1999* Jun 2000 Dec 2000 Mar 2001
$b
Australian Retail Funds** Australian Wholesale Funds
International Funds Australian Life Assets
Other Life Assets
Share Price Performance
05
101520
25303540
Dec1996
Jun1997
Dec1997
Jun1998
Dec1998
Jun1999
Dec1999
Jun2000
Dec2000
Jun2001
Sh
are
pri
ce $
0
10
20
30
40
To
tal
Sh
areh
old
er
Ret
urn
%
Closing share price ($) (LHS)Total Shareholder Return for 5 years (% pa)Average TSR (ANZ, NAB, Westpac)
13
Australian Market Share Australian Market Share Jun2000
Dec2000
Mar 2001
Home Loans 21.4% 20.8% 20.9%
Credit Cards 29.0% 29.0% **
Personal Loans 23.9% 22.9% 23.6%
Retail Deposits 25.3% 24.6% 24.6%
Retail FUM 16.0% 17.1% 20.0%
Retail Broking 9.0% 8.5% 8.0%
** Not available for March 2001
14
The Integration AchievementThe Integration Achievement
17/7/00
• Interim Risk management framework
• Staff & Customer Communications
• Email link
• Key management roles
• Corporate entity restructuring
• Product Decisions
• Brand Strategies
• Owned Distribution
•Third Party Distribution
• Managerial Functions Rationalisation
• On-line strategies
• Product Rationalisation
• Brand economics analysed
• Systems changes to support product specification
• Back office processing specifications
• Interim process integration
• Distribution function specifications
• Colonial Customers transact in CBA branches
• Brands rationalised
• Branch amalgamation
• Call Centre & Back office integration
• Third party distribution alignment
• On line business model
• Property rationalisation
• Systems integration
30/9/0031/12/00
30/6/01
People
Phase
Design
Phase
Specifications
PhaseImplementation
Phase
15
The Integration ExperienceThe Integration Experience
• Transaction bridge designed and built for testing within 90 days
• 279 branch amalgamations and 89 Colonial branch sites
were rebadged over 7 weekends
• 1,950 staff completed Orientation workshops
• 39,600 hours of call centre staff training– 90 new scripts prepared to respond to customer questions about the merger and product conversion
• 3.5 million Colonial ATM transactions per month redirected to the Commonwealth Bank ATM network
• 1 million Product conversion mailing packs sent to customers
• 700,000 Access cards issued to customers
– existing pins and passwords automatically transferred
• 1.3 million accounts converted
16
Capital and Debt Management StrategyCapital and Debt Management Strategy
• $3.6 billion of share buy-backs since 1996 (full $3.6 billion of share buy-backs since 1996 (full privatisation)privatisation)
– Off market share buy-back of $700 million in April Off market share buy-back of $700 million in April 2001. More than 9 times oversubscribed. 2001. More than 9 times oversubscribed.
• Preference Share Issue of $700 million in April 2001Preference Share Issue of $700 million in April 2001
– Through ComSec : 6,075 online prospectus Through ComSec : 6,075 online prospectus requests and 2,047 online applications.requests and 2,047 online applications.
• $7.5 billion of mortgage backed securities issued $7.5 billion of mortgage backed securities issued since 1997since 1997
– Australian mortgage securitisation of $2.9 billion in Australian mortgage securitisation of $2.9 billion in April 2001April 2001
17
Group StrategyGroup Strategy
To be To be
the best the best
brands in brands in
helping helping
customers customers
manage and manage and
build wealthbuild wealth
To be To be
the best the best
brands in brands in
helping helping
customers customers
manage and manage and
build wealthbuild wealth
Strategic Vision
Low inflationLow inflation
Technology shiftTechnology shift
Environment of:
Competition and margin squeezeCompetition and margin squeeze
Ageing population and rate of changeAgeing population and rate of change
On line services and wealth creationOn line services and wealth creation
Recent and Future DevelopmentsRecent and Future Developments
19
TechnologyTechnology
• Shared ApplicationsShared Applications– Web enabled Human Resources information servicesWeb enabled Human Resources information services
– Financial systemsFinancial systems
– On-line eProcurementOn-line eProcurement
– Data and customer relationship managementData and customer relationship management
• Business ApplicationsBusiness Applications– Image item processingImage item processing
– End to end process re-engineeringEnd to end process re-engineering
• InfrastructureInfrastructure– IPNetIPNet
– IntranetIntranet
• OutsourcingOutsourcing– IT - EDS AustraliaIT - EDS Australia
– Telecommunications - TCNZATelecommunications - TCNZA
Technology
20
PeoplePeople
• Upskilling of people to achieve business leadership Upskilling of people to achieve business leadership skills, commercial acumen and depth of talent.skills, commercial acumen and depth of talent.
