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Commonwealth Bank of AustraliaPrimary Credit Analyst:Mark Legge, Melbourne 61-3-9631-2041; [email protected]

Secondary Credit Analyst:Sharad Jain, Melbourne (61) 3-9631-2077; [email protected]

Table Of Contents

Major Rating Factors

Rationale

Outlook

Peer Analysis

Profile

Support And Ownership

Strategy

Financial Management

Risk Management

Profitability

Capital

Related Research

July 19, 2009

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Commonwealth Bank of Australia

Major Rating Factors

Strengths:

• Robust market position in key market segments

• Globally among the strongest banks on key earning metrics and earnings

stability

• Good asset quality supported by conservative lending standards

• Low-risk traditional retail and commercial banking model

Counterparty Credit Rating

AA/Stable/A-1+

Weakness:

• Significant dependence on wholesale offshore borrowings, which could cause a disruption to funding access

RationaleThe 'AA' issuer credit rating on Australia-based major bank Commonwealth Bank of Australia (CBA) isunderpinned by our expectation that CBA will remain among the strongest banks globally, based on key earningmetrics, earnings stability, and asset quality.

The rating continues to be supported by the bank's very strong business profile in its key and main domestic markets

of Australia and New Zealand.

Standard & Poor's Ratings Services expects that the global economic downturn is likely to have a fairly benignimpact on the Australian economy, resulting in only a mild and short recession in the country.

Furthermore, we believe that the Australian banking sector's less fiercely competitive environment relative to some

of the global peers has contributed to less risky lending standards, reflected in lower loan-to-value ratios in the

residential mortgage sector. Consequently, we believe that earnings pressures and impairments or credit losses for

CBA are likely to remain significantly lower than those experienced by some international peers. Standard & Poor's

expects CBA to maintain an earnings profile supportive of its 'AA' rating in the medium term. Together with its

wealth management brand, Colonial First State (CFS), CBA has the largest domestic franchise in the Australian

financial services sector, with total assets of almost A$619 billion on Dec. 31, 2008.

We believe that with the weakening global economy—including CBA's main markets of Australia and NewZealand—credit losses are likely to significantly increase compared with the very benign record in recent years.

In our opinion, new loan loss provisions are likely to increase in fiscal 2010, but only slightly from the levels

recorded in the first half of fiscal 2009, before starting to decrease in fiscal 2011. (For further details on our

expected credit loss rates, please see "Criteria | Financial Institutions | General: Credit Stress Testing Asia-Pacific

Banks", published on June 16, 2009.)

A key factor underpinning the 'AA' rating is our view that the "traditional" retail and commercial banking modeladopted by CBA supports its income stability.

The contribution of trading income or losses to CBA's earnings is small, as CBA undertakes very limited proprietary

trading and holds insignificant amounts of trading securities, which are subject to volatile mark-to-market

movements. At Dec. 31, 2008, customer loans formed 74.4% of the group's total assets.

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CBA's creditworthiness is underpinned by its very strong competitive and market positions.

As one of the largest financial institutions in Australia, it has a leading market share in the important business lines

of household deposits and home lending. Moreover, CBA's acquisition of Bank of Western Australia Ltd.

(BankWest; AA/Stable/A-1+) provides it with the ability to further grow its market share. We believe integration

risks are manageable because of the modest size of the acquisition.

CBA has strengthened its capital position recently.

At Dec. 31, 2008, its tier 1 capital-to-risk weighted assets ratio was 8.75%, compared with 7.14% at June 30, 2007.

The bank's tier 1 capital is in line with its Australian peers, and is substantially above the bank's 7.0% target.

Standard & Poor's anticipates CBA will maintain this buffer until global financial markets stabilize. The bank's

quality of capital is lessened by the level of nonrecourse debt in Colonial Holding Co. Ltd. (AA-/Stable/A-1+), which

Standard & Poor's expects CBA would support when needed.

Short-term credit factorsThe short-term rating is 'A-1+', reflecting our opinion that CBA's very strong on-balance-sheet liquidity andproactive liquidity management minimize any potential for financial stress in the medium term.

At Dec. 31, 2008, CBA's liquid assets (excluding BankWest's) represented 20% of the bank's total borrowings. CBA

has significantly strengthened its on-balance-sheet liquidity, which includes substantial internally securitized

residential mortgages securities that are repurchase (repo)-eligible securities for the respective central banks. Despite

potential dislocation in global financial markets, such as that witnessed in the past two years, we consider that

CBA's funding and liquidity are likely to remain well managed. The bank has successfully raised wholesale funding

with the benefit of guarantee schemes announced by the government in Australia in recent months. CBA is also a

participant of the Australian Interbank Deposit Agreement, potentially providing A$6 billion funds, if required.

CBA has maintained a high reliance on its relatively stable customer deposits and long-term wholesale sources,which funded about 71% of total funding as at March 31, 2009.

Similar to other large Australian banks, CBA remains significantly dependent on the international wholesale-funding

market, which exposes the bank to volatility in global financial markets.

Although the withdrawal of government guarantee schemes before global financial markets stabilize could affectCBA's funding access, we believe the risk of the governments doing so is low in the near term.

We expect that withdrawal of such guarantee schemes will be done in an orderly manner by the G-20 countries and

only after the global financial markets have stabilized.

OutlookThe stable outlook is supported by our expectations of CBA's continued satisfactory earnings, credit lossesremaining well under control, adequate capitalization, well-managed funding and liquidity (notwithstandingCBA's material dependence on offshore wholesale funding), and conservative risk appetite.

Standard & Poor's acknowledges that, similar to other major Australian banks, CBA is likely to face significant

challenges in the next two years due to the global economic downturn and potentially further financial-market

volatility. Despite these challenges, we believe that the risk of a rating downgrade is lower than a "one-in-three"

chance threshold that would apply to a negative outlook.

We believe that the most likely foreseeable risks to the ratings on CBA would be one or more of the following three

factors:

• An increase in credit losses that is materially beyond our current expectations. The rating is likely to be reviewed




if our expectations of credit losses moved to a level closer to the current downside scenario from the current

base-case scenario outlined in our stress test article. Based on our stress test criteria and under our base-case loss

rate assumptions, we estimate CBA's annual new loan loss provisions to remain at about 0.7% of customer loans

in the medium term. The provisions are estimated to be about 1.2% under the downside case. Credit losses could

significantly rise due to a deeper, more rapid, and longer economic recession than our current expectations, or

even a worse-than-expected impact from a benign economic recession.

