Table of Contents
Profit Announcement
Incorporating ASX Appendix 4E requirements
For the full year ended 30 June 2007
For the full year ended 30 June 2007
Table of Contents
Appendix 4E | ||||
Results for announcement to the market(1) | ||||
Report for the full year ended 30 June 2007 | $M | |||
Revenues from ordinary activities | Up 16% to $33,169 | |||
Profit (loss) from ordinary activities after tax attributable to Equity holders | Up 14% to $4,470 | |||
Net profit (loss) for the period attributable to Equity holders | Up 14% to $4,470 | |||
Dividends (distributions) | ||||
Final Dividend – fully franked (cents per share) | 149 | |||
Interim Dividend – fully franked (cents per share) | 107 | |||
Record date for determining entitlements to the dividend | 24 August 2007 | |||
(1) Rule 4.2.C.3
Refer to Appendix 18 ASX Appendix 4E for disclosures required under ASX Listing Rules on page 56.
This report should be read in conjunction with the 30 June 2007 Annual Financial Report of the Group and any public announcements made in the period by the Group in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the ASX Listing Rules.
Important Dates for Shareholders | ||
Full Year Results Announcement | 15 August 2007 | |
Ex-dividend Date | 20 August 2007 | |
Record Date | 24 August 2007 | |
Final Dividend Payment Date | 5 October 2007 | |
Annual General Meeting | 7 November 2007 | |
2008 Interim Results Date | 13 February 2008 | |
For further information contact:
Investor Relations
Warwick Bryan
Phone: 02 9378 5130
Facsimile: 02 9378 2344
Email: ir@cba.com.au
Warwick Bryan
Phone: 02 9378 5130
Facsimile: 02 9378 2344
Email: ir@cba.com.au
Except where otherwise stated, all figures relate to the full year ended 30 June 2007 and comparatives to the full year ended 30 June 2006. The term “prior comparative period” refers to the half year ended 30 June 2006, while the term “prior half” refers to the half year ended 31 December 2006, unless otherwise stated.
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Table of Contents
Highlights
Financial Performance and Business Review
Performance Highlights
Full Year | Half Year | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Net Profit after Income Tax | $M | $M | $M | $M | ||||||||||||
Statutory basis | 4,470 | 3,928 | 2,279 | 2,191 | ||||||||||||
Cash basis | 4,604 | 4,053 | 2,333 | 2,271 | ||||||||||||
Cash basis ex HK sale | 4,604 | 3,908 | 2,333 | 2,271 | ||||||||||||
The Group’s net profit after tax (“statutory basis”) for the year ended 30 June 2007 was $4,470 million, an increase of 14% on the prior year. The final dividend of $1.49 per share is another record and the total dividend for the year is $2.56 per share.
Cash earnings per share(1) increased 16% on the prior year to 353.0 cents.
The net profit after tax (“cash basis”)(1) increased 18% to $4,604 million.
The Group’s Return on equity (“cash basis”) has improved by 80 basis points over the year to 22.1%.
The Group has delivered another strong performance during the year, through continued improvement in customer service and a focus on profitable growth. Key financial performance highlights over the year were:
• | Solid growth in Banking income of 10% on the prior year, following growth in average interest earning assets of 15% to $316 billion and net interest margin contraction of 15 basis points (including 10 basis points of underlying margin contraction); | |
• | Growth in Funds Under Administration of 17% to $177 billion supported by both strong underlying inflows and positive investment market returns; | |
• | Growth in insurance premiums of 21% to $1,400 million and improved operating margins; | |
• | Strong growth in Total operating income of 11% with expense growth of 7%. The expense growth is driven by ongoing reinvestment in our businesses through recruitment of front line staff and increased spend on strategic initiatives; and | |
• | Continued stability in credit quality across the portfolio. |
The result for the half year ended 30 June 2007 was solid with net profit after tax (“cash basis”), increasing by 17% to $2,333 million compared with the prior comparative period. The Group has invested significantly in the current half in support of its strategic priorities. The current half was also impacted by three fewer days and seasonally higher bad debts. This resulted in a 3% increase in cash profit compared with the prior half.
Other performance highlights specifically relating to the Group’s strategic priorities over the year included:
• | Significant increases in customer satisfaction scores; | |
• | Streamlining and simplifying the operation of the branch network, empowering local decision makers and strengthening the linkage between performance and remuneration; | |
• | Launch of CommBiz transactional banking service and the Local Business Banking Online networking platforms to further enhance service quality to business customers; and | |
• | Early success of the Wealth Management cross-sell initiatives with a 15% increase in total referrals and a 30% increase in new General Insurance sales. |
Dividends
The total dividend for the year is another record at $2.56 per share.
The final dividend declared is $1.49 per share which takes the full year dividend to $2.56, an increase of 32 cents or 14% on the prior year. The dividend has been determined based on net profit after tax (“cash basis”). On this basis the dividend payout ratio for the year is 73.0%.
The dividend payment is fully franked and will be paid on 5 October 2007 to owners of ordinary shares at the close of business on 24 August 2007 (“record date”). Shares will be quoted ex–dividend on 20 August 2007.
The Group issued $518 million of shares to satisfy shareholder participation in the Dividend Reinvestment Plan (“DRP”) in respect of the interim dividend for 2006/07.
Dividends per Share (cents)
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Outlook
The economy performed well in 2007 with strong credit growth in housing, personal and business lending, supported by low levels of unemployment and robust capital expenditure.
While the outlook for the Australian economy for the 2008 financial year remains positive, there is some risk from recent instability in global financial markets. However, given the mix of the Group’s business and, in particular, its strong retail franchise, the Group is well positioned to continue to deliver strong returns.
Credit growth for the 2008 financial year is likely to remain strong although growth in business credit, which ran at nearly 19% in the 2007 year, may begin to slow. Despite recent rate rises, housing credit growth is expected to be slightly stronger due to continued high demand assisted by the migration of skilled workers to Australia. However, consumer credit growth is likely to slow from the 15% experienced in 2007 to between 8.5 — 10.5%.
The current high level of competitive intensity is not anticipated to decline in the coming year. Despite this, all of the Group’s businesses are performing well and the investments we are making coupled with quality execution will ensure that we remain competitive.
Taking all these factors into consideration, the Group expects to again deliver EPS growth in the coming year which meets or exceeds the average of its peers through a continued focus on delivering exceptional customer service and profitable growth.
