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1 122 November 2007Commonwealth Bank of Australia ACN 123 123 124
Retail Banking ServicesMarket Update
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The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 22 November 2007. 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
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Our team
Chief Financial OfficerShayne Bryant
Third Party Banking
Kathy Cummings
Group Sales & Service
Retail Products
Retail Sales
Direct Channels & Operations
Credit Cards
Grahame Carney
Vittoria Shortt
Michael Cant
Stephen Karpin
Group Executive
Ross McEwan
Fred Pollock
Chief Risk Officer
David Grafton
Chief Information
OfficerAdam
Bennett
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Notes
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Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
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Notes
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Size and potential
Largest retail bank in Australia
40% of Group NPAT
~9 million customers
Over 16,000 people
~80% customer-facing
Easily the largest and most accessible distribution network
1,010
3,242
821
2,171500
1500
2500
3500
Branches ATMs
CBA
Nearest Major *
Customer Facing Retail Operations Support Office
77%
6%17%
Our People
* Source: APRA June 07
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Notes
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Australia’s most convenient bank
Channel figures are approximate
Branches
1,010sites
ATMs
3,242terminals
EFTPOS
171,100machines
NetBank
2 millionactive
customers
Australia Post
3,800agencies
Call Centres
120 millioncalls pa
Brokers
9,300brokers
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Notes
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Clear vision and strategy
Retail Bank Strategy
Group VisionTo be Australia’s finest financial services organisation
through excelling in customer service
To make it easy for customers
To meet their needs every time
So we can do more business with them
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Notes
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On track
InternalmeasuresInternal
measuresCustomer
satisfactionmeasures
Customer satisfactionmeasures
Market share
Market share
Revenuegrowth
Revenuegrowth
Outperformmarket
Outperformmarket
The journey so far Going forward
Roy Morgan
Customer surveys
Engagement
Safety
Culture survey
Compliments
Complaints
Home loans
Deposits
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Notes
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Good progress
Extended branch tradingBranch redesign and upgradeNetBank enhancementsSimple home loans
Meeting customer needsMeeting customer needs
Making it easierMaking it easier
Doing more businessDoing more business
New network operating modelAward winning productsSpecialist capability in branches
Needs analysis mastery trainingCross-sell and referral emphasisLeverage CommSee
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Notes
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Complaints
0
0
0
0
0
0
% Customers Satisfied*
CBA
Sep 07
* Roy Morgan
Our customers are happier
Customer satisfaction* at 10 year high
Complaints down 43% in 2007 and continuing to trend lower
Compliments up 69% last 12 months
62%
72%
82%
Jun 05 Dec 05 Jun 06 Dec 06 Jun 07Dec 05 Jun 06 Dec 06 Jun 07Jun 05 Sept 07
Dec 05 Jun 06 Dec 06 Jun 07Jun 05 Sept 07
Complaints
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Notes
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Our people are more engaged
^ claims per 1 million hours worked
Safety^(Claims Frequency Rate)
5.9
4.5
Jun 06 Sept 07
Culture survey trending higher
Safety incidents falling
Turnover stable in tight
labour market
24%
% Culture Survey (CARES)
60
69 70
55
60
65
70
75
May-06 Nov-06 May-07May 06 Nov 06 May 07
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Notes
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Market share improving
Market Share* bps
Home Loans +17
Personal Loans Steady
Credit Cards –84
Deposits +19
* Source: APRA/RBA September 07
Movements since December 2006
Six consecutive monthly increasesSix consecutive monthly increases
Gaining 30% share of net system growthGaining 30% share of net system growth
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Notes
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Priorities
PeoplePeople
CustomersCustomers
RevenueRevenue
Leverage ScaleLeverage Scale
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Notes
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Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
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Notes
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Why change?
