Commonwealth Bank of Australia

Commonwealth Bank of Australia Investor presentations Group Treasury Lyn Cobley Group Treasurer 16th and 17th November, 2010 Agenda Some reflectio...
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Commonwealth Bank of Australia Investor presentations

Group Treasury Lyn Cobley Group Treasurer

16th and 17th November, 2010

Agenda Some reflections on the GFC Capital Funding position Outlook

2

Australian banks and the GFC

 Revolution in international banking industry has been well

documented

 In Australia, there has been less of a revolution. No banks have

been nationalised or bankrupted.

 Australian banks have experienced major paradigm shifts,

especially in all areas of bank treasuries and in deposit funding costs.

3

Funding – a long term issue for Australia Systemic Issues

CBA Position



Credit growth > deposit growth



Like peers, step-change in funding costs



Funding task > domestic capacity



Access to debt markets remains strong



Global funding increasingly expensive



CBA well regarded and stable AA rating



Regulatory change likely manageable



Prudent management:



Assets retained on bank balance sheets



Australia to continue to attract investment: ►

Diversification



Extending term maturity



Pre-funding

AAA rated fast growing economy 





Australian banks well-regarded

Working with ABA, Treasury and regulators to address systemic issues

4

Capital Tier 1 Capital Ratio 9.2%

Tier 1 capital movement All movements in basis points

9.52%

Dec 09

Organic growth

Sub total

On-market share purchase (DRP)

Jun 10

Tier 1 UK Comparison

Dec 09

Jun 10

Basel II Tier 1 Capital

14.00%

Europe Average Tier 1 : 11.4% Europe Average Core Tier 11: 9.2%

12.8%

13.00%

0.5%

12.00%

0.9%

Jun 10 CBA (UK FSA)

Tier 1 European comparison*

Tier 1 Capital

0.5%

P

0.3%

1.4%

11.00% 10.00%

Jun 09

9.15%

9.00% 8.00% June 2010 Actual (APRA)

RWA treatment (Mortgages)

Future Dividends

IRRBB

Value of in force deductions

Other

June 2010 Actual (UK FSA)

Core Tier 1

* 1

Top 15 European banks by market capitalisation as at July 1, 2010. Source: latest public disclosure and market updates Reflects Tier 1 Capital less hybrid Tier 1 Instruments

Hybrids

P

Pro-forma

5

Deposits Customer Deposit Funding

58% Deposit Funded $bn

Household Deposits – Market Share

RBS Deposit Mix Jun 10

Jun 09

$bn

$bn

Netbank saver

Investment accounts

Business online saver

Transaction accounts

Savings deposits Average balances

* Percent of funding excluding equity; no netting of surplus liquids

6

CBA – Wholesale Funding 58% Deposit Funded

Wholesale Funding by Product $bn

FY10 Issuance

Wholesale Funding by Region $m 8,406

7,938

6,994

6,675

5,846 4,585 3,117

3,051 3,023

2,627 293 616

Note: AUD, USD & EURO Public benchmark deals are fully allocated to their respective currency locations

7

Strong funding and liquidity positions Funding tenor 1

Long Term Funding 9 8 7 6 5 4 3 2 1 0

60.00 50.00 40.00

Billions

Billions

Long Term Funding Year to Date

Ye ars

30.00 20.00 10.00

Jun 09

Unguaranteed

Guaranteed

Cumulative

9%

Recent transactions

AUD

0%

17%

AUD GG USD

14%

1%

USD GG EUR JPY

16%

Other

42%

1

Jun 10

Funding Task (RHS)

FY2010 Issuance by Currency

1%

Dec 09

DATE

Amt

Tenor

 Feb 2010

€1,000

10 yr

 Mar 2010

A$1,500

3 yr

 Mar 2010

USD3,500

3, 5 & 10yr

 Apr 2010

CAD500

3 and 10yr

 Apr 2010

GBP500

5.5yr

Other GG

Weighted Average Maturity. Includes all deals with first call date or contractual maturity of 12 months or greater