(1) | Excluding the profit from the sale of the Hong Kong Insurance Business during the 2006 financial year. |
2 Commonwealth Bank of Australia
Table of Contents
Highlightscontinued
(1) | For purposes of presentation, Policyholder tax benefit and Policyholder tax expense components of corporate tax expense are shown on a net basis. | |
(2) | Minority interests include preference dividends paid to holders of preference shares in ASB Capital. |
(1) | For definitions refer to appendix 23 page 67. | |
(2) | Fully diluted EPS and weighted average number of shares (fully diluted) are disclosed on page 62. |
Profit Announcement 3
Table of Contents
Highlightscontinued
As At | ||||||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | Jun 07 vs | Jun 07 vs | ||||||||||||||||
Balance Sheet Summary | $M | $M | $M | Dec 06 % | Jun 06 % | |||||||||||||||
Lending assets(1) | 304,100 | 286,814 | 266,096 | 6 | 14 | |||||||||||||||
Total assets | 425,139 | 397,261 | 369,103 | 7 | 15 | |||||||||||||||
Total liabilities | 400,695 | 374,774 | 347,760 | 7 | 15 | |||||||||||||||
Shareholders’ Equity | 24,444 | 22,487 | 21,343 | 9 | 15 | |||||||||||||||
Assets held and Funds Under Administration (FUA) | ||||||||||||||||||||
On Balance Sheet: | ||||||||||||||||||||
Banking assets | 397,093 | 367,250 | 340,254 | 8 | 17 | |||||||||||||||
Insurance Funds Under Administration | 19,814 | 21,040 | 20,792 | (6 | ) | (5 | ) | |||||||||||||
Other insurance and internal funds management assets | 8,232 | 8,971 | 8,057 | (8 | ) | 2 | ||||||||||||||
425,139 | 397,261 | 369,103 | 7 | 15 | ||||||||||||||||
Off Balance Sheet: | ||||||||||||||||||||
Funds Under Administration | 157,257 | 146,622 | 130,721 | 7 | 20 | |||||||||||||||
Total assets held and FUA | 582,396 | 543,883 | 499,824 | 7 | 17 | |||||||||||||||
(1) | Lending assets comprise Loans, advances, and other receivables (gross of provisions for impairment and excluding securitisation) and Bank acceptances of customers. |
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
Jun 07 vs | Jun 07 vs | |||||||||||||||||||||||
Key Performance Indicators | 30/06/07 | 30/06/06 | Jun 06 % | 30/06/07 | 31/12/06 | Dec 06 % | ||||||||||||||||||
Banking | ||||||||||||||||||||||||
Underlying net profit after tax ($M) | 3,763 | 3,227 | 17 | 1,896 | 1,867 | 2 | ||||||||||||||||||
Net interest margin (%) | 2.19 | 2.34 | (15 | )bpts | 2.16 | 2.22 | (6 | )bpts | ||||||||||||||||
Average interest earning assets ($M)(1) | 316,048 | 274,798 | 15 | 325,380 | 306,868 | 6 | ||||||||||||||||||
Average interest bearing liabilities ($M)(1) | 294,792 | 255,100 | 16 | 303,171 | 286,548 | 6 | ||||||||||||||||||
Expense to income (%) | 45.8 | 47.7 | 4 | 46.1 | 45.6 | (1 | ) | |||||||||||||||||
Funds Management | ||||||||||||||||||||||||
Underlying net profit after income tax ($M) | 492 | 400 | 23 | 260 | 232 | 12 | ||||||||||||||||||
Operating income to average Funds under administration (%) | 1.15 | 1.12 | 3 | bpts | 1.16 | 1.13 | 3 | bpts | ||||||||||||||||
Funds Under Administration – spot ($M) | 177,071 | 151,513 | 17 | 177,071 | 167,662 | 6 | ||||||||||||||||||
Expense to average FUA (%) | 0.71 | 0.71 | — | 0.72 | 0.71 | (1 | ) | |||||||||||||||||
Insurance | ||||||||||||||||||||||||
Underlying net profit after income tax ($M) | 253 | 215 | 18 | 142 | 111 | 28 | ||||||||||||||||||
Inforce premiums ($M)(2) | 1,400 | 1,156 | 21 | 1,400 | 1,340 | 4 | ||||||||||||||||||
Expense to average inforce premiums (%) | 36.3 | 38.6 | 6 | 34.7 | 36.2 | 4 | ||||||||||||||||||
Capital Adequacy | ||||||||||||||||||||||||
Tier One (%) | 7.14 | 7.56 | (42 | )bpts | 7.14 | 7.06 | 8 | bpts | ||||||||||||||||
Total (%) | 9.76 | 9.66 | 10 | bpts | 9.76 | 9.78 | (2 | )bpts | ||||||||||||||||
Adjusted Common Equity (%) | 4.79 | 4.50 | 29 | bpts | 4.79 | 4.70 | 9 | bpts | ||||||||||||||||
(1) | Average interest earning assets and average interest bearing liabilities have been adjusted to remove the impact of securitisation. Refer to Average Balances and Related Interest Page 30. | |
(2) | During the current year the basis of calculating General Insurance inforce premiums was amended, the main change being the exclusion of badged premiums. Prior periods have been restated on a consistent basis. |
Credit Ratings | Long term | Short term | Affirmed | |||||||||
Fitch Ratings | AA | F1 | + | Jun 07 | ||||||||
Moody’s Investor Services | Aa1 | P-1 | Jun 07 | |||||||||
Standards & Poor’s | AA | A-1 | + | Jun 07 | ||||||||
The Group continues to maintain a strong capital position which is reflected in its credit ratings. In February 2007 Standards & Poor’s upgraded the Group’s long term credit rating from AA- to AA. In May 2007, Moody’s Investor Services upgraded the Group’s long term credit rating from Aa3 to Aa1. Additional information regarding the Group’s capital is disclosed in appendix 13, pages 47 to 50.
4 Commonwealth Bank of Australia
Table of Contents
Highlightscontinued
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(1) 2004 is presented on a previous AGAAP basis; 2006 is presented excluding the profit from sale of the Hong Kong Insurance Business.
Profit Announcement 5
Table of Contents
Banking Analysis
Financial Performance and Business Review
Performance Highlights
The full year underlying net profit after tax of $3,763 million for the Banking business increased by 17% on the prior year.
The strong performance during the year was supported by:
• | Significant business lending volume growth of 19% since June 2006 to $91 billion; | |
• | Solid volume growth in home loans, up 13% since June 2006 to $175 billion; | |
• | Domestic deposit volume growth of 17% since June 2006 to $175 billion including the doubling of NetBank Saver balances which now total over $8 billion; | |
• | Net interest margin decreased 15 basis points over the year, comprising 10 basis points of underlying margin contraction and five basis points due to the higher level of liquid assets held and AIFRS accounting volatility; | |
• | Targeted investment in areas which will drive future profitability balanced by cost control in other areas, resulting in operating expenses increasing 5% on the prior year; and | |
• | Continued stability in the credit quality across the portfolio. |
The underlying net profit after tax for the second half of the year increased by 2% to $1,896 million. The current half was impacted by a $45 million increase in investment spend on strategic initiatives. As in previous years, the second half performance was dampened by three fewer days and seasonally higher bad debts.
Detailed disclosure of business highlights by key business segments and product categories is contained on pages 10-15.
Net Interest Income
Net interest income increased by 8% on the prior year to $7,036 million. The growth was a result of continued strong volume growth reflected by an increase in average interest earning assets of 15% offset by a 6% reduction in net interest margin.
During the second half of the year net interest income increased 2%. This represents 3% growth on an underlying basis, with the positive impact of AIFRS hedging reclassification more than offset by the dampening impacts of three fewer days and a 50 basis point increase in the pensioner savings deeming rate in April. The increase in net interest income was driven by 6% growth in average interest earning assets and net interest margin contraction of six basis points.
Average Interest Earning Assets
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Average interest earning assets increased by $41 billion over the year to $316 billion, reflecting a $33 billion increase in average lending interest earning assets and $8 billion increase in average non-lending interest earning assets.