Ensure lending capability in every branch
Better leverage our distribution advantage
Greater empowerment
Enhance career progression
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Notes
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1,010 branches
One size fits all
1,010 branches
One size fits all
160
350
350
150
Branches
Tier 1 or 2 criteria not met
~22% branch revenue
~3% branch revenue
3
4
Deposit & Loan base
FTE
Strategic value
~40% branch revenue2
Flagship branches
Drive most value
Key strategic value
~35% branch revenue1
Contribution to total branch revenue
Tier
New network operating model
35%
40%
3%
22%
Tier 3
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Notes
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Early Tier 1 results encouragingHome Loan Sales
Sept 06 Quarter Sept 07 Quarter
Home Loan Balance Growth
Sept 06 Quarter Sept 07 Quarter
Insurance Cross Sell
Sept 06 Quarter Sept 07 Quarter
+ 61%
Deposit Balance Growth
Sept 06 Quarter Sept 07 Quarter
+0.8%
+1.7%
+3.4%
+4.9%
+ 20%
Home Loan Balance Growth Home Loan Sales
Insurance Cross-SellDeposit Balance Growth
Sept 06 Qtr
Sept 06 Qtr Sept 06 Qtr
Sept 06 Qtr Sept 07 Qtr
Sept 07 Qtr
Sept 07 Qtr
Sept 07 Qtr
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Notes
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Revitalising our branches
New branch design
Trial branches completed
Planned for FY08
− 70 redesigns
− 60 upgrades
Further selective expansion
Supported by specific training
Aligned to new environment
New behaviours
Customer engagement
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Notes
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Extended trading
67 sites open on Saturday
16 sites open on Sunday – more planned
Extended Christmas trading
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Notes
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Customer experience
Branch customer experience survey % advocates
Jan 07 * Sept 07
67%
71%
* New methodology implemented
Regular customer experience surveys
Conducted independently by Roy Morgan
Every branch
Every week
10 point scale (0 lowest, 10 highest)
Results part of KPIs – only 9 and 10 ratings count
71% of customers rate branch experience 9 or 10
Customers at new design branches –100% advocacy
Sept 07Jan 07*
Branch Customer Experience Survey % Advocates
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Notes
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Enhancing cross-sell
Our largest opportunity
~9 million customers
Target 20% increase on FY07
Needs analysis training
“Know it, do it, coach it”
6,700 “Masters”
Extra sales capability in branches
Converted referrals
1 2 Sept 06 Sept 07
11%
710Financial Planners
130Branch Insurance Representatives
550Personal Lenders
149Business Bankers
Specialists in Branches
Converted Referrals
Sept 06 Sept 07
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Notes
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Key messages
Revitalising our frontline – tapping our potential
Tiered branches – a more focused approach
Enhancing the customer experience
Cross-sell emphasis
Early results encouraging
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Notes
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Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
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Notes
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Total Fundings
1 2
Total Fundings ($m)
Sept 06 Qtr Sept 07 Qtr
16%
Home Loan Balance Growth*
0%
2%
4%
6%
8%
10%
12%
CBA Peer 1 Peer 2 Peer 3 Peer 4
Market
* Source: APRA Dec 06 to Sept 07 (9 months)
Home loan book in good shape
Strong growth in balances and fundings
Six consecutive months of market share growth
Improving run-off rates
High quality risk profile
Flight to quality/major banks
Process transformation offers significant upside
Home Loan Balance Growth*
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Notes
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Growth across channels
Strong fundings in both proprietary and broker channels
Proprietary
Investing in our lending capability
Branch balance growth tracking closer to market
Broker
#1 lender in broker market
Good business quality
Home Loan Branch Growth
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Sept 06 Dec 06 Mar 07 June 07 Sept 07
Branch Growth Market Growth
* Sept 07 Quarter
Home Loan Branch Growth
Dec 06 Mar 07 Jun 07Sept 06 Sept 07
Fundings by Channel Sept 07 Qtr
Broker38%
Premium13%
Branch49%
Fundings by Channel*
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Notes
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4%
20%55%
21% Short term wholesale