• Disruption in funding access. Similar to other major Australian banks, the risk of access to funding is heightened

by CBA's significant dependence on the international wholesale-funding market. Funding access could be affected

by developments such as a general disruption in the global funding markets—as witnessed several times in the

past two years—or, if CBA needs to compete with highly rated sovereign governments for wholesale funding.

Further, any material adverse developments relating to CBA could affect investor sentiment and consequently its

access to funding.

• Changes in risk appetite. A change in risk appetite is likely to be evidenced through CBA pursuing riskier business

models, a more aggressive strategy, or a large acquisition. The potential for such developments is underpinned by

possible shareholder pressure to grow earnings given the weak medium-term outlook, and likely M&A

opportunities as financial institutions worldwide restructure their businesses. Additionally, any large acquisitions

could also affect CBA's capital profile.

• In the medium term, the ratings are unlikely to be raised from the current level because relative to other highly

rated global peers, CBA remains reliant on fewer geographic markets, and is more dependent on offshore

wholesale funding.

Peer AnalysisThe most appropriate domestic peers for CBA are Australia and New Zealand Banking Group Ltd. (ANZ),National Australia Bank Ltd. (NAB), and Westpac Banking Corp. (WBC)—all rated 'AA/A-1+' with stableoutlooks.

There are strong similarities between CBA and the three other major Australian banks in terms of their: primarily

retail and commercial banking operations; main focus on Australasia; very strong market positions; and risk

appetite and management. We expect little differentiation in credit loss experience between the four banks and

broadly similar earnings and capitalization metrics. Nevertheless, key differences between CBA and its Australian

peers include:

• CBA and WBC have superior market positions for household deposits and home loans compared to NAB and

ANZ;

• CBA and WBC have higher ratios of residential loans-to-gross loans than the other two;

• CBA and ANZ have greater levels of customer deposits to their funding bases;

• CBA and WBC had lower credit and impairment losses than ANZ and NAB in fiscal 2008, although currently we

do not envisage credit risk will drive significant differentiation in the ratings of Australia's major banks;

• CBA has a lower proportion of its assets in New Zealand compared with ANZ - the standalone credit profiles of

the major Australian banks' subsidiaries in New Zealand are marginally weaker than their respective parents.

• CBA has a less aggressive Asian expansion strategy compared with ANZ.

• CBA and WBC had significant acquisitions in fiscal 2009. These acquisitions appear to be on track for an orderly




integration.

• CBA's relatively lower adjusted total equity (ATE)/adjusted asset ratio is offset by the bank's stronger market

shares of retail mortgages and deposits in Australia, as well as its low-risk residential mortgages comprising a

significant share of about 60% of total customer loans.

Standard & Poor's considers the closest international peers of CBA (and the other three major Australian banks) to

be the five Canadian banks: Bank of Montreal (A+/Stable/A-1), Bank of Nova Scotia (The) (AA-/Stable/A-1),

Canadian Imperial Bank of Commerce (A+/Negative/A-1), Royal Bank of Canada (AA-/Stable/A-1+), and

Toronto-Dominion Bank (The) (AA-/Stable/A-1). These Canadian banks share important characteristics with CBA

in terms of their: balance sheet sizes; dominant positions in the respective domestic banking markets; very low credit

loss and NPA levels; and significant reliance on domestic and wholesale funding. Other international peers include

France's Caisse Nationale des Caisses d'Epargne et de Prevoyance (A+/Stable/A-1), Singapore's DBS Bank Ltd.

(AA-/Stable/A-1+), Nordea Bank AB (AA-/Stable/A-1+), and Lloyds TSB Bank PLC (A+/Stable/A-1).

Standard & Poor's higher ratings on CBA (and the other three major Australian banks) compared with the above

international peers reflect the following strengths:

• The decline in CBA's earnings is expected to remain relatively muted;

• The Canadian banks have significantly higher exposures to trading activities.

• Return on assets and equity is expected to remain stronger in the medium term for CBA compared with the

Canadian banks.

• While DBS Bank also has strong market positions in its key markets, and has a better funding profile than CBA,

the higher ratings on CBA are supported by the bank's larger and more diversified operations, and significantly

lower credit risk.

• The final ratings on Lloyds TSB and Caisse Nationale benefit from parent and/or government support. However,

we consider their standalone credit profiles to be weaker than CBA's due to their significantly higher credit and

trading risks, and weaker capitalization and earnings profiles.

• Nordea Bank group benefits from a strong market position and good diversity within Scandinavia, and its low

credit losses. However, its earnings and ATE/adjusted assets metrics are also weaker than CBA's.

Table 1

Domestic and International Peers – Key Financial Metrics

Adj.assets

(bil.US$)

ATE(bil.

US$)

Pretaxearnings(bil. US$)

Op incomeafter LLP/Avg. adj.

assets (%)

ATE/Adj.

assets(%)

Gross loans tocustomers/

Adj. assets (%)

Customerloans/

customerdeposits (%)

Customerdeposits/

fundingbase (%)

New LLP/Avg.

customerloans (%)

Australia and NewZealand BankingGroup Ltd.

402 19.4 1.69 0.94 4.83 72 163 56 0.78

Commonwealth Bankof Australia

476 17.1 2.64 1.00 3.58 74 162 56 0.83

National AustraliaBank Ltd.

503 22.5 2.82 0.96 4.47 71 176 50 0.83

Westpac BankingCorp.

460 21.3 2.50 1.18 4.62 79 175 54 0.82

Bank of Montreal 382 17.2 0.65 0.31 4.51 42 180 34 0.87

Caisse Nationale 905 23.1 (5.09) (0.3) 2.55 46 136 46 0.52




Table 1

Domestic and International Peers – Key Financial Metrics (cont.)