Average home loan balances increased by 10% since 30 June 2006 and by 3% since December 2006. Both these growth rates were impacted by the $7 billion securitisation undertaken in March as part of ongoing capital management initiatives. Excluding this impact, the increase in gross home loan balances was 11% over the full year and 5% over the half year.
Personal Lending average balances have increased by 13% since June 2006 and 7% since December 2006. This result continues to be largely driven by strong growth in margin lending.
Average balances for Business, Corporate and Institutional lending increased 24% since June 2006 and 9% since December 2006, driven by lending to large institutions.
Net Interest Margin
Underlying net interest margin declined by 10 basis points. Increased holdings of liquid assets and AIFRS hedging volatility added a further five basis points, bringing total net interest margin decline to 15 basis points. The key drivers of the margin reduction were:
Liquid Assets: Average non lending interest earning assets have increased by $8 billion, resulting in headline margin contraction of six basis points.
AIFRS Volatility: The yield related to certain non-trading derivatives is reclassified to other banking income under AIFRS, which distorts the calculation of net interest margin. In the current year this had the effect of increasing headline margin by one basis point, net of increased hybrid instrument distributions.
Asset Pricing & Mix: Mainly the impact of strong competition in the home lending segment in both Australia and New Zealand (five basis points); and personal lending portfolio repricing (three basis points). Business lending margin has remained stable overall with some improving margins on domestic lending offsetting growth in lower margin offshore portfolios.
Cash Rate & Deposit Pricing: The combined impact of cash rate increases during 2006 on deposits, repricing of certain products and increasing proportion of lower margin savings accounts was a net benefit of three basis points. This was more than offset by an increase in the deeming rate on pensioner savings (one basis point); and yield curve impact from tightening of bill rate to cash rate spread and replicating portfolio (five basis points).
NIM movement since June 2006
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During the second half net interest margin decreased by six basis points on both a headline and an underlying basis due to the offsetting impact of liquid asset growth and AIFRS volatility.
Underlying margin contraction was due to:
• | Asset Pricing & Mix impact of three basis points due to competitive pricing of home loans and growth in the lower yielding margin lending portfolio; and | |
• | Cash Rate & Deposit Pricing related contraction of three basis points due to similar influences as described above. |
Additional information, including the Average Balance Sheet, is set out on pages 30 to 33.
6 Commonwealth Bank of Australia
Table of Contents
Banking Analysiscontinued
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Key Performance Indicators | $M | $M | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Net interest income | 7,036 | 6,514 | 8 | 3,551 | 3,485 | 2 | ||||||||||||||||||
Other banking income | 3,432 | 3,036 | 13 | 1,754 | 1,678 | 5 | ||||||||||||||||||
Total Banking income | 10,468 | 9,550 | 10 | 5,305 | 5,163 | 3 | ||||||||||||||||||
Operating expenses | 4,797 | 4,558 | (5 | ) | 2,443 | 2,354 | (4 | ) | ||||||||||||||||
Loan impairment expense | 434 | 398 | (9 | ) | 239 | 195 | (23 | ) | ||||||||||||||||
Net profit before income tax | 5,237 | 4,594 | 14 | 2,623 | 2,614 | — | ||||||||||||||||||
Income tax expense | 1,447 | 1,339 | (8 | ) | 713 | 734 | 3 | |||||||||||||||||
Minority interests | 27 | 28 | 4 | 14 | 13 | (8 | ) | |||||||||||||||||
Net profit after income tax (“cash basis”) | 3,763 | 3,227 | 17 | 1,896 | 1,867 | 2 | ||||||||||||||||||
Net profit after income tax (“underlying basis”) | 3,763 | 3,227 | 17 | 1,896 | 1,867 | 2 | ||||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Productivity and Other Measures | $M | $M | Jun 06 % | $M | $M | Dec 06% | ||||||||||||||||||
Net interest margin (%) | 2. 19 | 2.34 | (15 | )bpts | 2.16 | 2.22 | (6 | )bpts | ||||||||||||||||
Expense to income (%) | 45. 8 | 47.7 | 4 | 46.1 | 45.6 | (1 | ) | |||||||||||||||||
Effective corporate tax rate (%) | 27. 6 | 29.1 | 150 | bpts | 27.2 | 28.1 | 90 | bpts | ||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Total Banking Net Profit after Tax (“Underlying Basis”) | $M | $M | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Australian Retail products | 1,840 | 1,678 | 10 | 928 | 912 | 2 | ||||||||||||||||||
Business, Corporate and Institutional products(1) | 1,529 | 1,236 | 24 | 767 | 762 | 1 | ||||||||||||||||||
Hedging and AIFRS volatility(2) | 2 | (41 | ) | large | 1 | 1 | — | |||||||||||||||||
Asia Pacific | 390 | 356 | 10 | 201 | 189 | 6 | ||||||||||||||||||
Hedging and AIFRS volatility(2) | 59 | 17 | large | 85 | (26 | ) | large | |||||||||||||||||
Other(2) | (57 | ) | (19 | ) | large | (86 | ) | 29 | large | |||||||||||||||
Total Banking Net profit after tax (“underlying basis”) | 3,763 | 3,227 | 17 | 1,896 | 1,867 | 2 | ||||||||||||||||||
(1) | During the current year certain Balance Sheet risk management operations have been merged within the Financial Markets product of the Business, Corporate and Institutional segment; and the methodology for overhead cost allocation between Banking segments has been refined. Prior periods have been restated on a consistent basis. | |
(2) | During the current half the impact of Hedging and AIFRS volatility has been separately disclosed within the Business, Corporate and Institutional and Asia Pacific segments. Prior periods have been restated on a consistent basis. |
Other Banking Income
Full Year | Half Year | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Commissions | 1,729 | 1,635 | 870 | 859 | ||||||||||||
Lending fees | 896 | 800 | 479 | 417 | ||||||||||||
Trading income | 555 | 505 | 249 | 306 | ||||||||||||
Other income | 271 | 175 | 112 | 159 | ||||||||||||
3,451 | 3,115 | 1,710 | 1,741 | |||||||||||||
Non-trading derivatives | (19 | ) | (79 | ) | 44 | (63 | ) | |||||||||
Other banking income | 3,432 | 3,036 | 1,754 | 1,678 | ||||||||||||
Excluding the impact of AIFRS non-trading derivative volatility, Other banking income increased 11% over the year.
Other Banking Income
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Factors impacting Other banking income were:
• | Commissions: increased by 6% on the prior year to $1,729 million. The increase was driven by a 22% increase in CommSec brokerage volumes and increased volume of initial public offering activities; | |
• | Lending fees: increased by 12% on the prior year to $896 million. The result was driven by an increase in lending volumes, particularly line fees related to the business and corporate lending portfolios; | |
• | Trading income: increased 10% on the prior year to $555 million reflecting favourable market conditions; and | |
• | Other income: increased $96 million on the prior year. The current year includes a $79 million gain on the sale of the Group’s share in Greater Energy Alliance Corporation Pty Limited (“Loy Yang”) and $58 million in relation to the sale of Mastercard shares. The prior year includes $32 million relating to the Mastercard initial public offering. The level of asset sales is not inconsistent with historic experience. | |
Other income in the second half decreased by $47 million to $112 million. After adjusting for the timing of Loy Yang, Mastercard and other property asset sales, other income was flat. |
The current half result decreased by 2% compared to the prior half after excluding the impact of non-trading derivatives. This was the result of a reduction in trading income in the current half and the timing of asset sales impacting other income.
