deutsche bank asia pacific financial institutions conference 9 july 2001

Deutsche BankDeutsche BankAsia Pacific Financial Institutions Conference Asia Pacific Financial Institutions Conference

9 July 2001 9 July 2001www.commbank.com.auwww.commbank.com.au



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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

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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.”

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• 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


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


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

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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

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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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 bank asia pacific financial institutions conference 9 july 2001

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