Canadian ImperialBank of Canada

304 9.5 0.40 0.17 3.10 48 159 39 0.79

DBS Bank Ltd. 184 15.8 1.67 0.94 8.61 49 76 89 1.35

Lloyds TSB Bank 716 13.1 1.30 0.31 1.82 57 144 53 1.33

Nordea Bank AB 682 21.6 4.69 0.70 3.16 57 184 46 0.53

Royal Bank of Canada 607 22.7 5.18 0.85 3.97 43 198 33 1.19

Nova Scotia Bank 438 19.8 3.84 0.93 4.52 59 243 31 0.54

Toronto-DominionBank

490 16.1 2.05 0.54 3.33 44 113 51 1.01

Annualized data at second-quarter fiscal 2009 for Australian banks and first-quarter fiscal 2009 for others. 2008 full-year data for Caisse Nationale and Lloyds TSB.

ATE—Adjusted total equity. LLR—Loan loss reserve. Source: Standard & Poor's and bank financial reports.

ProfileCBA has a well-diversified earnings platform with operations in banking, funds management, and insurance.

For the half-year to Dec. 31, 2008, retail banking contributed 56% of net profit after tax (cash basis), corporate

banking 10%, wealth management 9%, and international operations 14%.

CBA has very strong competitive and market positions.

It is one of the largest financial institutions in Australia with a leading market share of household deposits (32.4%

including BankWest), home lending (25.3%), and credit cards. In December 2008, CBA acquired Bank of Western

Australia Ltd. (BankWest) and St. Andrew's Australia Pty Ltd. The BankWest acquisition provides CBA with the

ability to grow its market share in such important areas as deposits and home lending. Moreover, the relatively

modest size of the acquisition means CBA is well placed to successfully integrate BankWest into its operations.

Table 2

CBA's Market Shares In Australia Relative to Other Majors

At March 31, 2009

Australia and New ZealandBanking Group Ltd.

Commonwealth Bank of Australia(CBA)*

National AustraliaBank Ltd.

Westpac BankingCorp.*

Home lending 15.78 25.26 15.91 25.91

Business lending 16.47 18.56 18.88 15.89

Householddeposits

13.31 32.38 12.97 23.29

*CBA data includes Bank of Western Australia Ltd., and Westpac data includes St.George Bank Ltd. Source: Australian Prudential Regulation Authority.

Despite the slowing Australasian economies, volume growth over the 12 months to March 2009 has been strong.

In particular, the bank (including BankWest data) experienced strong growth in home loans (18.3% compared with

system growth of 7.5%), household deposits (18.9%; system 18.8%), business lending (6.4%; system 8.7%); and

business deposits (12.6%; system 15%).

The CBA group also holds strong positions in the Australian life and funds management markets through its 100%subsidiaries, CMLA and fund manager CFS.

In the New Zealand banking and insurance markets, it also has strong positions through its 100% subsidiaries ASB

Bank Ltd. (ASB; AA/Stable/A-1+) and Sovereign Assurance Ltd. ASB is one of New Zealand's largest providers of

home lending with a 23% market share. In Australia, CFS is the largest retail fund manager, and CMLA ranks




number one for in-force life business (excluding conventional business). CBA holds solid market positions in margin

lending and stockbroking through Commsec. CBA also has a solid business franchise in asset finance through its

core subsidiary, CBFC Ltd. (AA/Stable/A-1+), and has a European banking core subsidiary, CommBank Europe Ltd.

(AA/Stable/A-1+).

CBA's main lines of business are competitive--especially in household deposits--resulting in a contraction inmargins.

Nevertheless, the competitive threat has lessened from the non-bank sector as the virtual closure of the securitization

market has hindered the ability of non-banks to fund lending growth.

Support And OwnershipCBA is a registered authorized deposit-taking institution (ADI) and a publicly listed company on the AustralianSecurities Exchange.

It is subject to the Corporations Law of Australia. As an ADI, CBA is under prudential supervision by the Australian

Prudential Regulation Authority (APRA), which covers both banking and insurance sectors. The bank is the

principal operating entity and the parent entity for the CBA group. CBA's shares are widely held.

The Australian Government guarantee scheme is supportive of the country's financial system.

Since October 2008, the Commonwealth of Australia (AAA/Stable/A-1+) has guaranteed deposits and wholesale

term borrowings (maximum five-year maturity) of Australian incorporated banks, building societies, credit unions,

and Australian subsidiaries of foreign-owned banks. However, the scheme is not permanent – three years for

deposits, while the wholesale funding guarantee is to be withdrawn once markets have normalized.

StrategyCBA's strategy is focused on improving profitable market-share growth through enhanced staff engagement,customer satisfaction, and improved information technology and operational performance.

In addition, CBA aims to deepen its market presence in its Australian and New Zealand banking operations

organically, as well as in its insurance and wealth management market segments. While CBA has operations in six

Asian countries, these involve smaller stakes, with future expansion expected to be via opportunistic acquisitions of

a relatively small scale.

Financial ManagementCBA's approach to financial management appears reasonably conservative.

Balance-sheet management is prudent, and CBA's established risk limits are moderate in the context of the group's

relatively large balance sheet. CBA engages in minimal levels of proprietary trading risk and controls market risk

through a well-established, extensive risk-management function. Independent groupwide risk oversight involves the

individual business units directly, and the team responsible for the role has direct access to the board if required.

Risk Management




Credit riskWhile CBA has experienced some significant increases in impaired assets over the past year, its asset qualityremains strong and is primarily supported by CBA's robustly performing portfolio of residential mortgages.

Credit quality is also supported by CBA's sound credit culture and advanced suite of credit standards and policies.

In response to higher arrears, CBA has tightened its credit policies. CBA also has sound loan portfolio and

risk-management capabilities.

As a result of a softening domestic economy, CBA's nonperforming assets (NPAs) have increased substantially(albeit off a low base).

According to our adjustments, CBA's ratio of NPAs-to-loans rose to 1.1% as at March 31, 2009, from 0.48% at the

end of fiscal 2008. Of the A$3,399 million of impaired assets (March 31, 2009), 88% were corporate related. At

this stage, the bank is not seeing a marked deterioration in its small-to-medium enterprise book, and its home loan

book is holding up well. Home loans arrears (90 days plus) recorded a level of 0.55% as of April 2009, having risen

since the December 2007 figure of about 0.3%.

Standard & Poor's stress tests suggest that CBA's annualized first-half fiscal 2009 pretax earnings before new loanloss provisions would be sufficient to absorb credit losses under a downside scenario (see table 3).