Profit Announcement 7
Table of Contents
Banking Analysiscontinued
Operating expenses
Underlying operating expenses within the Banking business increased by 5% on the prior year to $4,797 million. Operating expenses were impacted by:
• | Average salary increases of 4% reflecting the competitive domestic labour market and the effect of inflation on general expenses; | |
• | Ongoing investment in front line staff across each of our key businesses, with staff numbers rising 3% over the year; | |
• | Continued investment in various projects supporting the strategic priorities of the Group most notably the Business Banking and Global Markets growth initiatives, which were accelerated in the current half contributing to a $35 million half-on-half increase in investment spend; and | |
• | Continued productivity improvements achieved through process simplification initiatives, including $100 million of cost savings in IT expenditure during the year. |
During the second half of the year operating expenses increased 4% to $2,443 million, driven by similar factors (particularly the accelerated investment).
Banking Expense to Income Ratio
The underlying Banking expense to income ratio improved from 47.7% for the full year ended 30 June 2006 to 45.8% in the current year representing a productivity improvement of 4%. The improvement reflects strong income growth, targeted growth in investment spend and discipline in underlying cost control.
Productivity
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Loan Impairment Expense
The total charge for loan impairment expense for the year was $434 million, which is 19 basis points of average risk weighted assets. During the second half the loan impairment expense increased by 23% to $239 million. This was driven by general growth in risk weighted assets, risk ratings downgrades in the corporate middle market segment and seasonal influences. Loan impairment expense on consumer loans remained steady in the second half as a proportion of risk weighted assets.
Gross impaired assets were $421 million as at 30 June 2007, compared with $326 million at June 2006.
The Group remains well provisioned, with total provisions for impairment as a percentage of gross impaired assets of 298%.
Taxation Expense
The corporate tax charge for the year was $1,447 million, an effective tax rate of 27.6%.
The effective tax rate for the half year ended 30 June 2007 was 27.2% compared to 28.1% in the prior half.
The lower effective tax rate was principally due to the utilisation of domestic capital losses in the current half and was also assisted by lower offshore tax rates.
Provisions for Impairment Losses
Total provisions for impairment losses at 30 June 2007 were $1,256 million. This includes a collective provision of $1,034 million, which expressed as a percentage of gross loans and acceptances is 0.32%. The current level reflects:
• | Stable arrears rates within the Group’s consumer lending portfolios; | |
• | The high proportion of low risk home loans within the credit portfolio; and | |
• | Risk ratings downgrades and specific provisions within the business lending portfolio. |
Risk Weighted Assets on Balance Sheet ($M)
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Gross Impaired Assets ($M)
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8 Commonwealth Bank of Australia
Table of Contents
Banking Analysiscontinued
As At | |||||||||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | Jun 07 vs | Jun 07 vs | |||||||||||||||||||
Total Banking Assets & Liabilities | $M | $M | $M | Dec 06 % | Jun 06 % | ||||||||||||||||||
Interest earning assets | |||||||||||||||||||||||
Home loans including securitisation | 190,337 | 176,721 | 167,121 | 8 | 14 | ||||||||||||||||||
Less: securitisation | (15,633 | ) | (10,754 | ) | (12,607 | ) | 45 | 24 | |||||||||||||||
Home loans excluding securitisation | 174,704 | 165,967 | 154,514 | 5 | 13 | ||||||||||||||||||
Personal | 20,074 | 18,237 | 17,228 | 10 | 17 | ||||||||||||||||||
Business and corporate | 90,601 | 84,215 | 76,044 | 8 | 19 | ||||||||||||||||||
Loans, advances and other receivables(1) | 285,379 | 268,419 | 247,786 | 6 | 15 | ||||||||||||||||||
Non lending interest earning assets | 49,553 | 45,792 | 40,283 | 8 | 23 | ||||||||||||||||||
Total interest earning assets | 334,932 | 314,211 | 288,069 | 7 | 16 | ||||||||||||||||||
Other assets(2) | 62,161 | 53,039 | 52,185 | 17 | 19 | ||||||||||||||||||
Total assets | 397,093 | 367,250 | 340,254 | 8 | 17 | ||||||||||||||||||
Interest bearing liabilities | |||||||||||||||||||||||
Transaction deposits | 41,915 | 36,070 | 35,771 | 16 | 17 | ||||||||||||||||||
Savings deposits | 49,975 | 47,380 | 42,729 | 5 | 17 | ||||||||||||||||||
Investment deposits | 76,856 | 72,188 | 67,364 | 6 | 14 | ||||||||||||||||||
Other demand deposits | 26,157 | 24,892 | 20,325 | 5 | 29 | ||||||||||||||||||
Total interest bearing deposits | 194,903 | 180,530 | 166,189 | 8 | 17 | ||||||||||||||||||
Deposits not bearing interest | 8,479 | 8,289 | 7,038 | 2 | 20 | ||||||||||||||||||
Deposits and other public borrowings | 203,382 | 188,819 | 173,227 | 8 | 17 | ||||||||||||||||||
Debt issues | 69,753 | 71,431 | 65,086 | (2 | ) | 7 | |||||||||||||||||
Other interest bearing liabilities | 43,719 | 40,320 | 34,890 | 8 | 25 | ||||||||||||||||||
Total interest bearing liabilities | 308,375 | 292,281 | 266,165 | 6 | 16 | ||||||||||||||||||
Securitisation debt issues | 15,737 | 11,130 | 13,505 | 41 | 17 | ||||||||||||||||||
Non interest bearing liabilities(3) | 53,355 | 46,788 | 44,515 | 14 | 20 | ||||||||||||||||||
Total liabilities | 377,467 | 350,199 | 324,185 | 8 | 16 | ||||||||||||||||||
Provisions for Impairment | |||||||||||||||||||||||
Collective provision | 1,034 | 1,040 | 1,046 | (1 | ) | (1 | ) | ||||||||||||||||
Individually assessed provisions | 199 | 171 | 171 | 16 | 16 | ||||||||||||||||||
Total provisions for loan impairment | 1,233 | 1,211 | 1,217 | 2 | 1 | ||||||||||||||||||
Other credit provisions(4) | 23 | 19 | 24 | 21 | (4 | ) | |||||||||||||||||
Total provisions for impairment losses | 1,256 | 1,230 | 1,241 | 2 | 1 | ||||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
Asset Quality | 30/06/07 | 30/06/06 | Jun 07 vs Jun 06 % | 30/06/07 | 31/12/06 | Jun 07 vs Dec 06 % | ||||||||||||||||||
Gross loans and acceptances ($M) | 321,653 | 280,282 | 15 | 321,653 | 299,085 | 8 | ||||||||||||||||||
Risk weighted assets ($M) | 245,347 | 216,438 | 13 | 245,347 | 234,569 | 5 | ||||||||||||||||||
Gross impaired assets ($M) | 421 | 326 | (29 | ) | 421 | 338 | (25 | ) | ||||||||||||||||
Net impaired assets ($M) | 222 | 155 | (43 | ) | 222 | 167 | (33 | ) | ||||||||||||||||
Collective provisions as a % of risk weighted assets | 0.42 | 0.48 | (6 | )bpts | 0.42 | 0.44 | (2 | )bpts | ||||||||||||||||
Collective provisions as a % of gross loans and acceptances | 0.32 | 0.37 | (5 | )bpts | 0.32 | 0.35 | (3 | )bpts | ||||||||||||||||
Individually assessed provisions for impairment as a % of gross impaired assets(5) | 23.8 | 24.5 | (70 | )bpts | 23.8 | 23.4 | 40 | bpts | ||||||||||||||||
Loan impairment expense as a % of average risk weighted assets annualised(6) | 0.19 | 0.20 | 1 | bpt | 0.20 | 0.17 | (3 | )bpts | ||||||||||||||||
Loan impairment expense as a % of gross loans and acceptances annualised | 0.13 | 0.14 | 1 | bpt | 0.15 | 0.13 | (2 | )bpts | ||||||||||||||||
(1) | Gross of provisions for impairment which are included in Other assets. | |
(2) | Other assets include Bank acceptances of customers, derivative assets, provisions for impairment and securitisation assets. | |
(3) | Non interest bearing liabilities include derivative liabilities. | |
(4) | Included in Other provisions. | |
(5) | Bulk portfolio provisions of $99 million at 30 June 2007 ($92 million at 31 December 2006 and $91 million at 30 June 2006) to cover unsecured personal loans and credit card lending have been deducted from individually assessed provisions to calculate this ratio. These provisions are deducted due to the exclusion of the related assets from gross impaired assets. The related asset amounts are instead included in the 90 days or more past due disclosure. | |
(6) | Average of opening and closing balances. |
Profit Announcement 9
Table of Contents
Banking Analysiscontinued
Australian Retail
The Australian Retail product segment performed strongly over the year, with underlying net profit after income tax increasing by 10% to $1,840 million. This result reflects the strategic targeting of profitable growth in a competitive market, disciplined cost management and continued sound credit quality.