Long term wholesale
Securitisation
Retail
Source of Funding ^
* Source: APRA Sept 07
^ As at 30 June 2007
Relative funding advantage
Clear #1 deposit franchise - 29% share*
Diversified funding mix
Deposits 55% of Group funding
Little reliance on securitisation
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Notes
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Transaction Net Account Growth
1 2 3 4 5Sept 05 Mar 06 Sept 06 Mar 07 Sept 07
Transaction Net Account Growth
Deposit Share of New Market Growth
0%
5%
10%
15%
20%
25%
30%
35%
CBA Peer 1 Peer 2 Peer 3 Peer 4
Share of Market Balance Growth*
* Source: APRA Dec 06 – Sept 07 (9 months)
Strong deposit growth
Significant turnaround in balances and net account growth
Growing share despite aggressive price competition
More competitive products and pricing
Branch P&L driving focus on deposits
Sales and service program having an impact
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Notes
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20%
4%
38%
38%
Percentage of Total Deposit Balances
2006*
Effectively managing back book substitution
Gradual shift in portfolio mix
Modest substitution to date
Good volume of external funds
Use of segmented offers
Overall deposits margin holding up
2007*
* As at 30 June
1%
38%
34%8%
19%
Other TransactionAccounts
Investment Accounts
Savings Deposits
Netbank Saver
Business Online Saver
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Notes
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-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
FY 0506 FY 0607 FY 0708 YTD
Credit Cards% change in total accounts vs Prior Year
Upside potential in consumer finance
Credit cards – upside potential
Return to net account growth
Product mix well balanced
Focus on profitable growth
Personal loans – improved profitability
Improved credit quality
2004/05 portfolio running off
Increasing margin
Platinum Awards Card
Gold Awards Card
Low Rate Card
Sept YTDFY06 FY07
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Notes
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Key messages
Reinvestment in our core franchise
Successfully managing the volume/margin trade off
Portfolio quality remains high
Momentum in our key product lines
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58
Notes
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59
Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
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60
Notes
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61* Includes all Severity 1 and 2 IT incidents
(excluding those caused by other financial institutions)
Severity 1 and 2 Incidents Repeated*June 06 – Sept 07
0
4
8
12
16
20
Jun
Jul
Aug
Sep
t
Oct
Nov
Dec Ja
n
Feb
Mar
Apr
May Jun
July
Aug
Sep
t
Sev1 Sev2
Nil
# In
cide
nts
IT stability and enhancements
IT platform stability improving
Continued investment in IT and cost optimisation
Key platform enhancements
NetBank
Call Centre IVR upgrade
Credit Card system upgrade
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62
Notes
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Key Metrics100,000 customer interactions per day
5m transactions per day
110m statements per year
500,000 items processed per day
5m cards issued per year
Retail Operations Support Staff
Operations Processing
Collections
Mortgage Services
Retail operations
Supporting the Bank’s retail front-line
2,700 people
Mortgage Services
Operations Processing
Collections
Focus on continuous improvement
Simple processes
Efficiency
Automation
Centres of functional excellence
Quality
19%
22%59%
Retail Operations Support Staff
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64
Notes
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65
May-07 Aug-07 TARGET
85% reduction
Simple home loans
Process and system improvement
Targeting significant reduction in lead time to fund
Significant customer and efficiency benefits
Eliminated middle office from branch network
National rollout of efficiency program
Application to ‘Ready-to-Fund’ Lead Time
Lender Support Roles
206
400
May 07 Aug 07
Middle Office Support Roles
8 day reduction8 day reduction
May 07 Aug 07 Target
May 07 Aug 07
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66
Notes
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67
Key messages
Improve customer experience
Leverage scale in systems & processes
Stability of IT systems
Enhancements and new platforms
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68
Notes
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69
Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