While we expect further softening in CBA's asset quality as a result of deteriorating economic conditions, it is

expected to remain solid by historical and international standards.

Table 3

Standard & Poor's Loss Rate Forecasts Under Base-Case And Stress-Case Scenarios For Commonwealth Bank of Australia

Annualized H1 pretax pre-provision recurring income (mil. A$)

2009H1 8,330

Loan loss provisions (Actuals) (mil. A$)

2008 930

2009H1 1,607

Loan loss provisions base-case forecast (mil. A$)

2009e 3,309

2010e 3,604

2011e 3,059

Loan loss provisions stress-case forecast (mil. A$)

2009e 3,745

2010e 5,493

2011e 5,102

Loan loss provisions/Average customer loans (actuals)

2008 0.27

2009H1 0.83

Loan loss provisions/Average customer loans base-case forecast

2009e 0.72

2010e 0.78

2011e 0.66

Loan loss provisions/Average customer loans stress-case forecast

2009e 0.81

2010e 1.19




Table 3

Standard & Poor's Loss Rate Forecasts Under Base-Case And Stress-Case Scenarios For Commonwealth Bank ofAustralia (cont.)

2011e 1.10

*Based on first half of fiscal 2009 data. e--Estimated figures based on Standard & Poor's stress tests. Source: Standard & Poor's and bank financial reports.

The strong asset quality has benefited from the bank's focus on the home loan segment (60% of loans, advances,and other receivables as at Dec. 31, 2008).

Exposures to the corporate and commercial segments are reasonably well spread by industry. Nonlending assets are

of adequate quality, consisting of cash and money market securities and other readily marketable securities. Lending

assets consisted of 74% of total assets as of Dec. 31, 2008. Importantly, commercial property comprises less than

7% of the loan portfolio.

Large single-customer exposures are acceptable and, on average, are of good credit quality. The top-20 commercial

exposures comprised around 4% of committed exposure as of Dec. 31, 2008.

Liquidity riskAs a result of continued uncertainty concerning access to global funding markets, CBA holds higher levels ofliquidity compared with prior to the disruption in financial markets.

As at Dec. 31, 2008, CBA's liquid-to-total borrowings ratio was 20%, compared with 13.0% six months earlier.

Standard & Poor's expects CBA to maintain an appropriately highly liquid position for the duration of the market

disruption.

The bank's liquidity policies are sound.

Active monitoring of structural mismatches, crisis scenario analysis, and bankwide specified limits and reporting

requirements support the bank's liquidity management. CBA is a participant of the Australian Interbank Deposit

Agreement, which provides the bank with A$6.0 billion funds, if required.

Limits are set for operational minimum qualifying liquid assets, which maintain positive cash flows under name

crisis scenarios, and for maximum maturities of long-term/short-term wholesale liabilities.

Market riskThe bank uses earnings-at-risk (EAR) and economic value-at-risk (VAR) models to manage interest rate risk in thenontrading balance sheet within conservative limits determined and monitored by the board risk committee.

Although the bank's treasury function is a profit center, Standard & Poor's is comfortable with the tolerance for

risk-taking at the bank. CBA's trading-risk management framework and policies are viewed as strong and consistent

with risks assumed.

Policies for balance-sheet, market, and operational risk management appear well developed and conservativelybased.

The bank's interest rate risk tolerance is minimal, and managed using traditional derivatives, such as swaps, forward

rate agreements, and futures.

Market risk associated with trading activities, which is equally moderate, is also monitored through the use of VAR.

CBA's trading risk framework and VAR model support are well developed.

Funding risk




To date, CBA has successfully managed the funding challenges posed by wholesale funding avenues that weredisrupted at times in the past year, increased costs, and to a lesser extent, the virtual closure of the RMBSsecuritization market.

As at the end of March 2009, the bank had completed its A$26 billion funding task for fiscal 2009 and is currently

prefunding for 2010. Difficulty in issuing debt with greater than three years' maturity at times during 2008 has

resulted in a bigger portion than before of CBA's debt maturing in the next 2-3 years, although this should be

manageable.

Just as other banks worldwide have depended on their respective government guarantees, CBA's funding hasextensively relied on the Commonwealth of Australia's wholesale debt guarantee to access wholesale debt markets.

Since September 2008, the overwhelming majority of term debt raised by CBA has utilized the government

guarantee. Nevertheless, the bank's diversified funding base has enabled it to undertake three unguaranteed deals

since January 2009, totaling A$2.6 billion. CBA has a substantial reliance on offshore sources, with funding

composition at March 31, 2009, comprising: Australia 43%; U.S. 23%; Europe 11%; and Japan 7%.

CBA's funding position benefits from its substantial retail base (largest in Australia) and diversified fundingsources.

As of Dec. 31, 2008, CBA had sourced 57% of its funding from retail deposits, 27% from short-term wholesale

markets, 14% from long-term wholesale markets, and 2% from securitization markets. While wholesale funding has

formed a greater proportion of CBA's total funding sources over the recent years, the bank has been successful in

increasing its household deposits during the period of global financial stress, with 19% growth in the year to

December 2008. This increase in deposits, in our opinion, partly reflects a 'flight to quality'.

ProfitabilityHigher funding costs and increasing credit loss provisions have adversely impacted CBA's financial performanceand resulted in reduced profitability.

Despite the difficult operating conditions, CBA has displayed strong earnings stability, with the group being

consistently profitable throughout the global financial crisis. Further, in spite of the continued deteriorating

economic conditions in Australasia and expected subdued investment markets, Standard & Poor's expects CBA will

continue to be profitable, although at a moderate level in the near term.

For the March quarter of 2009, cash earnings (unaudited) were A$1.15 billion (including impairment expense ofaround A$630 million), which is equivalent to a return on equity of 15%.

Moreover, a substantial increase in credit loss provisions was the driver for a 16% fall in CBA's first-half 2009 net

profit after tax (NPAT: cash basis) over the year to December 2008. Impairment charges increased almost five-fold

to A$1.6 billion as of Dec. 31, 2008, compared with a year earlier. Also negatively impacting the profit results was a

12% reduction in funds management income due to a more than 20% reduction in funds under management over

the year.

CapitalCBA has strengthened its capital position over recent times.

At Dec. 31, 2008, its tier 1 capital-to-risk weighted assets ratio was 8.75%, compared with 7.14% at June 30, 2007.