Business Review
Over the year, a number of initiatives have been implemented to help ensure the Group achieves its vision to be Australia’s finest financial services organisation through excelling in customer service. Highlights included:
• | The continued revitalisation of the branch network, including the refurbishment of existing sites, the opening of six new branches and the introduction of extended Saturday trading at 65 of the busiest branches; | |
• | Further changes to the branch network operating model which give local management greater authority. Key customer processes have been further streamlined. This has been supported by new remuneration and bonus arrangements for branch managers depending on the size, contribution and performance of branches; | |
• | The creation of more than 600 new front line customer service positions since October 2005; | |
• | The continued utilisation of CommSee, the Group’s market-leading customer information and management system, as a central element of sales and service processes; | |
• | The implementation of more effective sales and service training programs, including entry training for new customer service staff, and sales and service leadership training for all front line team leaders; and | |
• | Improvements to the product range as illustrated by the awarding of five star ratings* to many of the Group’s deposit accounts and credit card products (* Source: Cannex). |
As a result of these and other actions, the Group has seen:
• | Significant improvements in Customer Satisfaction ratings; | |
• | A reduction in customer complaints of over 40% since June 2006; | |
• | Improvements in a range of staff engagement measures; and | |
• | Strong volume growth leading to stabilised and growing market shares across key product lines. |
Home Loans
Home loan revenue increased by 4% over the year to $1,466 million. Balances grew by 11% over the year, including strong second half growth of 7% driven by improved network sales performance. Margin compression over the year occurred predominantly in the first half, reflecting strong growth in lower margin package and fixed rate loans and the tightening of the yield curve ahead of the August 2006 and November 2006 cash rate rises.
Second half revenue was in line with the first half, with strong volume growth offsetting the negative impact of three fewer calendar days. Despite strong competition, market share was held constant in the second half of the year, underpinned by strong network sales and the continued success of third party banking.
Consumer Finance (Personal Loans and Credit Cards)
Total income in the Consumer Finance portfolio grew by 3% over the year. The current year includes $58 million in relation to the sale of MasterCard shares in January 2007. The prior year included $32 million relating to the MasterCard initial public offering.
The Group’s focus remains on profitable growth, achieved through effective product pricing and other initiatives.
The Group’s low-rate credit card (“Yellow”) continues to attract strong customer support, with over 240,000 accounts opened since launch in March 2006.
Retail Deposits
Deposit revenue increased by 7% on the prior year, driven by a combination of strong volume growth and improved margins. Second half revenue was only marginally down on the prior half, despite the negative impact of three fewer calendar days, the increased pensioner savings deeming rate in April and seasonal balance outflows from transaction-based accounts.
Deposit balances grew by 9% over the year, with all major product categories recording good inflows, including Transaction Accounts, Term Deposits, Cash Management Accounts and NetBank Saver. Whilst some deposit market share was ceded in the first half of the year due to aggressive pricing by competitors, the position has stabilised in the second half.
Operating Expenses
Expense growth was contained to 2% over the full year and 1% in the second half. Productivity improvements and technology savings have largely offset the cost of additional front line customer service staff and other sales and service related investments. Productivity gains contributed to further improvements in the expense to income ratio, which fell from 46.6% in the prior year to 45.2%.
Loan Impairment Expense
Loan impairment expense for the full year was $349 million. In the current half the expense was $185 million, an increase of $21 million on the prior half driven by normal seasonal factors. Loan impairment expense to risk weighted assets reduced over the year reflecting a continued focus on credit quality. Home loan impairment expenses remain broadly in line with prior years. Personal loan quality continues to improve as new business progressively replaces lower quality loans written in 2004/05. While the market has seen some deterioration, the Group’s credit card arrears rates continue to trend in line with expectations and at a lower level than last year.