• Align work, business, leadership and remuneration Align work, business, leadership and remuneration systems to future Group requirements.systems to future Group requirements.
Best Team• Implementation of consistent Implementation of consistent Group wide models for attraction, Group wide models for attraction, retention, promotion and reward.retention, promotion and reward.
21
Reconfiguration of the Reconfiguration of the Proprietary Distribution NetworkProprietary Distribution Network
• An efficient and productive networkAn efficient and productive network– Face-to- FaceFace-to- Face– Mobile BankersMobile Bankers– Business Banking CentresBusiness Banking Centres
• Underpinned by:Underpinned by:– effective technology and streamlined processeseffective technology and streamlined processes– transformational change in front-line people systems transformational change in front-line people systems
and cultureand culture
• Aligned to customer segment needs and valuesAligned to customer segment needs and values
22
Products, post integrationProducts, post integration
• BrandsBrands
• Proprietary and third party channelsProprietary and third party channels
• ‘‘Best of breed’ product offeringBest of breed’ product offering– choicechoice
– competitivecompetitive
– convenienceconvenience
23
SuperannuationSuperannuation
Simple - Discrete products
Complex - Masterfunds
Platform - Administration wrap
0%
20%
40%
60%
80%
100%
2000 2001 2002 2003 2004 2005
Source: Plan for Life
Su
per
ann
uat
ion
ass
ets
24
SuperannuationSuperannuation
Corporate Funds
Do it yourself Funds
Industry Funds
Public Sector Funds
Retail
Wholesale Funds ManagementWholesale Funds Management Education/retirement planning
Cash Management Trusts
Retail Unit Trusts ComSec Super Bonds
Wholesale Funds Manager
Commonwealth Bank Group
25
United Kingdom• London &
Edinburgh• 188 staff
Asia• Presence in Hong Kong,
Singapore & Mainland China• 84 staff
Australia• 1996,1998 & 1999 Australian fund
manager of the year• Listed, retail, wholesale and private
equity products• Direct property investment
products• Consistent top quartile performer• Over 700 staff
New Zealand
Funds Under MangementFunds Under MangementColonial First StateColonial First State
Aus76%
UK18%
Asia3%
NZ3%
Location of FUM - by source
Operations in Australia, UK, New Zealand, Hong Kong, Singapore and China
Focus on institutional, wholesale and retail markets. Investment in most asset classes
Tactical Global Management
• 24 staff• Domestic &
International clients
Total FUM - A$ 84bn
26
Funds under ManagementFunds under ManagementCommonwealth Investment ManagementCommonwealth Investment Management
Composition of FUM
Investment Mix
Over $35bn in FUM across a diverse range of clients (including $10bn of cash management).
Quantitative management and active management of Australian shares, bonds, credit, cash and infrastructure.
Innovative product offerings such as Commonwealth Diversified Credit Fund.
As at 31 May 2001Index28%
Active72%
Wholesale Super Funds18%
Institutional Funds16%
Wholesale Unit Trusts 6%
Retail Life Ins. & Super 34%
Retail Unit Trusts 26% 66%
24%4%
43% 7%
cash component#%
27
The Group’s approach to RiskThe Group’s approach to Risk
• Integrated Risk Management FrameworkIntegrated Risk Management Framework
• Risk ToleranceRisk Tolerance
• Economic EquityEconomic Equity
Summing upSumming up
29
Summing upSumming up
• Brand and scaleBrand and scale
• PeoplePeople– Customer ServiceCustomer Service
• RevenueRevenue– Customer segmentationCustomer segmentation– Volume and market share growthVolume and market share growth– Cross-offering non-traditional products to the Group’s Cross-offering non-traditional products to the Group’s
customer base.customer base.
• Productivity enhancementProductivity enhancement– Process re-engineeringProcess re-engineering– Unit cost reductionUnit cost reduction
• International presenceInternational presence
Deutsche BankDeutsche BankAsia Pacific Financial Institutions Conference Asia Pacific Financial Institutions Conference
9 July 2001 9 July 2001www.commbank.com.auwww.commbank.com.au
Deutsche BankDeutsche BankAsia Pacific Financial Institutions Conference Asia Pacific Financial Institutions Conference
9 July 2001 9 July 2001www.commbank.com.auwww.commbank.com.au