Tier 1 capital is substantially above the bank's 7.0% target and Standard & Poor's anticipates CBA will continue to

maintain this buffer while the global financial and economic distress remains. The bank has successfully raised

A$4.6 billion in equity over the six months to December 2008, which was distributed to the following: A$2.0 billion




reserved for the BankWest acquisition; A$2.0 billion provision partly in response to an expected increase in full-year

loan impairment expenses; and A$548 million from a dividend reinvestment plan. The bank's prospective capital

position will be assisted by CBA's decision to reduce its final dividend by 25%, which translates into a full-year

dividend fall of 14%.

The bank's quality of capital is lessened by the level of nonrecourse debt in Colonial Holding Co. Ltd.

(AA-/Stable/A-1+), which Standard & Poor's expects CBA would support when needed.

Based on our stress tests, CBA's capital levels are unlikely to come under threat in the medium term. Nevertheless,

we are in the process of rolling out Standard & Poor's risk adjusted capital framework, which would provide

further insights and help us in refining our evaluation of the bank's capital position.

Related Research

This report is based in part on the following criteria articles:

• Criteria | Financial Institutions | Banks: FI Criteria: Bank Rating Analysis Methodology Profile, published on

March 18, 2004

• Criteria | Financial Institutions | General: Credit Stress Testing Asia-Pacific Banks, published on June 16, 2009

Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Standard & Poor's (Australia) Pty. Ltd. does not hold

an Australian financial services license under the Corporations Act 2001. Any rating and the information contained in any research report published by Standard &

Poor's is of a general nature. It has been prepared without taking into account any recipient's particular financial needs, circumstances, and objectives. Therefore, a

recipient should assess the appropriateness of such information to it before making an investment decision based on this information.

Table 4

Balance Sheet Statistics

--Year ended June 30-- Breakdown as a % of assets (adj.)

(Mil. A$.) 2009* 2008 2007 2006¶ 2005 - 2009* 2008 2007 2006¶ 2005

Assets

Cash and money market instruments 41,429 14,720 15,603 12,975 11,965 7.59 3.21 3.81 3.85 4.12

Securities 44,777 35,462 33,161 27,966 24,900 8.21 7.73 8.11 8.29 8.58

Trading securities (marked tomarket)

24,862 21,676 21,469 15,758 14,628 4.56 4.72 5.25 4.67 5.04

Nontrading securities 19,915 13,786 11,692 12,208 10,272 3.65 3.00 2.86 3.62 3.54

Mortgage-backed securitiesincluded above

0 0 0 0 1,055 0.00 0.00 0.00 0.00 0.36

Loans to banks (net) 0 8,917 7,894 407 0 0.00 1.94 1.93 0.12 0.00

Customer loans (gross) 405,848 373,515 329,884 279,498 235,849 74.39 81.38 80.63 82.90 81.29

Public sector/government N.A. 1,568 1,777 1,528 3,000 N.A. 0.34 0.43 0.45 1.03

Residential real estate loans N.A. 186,926 163,839 144,834 119,095 N.A. 40.73 40.05 42.96 41.05

Other consumer loans N.A. 19,233 18,252 16,001 14,504 N.A. 4.19 4.46 4.75 5.00

Foreign loans 63,715 56,069 53,340 42,218 37,022 11.68 12.22 13.04 12.52 12.76

Commercial real estate loans N.A. 1,647 1,588 2,085 1,694 N.A. 0.36 0.39 0.62 0.58

Commercial/corporate loans N.A. 85,578 66,455 49,448 39,282 N.A. 18.65 16.24 14.67 13.54

All other loans 342,133 22,494 24,633 23,384 21,252 62.71 4.90 6.02 6.94 7.32




Table 4

Balance Sheet Statistics (cont.)

Loan loss reserves 2,683 1,713 1,233 1,217 1,547 0.49 0.37 0.30 0.36 0.53

Customer loans (net) 403,165 371,802 328,651 278,281 234,302 73.90 81.01 80.33 82.53 80.75

Earning assets 479,796 424,878 376,434 314,978 270,428 87.94 92.57 92.01 93.42 93.20

Equity interests/participations(nonfinancial)

804 648 629 9 18 0.15 0.14 0.15 0.00 0.01

Inv. in unconsolidated subsidiaries(financial co.)

3,247 258 207 181 34 0.60 0.06 0.05 0.05 0.01

Intangibles (nonservicing) 8,085 7,947 7,524 7,498 11,054 1.48 1.73 1.84 2.22 3.81

Fixed assets 2,251 1,640 1,436 1,314 1,344 0.41 0.36 0.35 0.39 0.46

Derivatives credit amount 43,209 18,232 12,743 9,675 12,144 7.92 3.97 3.11 2.87 4.19

Accrued receivables 0 2,889 2,923 2,015 1,838 0.00 0.63 0.71 0.60 0.63

All other assets 24,399 25,057 29,386 28,782 31,436 4.47 5.46 7.18 8.54 10.83

Total reported assets 571,366 487,572 440,157 369,103 329,035 104.73 106.23 107.59 109.47 113.40

Less insurance statutory funds (17,695) (20,650) (23,519) (24,437) (27,837)

Less nonservicing intangibles+ I/Ostrips

(8,085) (7,947) (7,524) (7,498) (11,054) (1.48) (1.73) (1.84) (2.22) (3.81)

Adjusted assets 545,586 458,975 409,114 337,168 290,144 100.00 100.00 100.00 100.00 100.00

Breakdown as a % of liabilities + equity

2009* 2008 2007 2006¶ 2005 2009* 2008 2007 2006¶ 2005

Liabilities

Total deposits 321,347 284,375 236,788 189,154 173,389 56.24 58.32 53.80 51.25 52.70

Noncore deposits 70,312 58,792 35,454 30,328 27,169 12.31 12.06 8.05 8.22 8.26

Core/customer deposits 251,035 225,583 201,334 158,826 146,220 43.94 46.27 45.74 43.03 44.44

Acceptances (liability) 14,732 18,278 18,721 18,310 16,786 2.58 3.75 4.25 4.96 5.10

Repurchase agreements 10,062 1,589 3,353 1,410 2,663 1.76 0.33 0.76 0.38 0.81

Other borrowings 113,326 102,403 101,610 91,268 64,781 19.83 21.00 23.08 24.73 19.69