Market Share Percentage(1) | 30/06/07 | 31/12/06 | 30/06/06 | |||||||||
Home loans(2) | 18.5 | 18.4 | 18.7 | |||||||||
Credit cards(2) (3) | 18.8 | 19.3 | 20.3 | |||||||||
Personal lending (APRA and other households)(4) | 16.4 | 16.4 | 16.1 | |||||||||
Household deposits | 29.0 | 28.8 | 29.3 | |||||||||
Retail deposits | 21.6 | 21.9 | 22.2 | |||||||||
(1) | For market share definitions refer to appendix 24, page 68. | |
(2) | 31 December 2006 comparatives revised. | |
(3) | As at 31 May 2007. | |
(4) | Personal lending market share includes personal loans and margin loans. |
10 Commonwealth Bank of Australia
Table of Contents
Banking AnalysisContinued
Australian Retail(1)
Full Year to June 2007 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
Home loans | 1,294 | 172 | 1,466 | |||||||||||||||||||||
Consumer finance | 708 | 424 | 1,132 | |||||||||||||||||||||
Retail deposits | 2,107 | 676 | 2,783 | |||||||||||||||||||||
Australian Retail products | 4,109 | 1,272 | 5,381 | 2,430 | 349 | 1,840 | ||||||||||||||||||
Full Year to June 2006 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
Home loans | 1,260 | 151 | 1,411 | |||||||||||||||||||||
Consumer finance | 732 | 368 | 1,100 | |||||||||||||||||||||
Retail deposits | 1,938 | 674 | 2,612 | |||||||||||||||||||||
Australian Retail products | 3,930 | 1,193 | 5,123 | 2,388 | 354 | 1,678 | ||||||||||||||||||
Half Year to June 2007 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
Home loans | 650 | 85 | 735 | |||||||||||||||||||||
Consumer finance | 357 | 233 | 590 | |||||||||||||||||||||
Retail deposits | 1,046 | 339 | 1,385 | |||||||||||||||||||||
Australian Retail products | 2,053 | 657 | 2,710 | 1,224 | 185 | 928 | ||||||||||||||||||
(1) | During the current period the methodology for allocation of total Australian Retail income between products and segments has been refined. Prior periods have been restated on a consistent basis. | |
(2) | During the current period the methodology for overhead cost allocation has been refined. Prior periods have been restated on a consistent basis. |
As At | ||||||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | Jun 07 vs | Jun 07 vs | ||||||||||||||||
Major Balance Sheet Items (gross of impairment) | $M | $M | $M | Dec 06 % | Jun 06 % | |||||||||||||||
Home loans (incl securitisation) | 161,406 | 150,834 | 144,834 | 7 | 11 | |||||||||||||||
Consumer finance(1) | 10,809 | 10,602 | 10,640 | 2 | 2 | |||||||||||||||
Total Assets — Australian Retail products | 172,215 | 161,436 | 155,474 | 7 | 11 | |||||||||||||||
Home loans (net of securitisation) | 145,773 | 140,080 | 132,227 | 4 | 10 | |||||||||||||||
Transaction deposits | 18,980 | 18,323 | 16,993 | 4 | 12 | |||||||||||||||
Savings deposits | 39,349 | 37,898 | 36,176 | 4 | 9 | |||||||||||||||
Other demand deposits | 38,754 | 37,710 | 35,893 | 3 | 8 | |||||||||||||||
Deposits not bearing interest | 2,599 | 2,930 | 2,362 | (11 | ) | 10 | ||||||||||||||
Total Liabilities — Australian Retail products | 99,682 | 96,861 | 91,424 | 3 | 9 | |||||||||||||||
(1) | Consumer Finance includes personal loans and credit cards. |
CBA Home Loan Approvals by State | CBA Home Loan Balances by State | |
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Profit Announcement 11
Table of Contents
Banking AnalysisContinued
Business, Corporate and Institutional
The Business, Corporate and Institutional product segment delivered underlying net profit after tax of $1,529 million, an increase of 24% on the prior year. Included in the current year is a $55 million after tax profit on the sale of the Group’s share in Greater Energy Alliance Corporation Pty Limited (“Loy Yang”). Excluding this amount, profit increased 19% on the prior year.
Business Review
Business Banking is one of the Group’s strategic priorities with the aspiration to be widely regarded as the Business Banking partner of choice. Good progress was made over the past year against this objective, with performance highlights including:
• | Opening of eight new Business Banking Centres and recruitment of 72 new sales people in the first year of a three year expansion program, targeting 25 new sites and 270 new sales people in total by the end of the third year; |
• | Re-introduction of Business Bankers into branches, with 135 recruited and 85 operating within the branch network after completing a rigorous induction and training program; |
• | Launch of 24 hour, 7 days per week, 365 days per year remote customer service centre for local business customers supported by a new team of 78 Local Business Banking Associates. Local Business Banking Online was also launched, providing new ways for our customers to interact with us and each other; |
• | Launch of Agriline, a dedicated customer service centre for our rural customers, supported by a new team of 23 Agriline Associates. In addition, 30 additional Agribusiness sales people were recruited as part of an expansion in rural banking; and |
• | Launch of CommBiz, a new transaction banking platform for businesses of all sizes from institutional and corporate clients to small business customers. Over 10,000 customers have already migrated from legacy platforms since its launch in December 2006. |
Institutional Banking continued to have strong momentum, achieving above market growth rates. This has been achieved through a focus on integrated debt and equity capital management, financial and commodity risk management and transaction banking, combined with key competencies in growth industries.
Global Markets and Treasury has undertaken an investment in people and technology to provide a platform for future growth opportunities. The Global Markets and Treasury team ended the year at number one on the Australian debt capital markets ranking and has substantially increased the Australian equity capital markets ranking following a number of key equity deals completed during the year.
CommSec maintained its position as Australia’s number one broker platform by volume and benefited from strong market conditions, with a new monthly volume record set in June 2007 of 1.1 million trades. Other highlights included CommSec winning the Lead Manager role for the Platinum Asset Management initial public offering and the launch of CommSec Self Managed Super Fund.
Corporate Banking
Corporate Banking includes commercial and corporate transaction services and merchant acquiring.
This line of business achieved income growth of 10% on the prior year following balance growth in the newly introduced Business Online Saver product and strong growth across higher margin commercial and corporate Current Accounts. Cash rate increases in the first half also contributed to the income growth.
Financial Markets
Financial Markets includes financial markets and wholesale operations, treasury, equities broking (including CommSec) and structured products, capital markets services (including IPOs and placements) and margin lending.
Financial markets income has increased 14% on the prior year following continued favourable trading conditions and increased customer flows. Growth in investment markets has resulted in record CommSec trading volumes and margin lending balances have increased 40% on the prior year.
Lending and Finance
Lending and Finance includes asset finance, structured finance and general business lending.
Lending and Finance income increased by 21% on the prior year. This includes the impact of the pre-tax gain on sale of the Bank’s share in Greater Energy Alliance Corporation Pty Limited (“Loy Yang”) during the year of $79 million.
Lending and Finance assets have increased $11 billion or 11% on the prior year. The increase has been driven by continued growth in the Australian and New Zealand syndicated loan market and in structured finance transactions.
Operating Expenses
Operating expenses of $1,741 million represented 10% growth compared to the prior year. This was driven by general salary increases and higher employee numbers. In addition, the Group significantly increased investment to support the strategic expansion of the Business Banking and Financial Markets activities. Productivity gains contributed to further improvements in the expense to income ratio, which fell from 47.1% in the prior year to 45.0%.
Loan Impairment Expense
Loan impairment expense for the full year was $7 million higher than the prior year at $75 million. This was due to an increase in our assessment of portfolio risk and specific provisions related to the corporate middle market segment in the current half, which drove a $35 million increase in loan impairment expense on the prior half.
Market Share
Business lending market share to non-financial corporations, as measured by APRA, has increased by 30 basis points since 30 June 2006 to 12.4%.
Asset finance market share has decreased by 130 basis points to 13.2% since 30 June 2006. The decline reflects the maturity of this business segment, which has been characterised by aggressive price competition coupled with competitor expansion. Business deposit market share of non-financial corporations, as measured by APRA, has increased by 110 basis points since 30 June 2006 to 13.0%.