![Page 70: Retail Banking Services - CommBank · Retail Banking Services Market Update . 2 The material that follows is a presentation of general background information about the Bank’s activities](https://reader033.vdocuments.mx/reader033/viewer/2022041612/5e3847d6624da92d94786743/html5/thumbnails/70.jpg)
70
Notes
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71
Home Loan Arrears
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Sep-06 Dec-06 Mar-07 Jun-07 Sep-07
Days+ 30 Days+ 90
0%
10%
20%
30%
40%
50%
60%
70%
80%
0-60 60.1-75 75.1 -80 80.1 -90 90.1+
Original LVR Market LVR - Mar 07
LVR Profile*
*Australian Owner Occupied and Investment Housing only, excludes Lines of CreditLoans as at 31 Dec 06 and Market Value at March 07Market Values marked against the APM database
Home loans – portfolio quality
Portfolio credit quality remains sound
Delinquencies improving
Portfolio LVR at 50%
No ‘sub prime’ lending
Collections focus on higher risk loans
Home Loan Arrears
Days 30+ Days 90+Sept 06 Dec 06 Mar 07 Jun 07 Sept 07
Del
inqu
enci
es %
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72
Notes
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73
Home loan stress testing
Overall portfolio showing little signs of stress
Stable expected losses over past 12 months
Regular stress testing – losses under APRA extreme stress scenario $300m (~3 months home loan net interest earnings)
Policies and procedures to assist customers in difficulty
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74
Notes
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75
Consumer Finance Arrears
0.8%
0.9%
1.0%
1.1%
1.2%
1.3%
1.4%
1.5%
Sep-06 Dec-06 M ar-07 Jun-07 Sep-07
+Card 90 +PL 90
0%
1%
2%
3%
4%
5%
6%
7%
Fund Month
Months on Book 3 Months on Book 6 Months on Book 12
Note: Includes Write-Offs
Personal Loans Arrears
Dec 05 Dec 06 Sept 07
Consumer finance – portfolio quality
Credit cards
Strong credit quality maintained
Improving quality in new loan book
Personal loans
Continued improvement in credit quality
Older poorer quality book replaced by better quality accounts
New scorecard delivering higher business volumes at same level of risk
Dec 04
Dec 06 Mar 07 Jun 07Sept 06 Sept 07
Cards 90+ PL 90+
Del
inqu
enci
es %
% 3
0 D
ays+
Arr
ears
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76
Notes
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77
Responsible lending
The Australian Law Reform Commission (ALRC) recommending changes
The Bank is in favour of sharing credit stress data – responsible lending
Result in:
Better credit decisions
Opens mainstream credit to currently marginalised groups
Recommendations to government from ALRC (March 2008)
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78
Notes
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79
Key messages
Portfolio quality remains sound
Positive arrears trends
Little signs of stress in home loan book
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80
Notes
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81
Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
![Page 82: Retail Banking Services - CommBank · Retail Banking Services Market Update . 2 The material that follows is a presentation of general background information about the Bank’s activities](https://reader033.vdocuments.mx/reader033/viewer/2022041612/5e3847d6624da92d94786743/html5/thumbnails/82.jpg)
82
Notes
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83
Key messages
Continuation of a clear vision and strategy
Size and scale – a unique competitive advantage
Key priorities
Engaged people
Customer satisfaction
Revenue
Leverage scale more effectively
Early results encouraging
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84
Notes
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85
Today
Our journey Ross McEwan
Revitalising our distribution Grahame Carney
Enhancing our product performance Michael Cant
Simplifying our operations Vittoria Shortt
Managing risk David Grafton
Key messages Ross McEwan
Ask us Panel
![Page 86: Retail Banking Services - CommBank · Retail Banking Services Market Update . 2 The material that follows is a presentation of general background information about the Bank’s activities](https://reader033.vdocuments.mx/reader033/viewer/2022041612/5e3847d6624da92d94786743/html5/thumbnails/86.jpg)
86
Notes
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87
Panel
Retail Products
Retail Sales
Credit Cards
Grahame Carney
Michael Cant
Stephen Karpin
Group Executive
Ross McEwan
Chief Risk OfficerDavid
Grafton
Direct Channels & Operations
Vittoria Shortt
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888822 November 2007Commonwealth Bank of Australia ACN 123 123 124
Retail Banking ServicesMarket Update