Other liabilities 68,000 50,770 52,582 44,827 45,225 11.90 10.41 11.95 12.14 13.74

Total liabilities 527,467 457,415 413,054 344,969 302,844 92.32 93.81 93.84 93.46 92.04

Total shareholders' equity 33,165 30,157 27,103 24,134 26,191 5.80 6.19 6.16 6.54 7.96

Limited life preferred and quasiequity

104 104 118 135 131 0.02 0.02 0.03 0.04 0.04

Preferred stock and other capital 5,065 5,360 3,985 4,100 2,260 0.89 1.10 0.91 1.11 0.69

Minority interest-equity 14 13 7 3 1,789 0.00 0.00 0.00 0.00 0.54

Common shareholders' equity(reported)

27,982 24,680 22,993 19,896 22,011 4.90 5.06 5.22 5.39 6.69

Share capital and surplus 20,365 15,727 14,483 13,505 13,871 3.56 3.23 3.29 3.66 4.22

Revaluation reserve (409) 495 590 255 92 (0.07) 0.10 0.13 0.07 0.03

General banking risk reserves N.A. 0 350 350 N.A. N.A. 0.00 0.08 0.09 N.A.

Reserves (incl. inflationrevaluations)

1,367 711 1,203 1,299 4,532 0.24 0.15 0.27 0.35 1.38

Retained profits 6,659 7,747 6,367 4,487 3,516 1.17 1.59 1.45 1.22 1.07

Memo: Dividends (not yetdistributed)

(1,662) (2,029) (1,939) (1,668) N.A. N.A.

Total liabilities and equity 560,632 487,572 440,157 369,103 329,035 98.12 100.00 100.00 100.00 100.00




Table 4

Balance Sheet Statistics (cont.)

Equity Reconciliation Table

Common shareholders' equity(reported)

27,982 24,680 22,993 19,896 22,011

+ Minority Interest (equity) 14 13 7 3 1,789

- Dividends (not yet distributed) (1,662) (2,029) (1,939) (1,668) 0

- Revaluation reserves 409 (495) (590) (255) (92)

- Nonservicing Intangibles (8,085) (7,947) (7,524) (7,498) (11,054)

- Postretirement benefit adjustments (36) (1,075) (1,270) 0 0

Adjusted common equity 18,622 13,147 11,677 10,478 12,654

+ Admissible Prefs and hybrids 5,169 4,339 3,853 3,458 2,391

+ General Reserves 0 0 0 0 1,390

- Equity in UnconsolidatedSubsidiaries

(3,247) (258) (207) (181) (34)

- Capital of Insurance Subsidiaries (2,176) (1,920) (1,611) (1,523) N.A. N.A.

- Adjustment for Securitized Assets (168) 0 0 0 0

Adjusted total equity 18,200 15,307 13,712 12,232 16,401

*Data as of Dec. 31, 2008. Ratios annualized where appropriate. ¶Capital and profitability items prior to 2006 are not comparable due to modifications and refinements to

Standard & Poor's analytical adjustments. N.A.--Not available.

Table 5

Profit and Loss Statement Statistics

--Year ended June 30-- Adj. avg. assets (%)

(Mil. A$.) 2009* 2008 2007 2006¶ 2005 - 2009* 2008 2007 2006¶ 2005

Profitability

Interest income 16,462 29,234 23,862 19,758 16,194 6.45 6.56 6.27 5.94 5.83

Interest expense 11,919 21,327 16,826 13,244 10,228 4.67 4.78 4.42 3.98 3.68

Net interest income 4,543 7,907 7,036 6,514 5,966 1.78 1.77 1.85 1.96 2.15

Operating noninterest income 3,134 6,676 6,355 5,627 5,388 1.23 1.50 1.67 1.69 1.94

Fees and commissions 2,451 5,166 4,596 3,913 3,746 0.96 1.16 1.21 1.18 1.35

Trading gains 448 546 555 505 440 0.18 0.12 0.15 0.15 0.16

Other market-sensitive income (145) 13 37 (34) (13) (0.06) 0.00 0.01 (0.01) 0.00

Net insurance income 258 740 1,043 1,113 1,075 0.10 0.17 0.27 0.33 0.39

Other noninterest income 122 211 124 130 140 0.05 0.05 0.03 0.04 0.05

Operating revenues 7,677 14,583 13,391 12,141 11,354 3.01 3.27 3.52 3.65 4.08

Noninterest expenses 3,512 6,918 6,349 5,980 5,697 1.38 1.55 1.67 1.80 2.05

Personnel expenses 1,881 3,661 3,229 2,823 2,643 0.74 0.82 0.85 0.85 0.95

Other general and administrativeexpense

1,519 3,063 2,944 2,993 2,880 0.60 0.69 0.77 0.90 1.04

Depreciation 112 194 176 164 174 0.04 0.04 0.05 0.05 0.06

Net operating income before lossprovisions

4,165 7,665 7,042 6,161 5,657 1.63 1.72 1.85 1.85 2.04

Credit loss provisions (net new) 1,607 930 434 398 322 0.63 0.21 0.11 0.12 0.12

Net operating income after lossprovisions

2,558 6,735 6,608 5,763 5,335 1.00 1.51 1.74 1.73 1.92




Table 5

Profit and Loss Statement Statistics (cont.)