Market Share Percentage(1) | 30/06/07 | 31/12/06 | 30/06/06 | |||||||||
Business lending — APRA | 12.4 | 12.5 | 12.1 | |||||||||
Business lending — RBA(2) | 12.9 | 13.0 | 13.2 | |||||||||
Asset finance | 13.2 | 13.9 | 14.5 | |||||||||
Business deposits — APRA | 13.0 | 12.0 | 11.9 | |||||||||
Equities trading (CommSec)(2) | 4.4 | 4.4 | 4.3 | |||||||||
(1) | For market share definitions refer to appendix 24, page 68. | |
(2) | Prior period comparatives have been revised. |
12 Commonwealth Bank of Australia
Table of Contents
Banking AnalysisContinued
Business, Corporate and Institutional(1)
Full Year to June 2007 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
Corporate Banking | 555 | 366 | 921 | |||||||||||||||||||||
Financial Markets | 500 | 803 | 1,303 | |||||||||||||||||||||
Lending and Finance | 1,005 | 636 | 1,641 | |||||||||||||||||||||
Business, Corporate and Institutional products | 2,060 | 1,805 | 3,865 | 1,741 | 75 | 1,529 | ||||||||||||||||||
Hedging and AIFRS volatility (excluded from above) | 135 | (132 | ) | 3 | 2 | |||||||||||||||||||
Full Year to June 2006 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
Corporate Banking | 496 | 344 | 840 | |||||||||||||||||||||
Financial Markets | 440 | 708 | 1,148 | |||||||||||||||||||||
Lending and Finance | 870 | 491 | 1,361 | |||||||||||||||||||||
Business, Corporate and Institutional products | 1,806 | 1,543 | 3,349 | 1,577 | 68 | 1,236 | ||||||||||||||||||
Hedging and AIFRS volatility (excluded from above) | 46 | (104 | ) | (58 | ) | (41 | ) | |||||||||||||||||
Half Year to June 2007 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
Corporate Banking | 281 | 179 | 460 | |||||||||||||||||||||
Financial Markets | 291 | 393 | 684 | |||||||||||||||||||||
Lending and Finance | 510 | 313 | 823 | |||||||||||||||||||||
Business, Corporate and Institutional products | 1,082 | 885 | 1,967 | 908 | 55 | 767 | ||||||||||||||||||
Hedging and AIFRS volatility (excluded from above) | 106 | (105 | ) | 1 | 1 | |||||||||||||||||||
(1) | The components of the three Business, Corporate and Institutional product segments have been rearranged during the current year, in order to align with the wider divisional restructure which was undertaken during the year as part of a re-focus on customer service. Prior periods have been restated on a consistent basis. | |
(2) | During the current period the methodology for overhead cost allocation has been refined. Prior periods have been restated on a consistent basis. |
As At | ||||||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | Jun 07 vs | Jun 07 vs | ||||||||||||||||
Major Balance Sheet Items (gross of impairment) | $M | $M | $M | Dec 06 % | Jun 06 % | |||||||||||||||
Interest earning lending assets | 80,464 | 74,029 | 66,343 | 9 | 21 | |||||||||||||||
Bank acceptances of customers | 18,721 | 18,395 | 18,310 | 2 | 2 | |||||||||||||||
Non lending interest earning assets | 41,530 | 41,723 | 35,471 | — | 17 | |||||||||||||||
Margin loans | 8,070 | 6,542 | 5,758 | 23 | 40 | |||||||||||||||
Other assets(1) | 25,842 | 19,486 | 19,947 | 33 | 30 | |||||||||||||||
Total Assets(2) | 174,627 | 160,175 | 145,829 | 9 | 20 | |||||||||||||||
Transaction deposits | 21,578 | 16,648 | 16,426 | 30 | 31 | |||||||||||||||
Other demand deposits | 29,347 | 26,162 | 23,641 | 12 | 24 | |||||||||||||||
Deposits not bearing interest | 4,084 | 3,686 | 3,520 | 11 | 16 | |||||||||||||||
Certificates of deposits and other | 25,573 | 24,923 | 20,178 | 3 | 27 | |||||||||||||||
Due to other financial institutions | 14,199 | 12,390 | 11,333 | 15 | 25 | |||||||||||||||
Liabilities at fair value through Income Statement | 4,228 | 3,783 | 2,085 | 12 | large | |||||||||||||||
Debt issues | 84,556 | 82,381 | 77,848 | 3 | 9 | |||||||||||||||
Loan Capital | 9,818 | 9,724 | 9,744 | 1 | 1 | |||||||||||||||
Other non interest bearing liabilities(1) | 43,317 | 36,805 | 36,703 | 18 | 18 | |||||||||||||||
Total Liabilities(2) | 236,700 | 216,502 | 201,478 | 9 | 17 | |||||||||||||||
Balance Sheet by Product Segment(3) | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Corporate Banking | 2,762 | 2,669 | 1,061 | 3 | large | |||||||||||||||
Financial Markets | 49,137 | 40,800 | 36,228 | 20 | 36 | |||||||||||||||
Lending and Finance | 115,446 | 112,713 | 104,086 | 2 | 11 | |||||||||||||||
Other(2) | 7,282 | 3,993 | 4,454 | 82 | 63 | |||||||||||||||
Total Assets | 174,627 | 160,175 | 145,829 | 9 | 20 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Corporate Banking | 46,359 | 39,953 | 37,375 | 16 | 24 | |||||||||||||||
Financial Markets | 58,580 | 51,376 | 40,838 | 14 | 43 | |||||||||||||||
Lending and Finance | 29,542 | 27,655 | 27,303 | 7 | 8 | |||||||||||||||
Other(2) | 102,219 | 97,518 | 95,962 | 5 | 7 | |||||||||||||||
Total Liabilities | 236,700 | 216,502 | 201,478 | 9 | 17 | |||||||||||||||
(1) | Other assets include intangible assets and derivative assets, and Other non interest bearing liabilities include derivative liabilities. | |
(2) | Includes Group Funding, Balance Sheet Management and other capital not directly attributed to the product based segments above. | |
(3) | During the current year, reclassifications of balance sheet amounts between product segments were made to align with the wider divisional restructure. Prior periods have been restated on a consistent basis. |
Profit Announcement 13
Table of Contents
Banking AnalysisContinued
Asia Pacific
Asia Pacific Banking incorporates the Group’s retail, business, commercial, rural and treasury banking operations in New Zealand, Fiji, Indonesia and China.
Underlying net profit after tax for Asia Pacific businesses increased 10% to $390 million(1) compared to the prior year. ASB Bank in New Zealand represents the majority of the business.
During the year, the accounting impacts arising from the application of “AASB 139 Financial Instruments: Recognition and Measurement” resulted in a gain of $85 million (before tax) within Total banking income. This impact, referred to as “Hedging and AIFRS volatility” was driven by:
• | Mark to market accounting gains on economic hedges which do not qualify for AIFRS hedge accounting and hedge ineffectiveness of $117 million; offset by |
• | Accounting losses on the economic hedge of New Zealand operations due to the difference between hedged currency rate and actual rate of $32 million. |
These accounting gains and losses are not reflective of the underlying economic reality, as all exposures are fully hedged within risk limits.
ASB Bank
The New Zealand banking industry continued to be very competitive during 2007, characterised by aggressive pricing particularly on home loans. Against this challenging background ASB Bank achieved statutory net profit after tax growth in New Zealand Dollar terms of 8% (excluding the impact of AIFRS hedge accounting).