8

Terming out is necessary … Funded assets FY09

Deposits

Wholesale Funding +$3bn Short term

Equity

Funded assets FY10

Long term

+1.46% x 58%

$bn

Wholesale Funding*

Funded assets includes securitisation, bank acceptances of customers and accounting gross-ups * Long term and short term. Includes basis risk

Increased funding cost +1.22%

Deposit Funding

+0.89% x 42%

9

….. But expensive ….. Good volumes driving income growth

Group NIM - 12 months 6 months annualised (basis points)1 [ap p37] bpts



Total Operating Income

6%

Funding Costs higher in 2H10 bpts $m

Jun 09

Net Interest Net Interest Fee Income - Volume Income - Margin changes

Other OBI

Funds & Insurance Income

Jun 10

10

...deposit “specials”

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Domestic Currency USD EUR GBP JPY CHF CAD AUD Other DKK

CS (A+)

DBS Singapore (AA-)

Nordea (AA-)

Danska (A)

SHB (AA-)

BBVA (AA)

Santander (AA)

Uni Credit (A)

Deutsche Bank (A+)

Credit Agricole (AA-)

Banq Pop (A+)

BNP (AA)

US Bank (A+)

13%

31%

76%

47%

61%

65%

54%

77%

77%

93%

81%

82%

33%

100% 91%

80%

25%

46%

69%

8%

4%

13%

7%

12%

35%

28%

27%

28%

13% 0%

0%

2% 0%

14% 0%

18% 0%

14% 0%

13% 0%

10%

9%

18%

15% 0%

26%

18%

28%

21%

38%

32%

20%

37%

38%

12%

34%

46%

23%

17%

10%

100%

71%

60%

Citigroup (A) PNC (A)

60%

34%

25%

38%

64%

Bank of America (A+)

JP Morgan Chase (A+)

Wells Fargo (AA-)

60%

45%

Bank of Nova Scotia (AA-)

Bank of Montreal (A+)

42%

37%

38%

TD (AA-)

Royal Bank Canada (AA-)

30%

19%

20%

Lloyds (A)

RBS (A)

Barclays (AA-) 24%

28%

9%

27%

NAB (AA)

WBC (AA)

40%

35%

47%

60%

HSBC (AA)

25%

ANZ (AA)

0% 25%

80%

CBA (AA)

Accessing offshore markets is necessary … Wholesale Funding Source

SEK

12

… But our investor base has changed …… European senior investor breakdown by type – H1 2007 Central Bank 3%

Hedge Fund Corporate 1% 1%

Other 1%

Pension 2%

Asset M anager 18%

Insurance 8%

European senior investor breakdown by type - 2009

Hedge Fund 2%

Corporate Other 1% 8%

Central Bank 2% Pension 6% Asset M anager 49%

Insurance 14%

Bank 18%

Bank 66% Source: Barclays Capital

Source: Barclays Capital

UK RMBS investor breakdown by type - 2006 Corporate 1.02% Supranational 2.67%

Sec Lender Agency SIV 1.24% 3.05% 8.08%

Central Bank 0.17% Broker 0.02%

Building Society 2.58%

UK RMBS investor breakdown by type - 2009 Building Society 1.17% Insurance Company 5.75%

Supranational 0.49%

Corporate 0.13%

Pension 1.69% Hedge Fund 0.37%

Bank 11.61%

Insurance Company 1.58%

Fund M anager 43.38%

JP M organ CIO 49.17%

Fund M anager 29.62%

Bank 36.21%

13 Source: Barclays Capital

Source: Barclays Capital

… Uncertain regulatory environment

 Basel III − LCR/NSFR/Leverage Ratio/Capital  Conglomerates Rules  Insurance Rules  Superannuation Reform

14

Questions?

15

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