Nonrecurring/special income 782 0 0 145 0 0.31 0.00 0.00 0.04 0.00

Nonrecurring/special expense 0 377 0 0 150 0.00 0.08 0.00 0.00 0.05

Amortization of goodwill andintangibles

57 103 70 49 325 0.02 0.02 0.02 0.01 0.12

Change in appraisal value of insurancebusinesses

N.A. N.A. N.A. N.A. 778 N.A. N.A. N.A. N.A. 0.28

Pretax profit 3,283 6,255 6,538 5,859 5,638 1.29 1.40 1.72 1.76 2.03

Tax expense/credit 694 1,433 2,041 1,900 1,637 0.27 0.32 0.54 0.57 0.59

Net income before minority interest 2,589 4,822 4,497 3,959 4,001 1.01 1.08 1.18 1.19 1.44

Minority interest in consolidatedsubsidiaries

16 31 27 31 10 0.01 0.01 0.01 0.01 0.00

Net income before extraordinaries 2,573 4,791 4,470 3,928 3,991 1.01 1.07 1.17 1.18 1.44

Net income after extraordinaries 2,573 4,791 4,470 3,928 3,991 1.01 1.07 1.17 1.18 1.44

Core Earnings Reconciliation

Net Income (before Minority Interest) 2,589 4,822 4,497 3,959 4,001

- Nonrecurring/Special Income (782) 0 0 (145) 0

+ Nonrecurring/Special Expense 0 377 0 0 150

+/- Tax Impact of Adjustments 165 (86) 0 47 (44)

+ Amortization/ Impairment ofGoodwill/ Intangibles

57 103 70 49 325

- Preferred dividends (18) (32) (55) 0 0

+/- Other earnings adjustments 0 0 0 0 (778)

Core earnings 2,011 5,184 4,512 3,910 3,654 0.79 1.16 1.18 1.18 1.31

2009* 2008 2007 2006¶ 2005

Asset Quality

Nonperforming assets 3,438 1,795 1,391 618 697

Nonaccrual loans 1,944 683 421 326 395

Loans in arrears but accruing 1,494 1,112 970 292 302

Net charge-offs 232 426 416 370 310

Average balance sheet

Average customer loans 387,484 350,227 303,466 256,292 219,356

Average earning assets 447,537 399,094 345,836 295,303 243,948

Average assets 537,417 475,738 412,285 368,032 317,149

Average total deposits 302,861 260,582 212,971 181,272 169,532

Average interest-bearing liabilities 422,084 362,249 325,097 281,259 225,592

Average common equity 26,331 23,837 21,445 20,954 21,078

Average adjusted assets 510,229 445,918 380,796 332,619 277,954

Other data

Commitments and contingencies N.A. 112,739 103,111 97,061 89,915 N.A.

Number of employees (end of period,actual)

45,013 39,621 37,873 36,664 35,313

Number of branches N.A. 1,009 1,010 1,005 1,006 N.A.

Total assets under management 179,371 173,960 157,257 130,721 100,105




Table 5

Profit and Loss Statement Statistics (cont.)

Assets under administration N.A. N.A. N.A. 151,513 123,064 N.A. N.A. N.A.

Off-balance-sheet credit equivalents N.A. 89,099 43,554 35,543 38,545 N.A.

*Data as of Dec. 31, 2008. Ratios annualized where appropriate. ¶Capital and profitability items prior to 2006 are not comparable due to modifications and refinements

to Standard & Poor's analytical adjustments. N.A.--Not available.

Table 6

Ratio Analysis

--Year ended June 30--

2009* 2008 2007 2006¶ 2005

ANNUAL GROWTH (%)

Customer loans (gross) 17.31 13.23 18.03 18.51 14.52

Loss reserves 113.25 38.93 1.31 (21.33) 0.72

Adjusted assets 37.74 12.19 21.34 16.21 8.87

Customer deposits 22.57 12.04 26.76 8.62 8.47

Total equity 19.95 11.27 12.30 (7.85) 4.64

Operating revenues 5.29 8.90 10.30 6.93 8.23

Noninterest expense 1.53 8.96 6.17 4.97 3.58

Net operating income before provisions 8.68 8.85 14.30 8.91 13.34

Loan loss provisions 245.59 114.29 9.05 23.60 16.67

Net operating income after provisions (24.04) 1.92 14.66 8.02 13.15

Pretax profit 4.97 (4.33) 11.59 3.92 46.71

Net income 7.38 7.23 13.59 (1.05) 55.02

2009* 2008 2007 2006¶ 2005

PROFITABILITY (%)

Interest Margin Analysis

Net interest income (taxable equiv.)/avg. earning assets 2.03 1.98 2.03 2.21 2.45

Net interest spread 1.71 1.44 1.72 1.98 2.10

Interest income (taxable equiv.)/avg. earning assets 7.36 7.33 6.90 6.69 6.64

Interest income on loans/avg. total loans 7.44 7.14 6.75 6.75 6.49

Interest expense/avg. interest-bearing liabilities 5.65 5.89 5.18 4.71 4.53

Interest expense on deposits/avg. deposits 5.04 5.14 4.24 4.08 4.17

Revenue Analysis

Net interest income/revenues 59.18 54.22 52.54 53.65 52.55

Fee income/revenues 31.93 35.42 34.32 32.23 32.99

Market-sensitive income/revenues 3.95 3.83 4.42 3.88 3.76

Noninterest income/revenues 40.82 45.78 47.46 46.35 47.45

Personnel expense/revenues 24.50 25.10 24.11 23.25 23.28

Noninterest expense/revenues 45.75 47.44 47.41 49.25 50.18

Noninterest expense/revenues less investment gains 44.90 47.48 47.54 49.12 50.12

Net operating income before provision/revenues 54.25 52.56 52.59 50.75 49.82

Net operating income after provisions/revenues 33.32 46.18 49.35 47.47 46.99

New loan loss provisions/revenues 20.93 6.38 3.24 3.28 2.84




Table 6

Ratio Analysis (cont.)

Net nonrecurring/abnormal income/revenues 10.19 (2.59) 0.00 1.19 (1.32)

Pretax profit/revenues 42.76 42.89 48.82 48.26 49.66

Tax/pretax profit 21.14 22.91 31.22 32.43 29.04

Core Earnings/Revenues 26.20 35.55 33.69 32.21 32.19

2009* 2008 2007 2006¶ 2005

Other Returns

Pretax profit/avg. risk assets (%) 0.00 0.00 2.83 2.89 3.14

Revenues/avg. risk assets (%) N.A. N.A. 5.80 5.98 6.33

Net operating income before LLP/LLP 259.18 824.19 1622.58 1547.99 1756.83

Net operating income before loss provisions/avg. risk assets (%) N.A. N.A. 3.05 3.04 3.15

Net operating income after loss provisions/avg. risk assets (%) N.A. N.A. 2.86 2.84 2.97

Net income before minority interest/avg. adjusted assets 1.01 1.08 1.18 1.19 1.44

Net income/employee (currency unit) 122,362 124,448 120,665 110,007 111,746

Non-interest expenses/average adjusted assets 1.38 1.55 1.67 1.80 2.05

Personnel expense/employee (currency unit) 88,900 94,485 86,642 78,442 73,818

Core earnings/average risk-weighted assets N.A. N.A. 1.95 1.93 2.04

Core earnings/average adjusted assets 0.79 1.16 1.18 1.18 1.31

Core earnings/ Average ACE (ROE) 25.32 41.76 40.73 33.81 29.64

2009* 2008 2007 2006¶ 2005

FUNDING AND LIQUIDITY (%)

Customer deposits/funding base 56.45 58.09 58.91 56.35 60.71

Total loans/customer deposits 161.67 169.53 167.77 176.23 161.30

Total loans/customer deposits + long-term funds 106.42 118.67 112.05 111.34 107.09

Customer loans (net)/assets (adj.) 73.90 81.01 80.33 82.53 80.75

Parent Only Analysis

Total equity double leverage N.A. 136.62 146.97 158.62 147.83

Common equity double leverage N.A. 151.83 163.15 181.69 132.48

2009* 2008 2007 2006¶ 2005

CAPITALIZATION (%)

Adjusted common equity/risk assets N.A. N.A. 4.76 4.84 6.68

Internal capital generation/prior year's equity 4.26 5.80 6.87 5.83 7.26

Tier 1 capital ratio 8.75 8.17 7.14 7.56 7.46

Regulatory total capital ratio 11.39 11.58 9.76 9.66 9.75

Adjusted total equity/adjusted assets§ 3.34 3.34 3.35 3.63 5.65

Adjusted total equity/adjusted assets + securitizations§ 3.34 3.34 3.35 3.63 5.65

Adjusted total equity/risk assets N.A. N.A. 5.59 5.65 8.65

Adjusted total equity plus LLR (specific)/customer loans (gross) 5.15 4.56 4.53 4.81 7.02

Common dividend payout ratio 79.41 71.97 69.04 67.34 63.37

2009* 2008 2007 2006¶ 2005

ASSET QUALITY (%)

New loan loss provisions/avg. customer loans (net) 0.83 0.27 0.14 0.16 0.15




Table 6

Ratio Analysis (cont.)

Net charge-offs/avg. customer loans (net) 0.12 0.12 0.14 0.14 0.14

Loan loss reserves/customer loans (gross) 0.66 0.46 0.37 0.44 0.66

Gen. loan loss reserves/customer loans (net of specifics) 0.00 0.00 0.00 0.00 0.59

Credit-loss reserves/risk assets N.A. N.A. 0.50 0.56 0.82

Nonperforming assets (NPA)/customer loans + ORE 0.85 0.48 0.42 0.22 0.30

NPA (excl. delinquencies)/customer loans + ORE 0.48 0.18 0.13 0.12 0.17

Residential real estate NPL N.A. 0.10 0.12 0.03 0.01

Other consumer NPL N.A. 0.08 0.03 0.36 0.34

Commercial real estate NPL N.A. N.A. N.A. 0.53 0.12

Commercial/corporate NPL N.A. 0.55 0.33 0.43 0.86

Net NPA/customer loans (net) + ORE 0.19 0.02 0.05 (0.22) (0.36)

NPA (net specifics)/customer loans (net specifics) 0.19 0.02 0.05 (0.22) 0.23

Loan loss reserves/NPA (gross) 78.04 95.43 88.64 196.93 221.95

*Data as of Dec. 31, 2008. Ratios annualized where appropriate. ¶Capital and profitability items prior to 2006 are not comparable due to modifications and refinements to

Standard & Poor's analytical adjustments. §Adjusting for the Bank of Western Australia acquisition, Standard & Poor's estimates that CBA's adjusted total

equity-to-adjusted assets ratio was 3.58% as of Dec. 31, 2008. N.A.--Not available.

Ratings Detail (As Of July 19, 2009)*


Counterparty Credit Rating AA/Stable/A-1+

Bank Fundamental Strength Rating

Local Currency A

Certificate Of Deposit

Foreign Currency NR/NR

Commercial Paper A-1+

Junior Subordinated (2 Issues) A+

Senior Unsecured (1 Issue) A-1+

Senior Unsecured (433 Issues) AA

Senior Unsecured (4 Issues) AAA

ASEAN Regional Scale (2 Issues) axAAA

Short-Term Debt (1 Issue) A-1+

Subordinated (1 Issue) A+

Subordinated (27 Issues) AA-

Counterparty Credit Ratings History

21-Feb-2007 AA/Stable/A-1+

07-Nov-2006 AA-/Watch Pos/A-1+

17-Dec-2001 AA-/Stable/A-1+

Sovereign Rating

Australia (Commonwealth of) AAA/Stable/A-1+

Related Entities

ASB Bank Ltd.

Issuer Credit Rating AA/Stable/A-1+




Ratings Detail (As Of July 19, 2009)*(cont.)

Bank Fundamental Strength Rating

Local Currency B+

Certificate Of Deposit AA/A-1+

Commercial Paper

Foreign Currency A-1+



ASB Capital Ltd.


ASB Capital No.2 Ltd.


ASB Finance Ltd.


ASB Finance Ltd. (London Branch)

Commercial Paper




Subordinated (1 Issue) AA-

Bank of Western Australia Ltd.


Certificate Of Deposit AA/A-1+

Commercial Paper


Senior Unsecured (1 Issue) AA


CBA Capital Australia Ltd.

Preference Stock (1 Issue) AA-

CBA Funding (NZ) Ltd.


Commercial Paper


CBFC Ltd.


Certificate Of Deposit

Local Currency AA

Commercial Paper

Local Currency A-1+

Senior Secured (1 Issue) A-1+

Senior Secured (1 Issue) AA


Colonial Holding Co. Ltd.

Issuer Credit Rating AA-/Stable/A-1+

Senior Unsecured (7 Issues) AA-




Ratings Detail (As Of July 19, 2009)*(cont.)


Colonial Mutual Life Assurance Society Ltd. (NZ Branch) (The)

Financial Strength Rating

Local Currency AA/Stable/--

Colonial Mutual Life Assurance Society Ltd. (The)

Financial Strength Rating


Issuer Credit Rating


CommBank Europe Ltd.


Preferred Capital Ltd.

Junior Subordinated (1 Issue) A+

*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard

& Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.




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