This result was driven by:
• | Strong asset growth represented by total lending balances increasing by NZD 6,170 million or 16% over the prior year including a 14% increase in home lending volumes; |
• | Solid growth in retail deposits of 16% to NZD 24.5 billion, mainly due to a 23% increase in FastSaver, BusinessSaver and Term Investment balances; |
• | Margin contraction for the year of ten basis points, most of which occurred during the first half, with margins declining only three basis points in the second half. The majority of this was driven by tightening home loan margins and changes in product mix such as the re-weighting of the deposits portfolio towards higher interest rate savings products; and |
• | Continued low impairment losses. |
Other performance highlights included:
• | Continued achievement of a market leading position in customer satisfaction rates among the major banks; |
• | Broadening access for customers to banking services with internet and telephone banking supplemented by banking updates to mobiles phones and 20 branches now operating seven days a week; |
• | Winner of the TUANZ Business Internet eCommerce Financial Services award in recognition of the ASB Fastnet Classic online banking service; |
• | ASB Group was appointed one of the default providers for the Kiwisaver Retirement scheme which was launched by the NZ government to encourage employees to save consistently during their working lives; and |
• | For the fifth consecutive year, ASB Bank was recognised as New Zealand’s “Bank of the Year” by the UK based Banker Magazine. |
Underlying net profit after tax increased 6% in the second half to $193 million(1). This result reflects continued strong lending growth, stabilisation of margins and the strengthening of the New Zealand Dollar.
Other Asia Pacific Business
The highlights in this region during the year were:
• | Acquisition of an 83% stake in Arta Niaga Kencana (Bank ANK) in Surabaya region of Indonesia adding 20 branches; |
• | Continued branch expansion in PT Bank Commonwealth in Indonesia with four new branches added during the year; |
• | Increasing the Group’s investment in Hangzhou City Commercial Bank to maintain 19.9% equity stake following an investment by the Asian Development Bank; and |
• | The launch of a new customer website “Moving to Australia?” in five different languages to make opening a bank account even easier for overseas customers moving to or doing business in Australia. |
Loan Impairment Expense
Total loan impairment expense for the Asia Pacific region was $18 million, which is in line with the prior year. The current half expense increased by $8 million, due to some deterioration in both retail and corporate portfolios in New Zealand.
Market Share
Home loan market share in New Zealand remained stable throughout the year at 23.1% as at 30 June 2007.
Retail deposit market share in New Zealand increased 90 basis points during the year to 21.2% as at 30 June 2007.
Market Share Percentage(2) | 30/06/07 | 31/12/06 | 30/06/06 | |||||||||
NZ lending for housing | 23.1 | 23.1 | 23.1 | |||||||||
NZ retail deposits | 21.2 | 20.7 | 20.3 | |||||||||
(1) | Represents Group Management view for the product segment rather than statutory view, excluding the impact of Hedging and AIFRS volatility. | |
(2) | For market share definitions refer to appendix 24, page 68. |
14 Commonwealth Bank of Australia
Table of Contents
Banking AnalysisContinued
Full Year to June 2007 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Asia Pacific(1) | Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | ||||||||||||||||||
ASB Bank | 732 | 285 | 1,017 | |||||||||||||||||||||
Other | 32 | 33 | 65 | |||||||||||||||||||||
Asia Pacific | 764 | 318 | 1,082 | 515 | 18 | 390 | ||||||||||||||||||
Hedging and AIFRS volatility (excluded from above) | (28 | ) | 113 | 85 | 59 | |||||||||||||||||||
Full Year to June 2006 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
ASB Bank | 680 | 291 | 971 | |||||||||||||||||||||
Other | 42 | 29 | 71 | |||||||||||||||||||||
Asia Pacific | 722 | 320 | 1,042 | 509 | 20 | 356 | ||||||||||||||||||
Hedging and AIFRS volatility (excluded from above) | — | 25 | 25 | 17 | ||||||||||||||||||||
Half Year to June 2007 | ||||||||||||||||||||||||
Net | Other | Total | Loan | Underlying | ||||||||||||||||||||
Interest | Banking | Banking | Expenses | Impairment | Profit after | |||||||||||||||||||
Income $M | Income $M | Income $M | $M(2) | $M | Tax $M | |||||||||||||||||||
ASB Bank | 386 | 137 | 523 | |||||||||||||||||||||
Other | 16 | 12 | 28 | |||||||||||||||||||||
Asia Pacific | 402 | 149 | 551 | 255 | 13 | 201 | ||||||||||||||||||
Hedging and AIFRS volatility (excluded from above) | (28 | ) | 149 | 121 | 85 | |||||||||||||||||||
(1) | During the current period the impact of AIFRS derivative hedging has been excluded from the Asia Pacific total and is disclosed separately above. Prior periods have been restated on a consistent basis. |
As At | ||||||||||||||||||||
Major Balance Items (gross of impairment)(1) | 30/06/07 | 31/12/06 | 30/06/06 | Jun 07 vs | Jun 07 vs | |||||||||||||||
$M | $M | $M | Dec 06 % | Jun 06 % | ||||||||||||||||
Home lending | 28,931 | 25,887 | 22,287 | 12 | 30 | |||||||||||||||
Other lending assets | 11,332 | 11,279 | 10,531 | — | 8 | |||||||||||||||
Non lending interest earning assets | 8,023 | 6,938 | 4,812 | 16 | 67 | |||||||||||||||
Other assets | 1,965 | 1,535 | 1,321 | 28 | 49 | |||||||||||||||
Total Assets — Asia Pacific | 50,251 | 45,639 | 38,951 | 10 | 29 | |||||||||||||||
Debt issues | 935 | 180 | 744 | large | 26 | |||||||||||||||
Deposits(1) | 23,094 | 21,038 | 18,040 | 10 | 28 | |||||||||||||||
Liabilities at fair value through the Income Statement | 15,203 | 14,204 | 11,727 | 7 | 30 | |||||||||||||||
Other liabilities | 1,853 | 1,414 | 772 | 31 | large | |||||||||||||||
Total Liabilities — Asia Pacific | 41,085 | 36,836 | 31,283 | 12 | 31 | |||||||||||||||
Balance Sheet by Segment | ||||||||||||||||||||
Assets | ||||||||||||||||||||
ASB Bank | 47,995 | 43,379 | 36,724 | 11 | 31 | |||||||||||||||
Other | 2,256 | 2,260 | 2,227 | — | 1 | |||||||||||||||
Total Assets — Asia Pacific | 50,251 | 45,639 | 38,951 | 10 | 29 | |||||||||||||||
Liabilities | ||||||||||||||||||||
ASB Bank | 38,926 | 34,885 | 29,306 | 12 | 33 | |||||||||||||||
Other | 2,159 | 1,951 | 1,977 | 11 | 9 | |||||||||||||||
Total Liabilities — Asia Pacific | 41,085 | 36,836 | 31,283 | 12 | 31 | |||||||||||||||
(1) | Asia Pacific Deposits exclude deposits held in other overseas countries (30 June 2007: $5 billion, 31 December 2006: $6 billion and 30 June 2006: $5 billion). |
Profit Announcement 15
Table of Contents
Funds Management Analysis
Financial Performance and Business Review
Performance Highlights
Underlying net profit after tax increased 23% over the year to $492 million for the Funds Management business reflecting continued strong revenue growth across the business.
The underlying net profit after tax result for the second half of the year increased 12% on the prior half to $260 million driven by continued growth in the funds management business and strong investment performance.
Funds Under Administration increased 17% to $177 billion as at 30 June 2007.
Business Review
Industry conditions have been positive with strong investment markets and retail flows underpinning growth over the year.
Net fund flows for the year ended 30 June 2007 of $1.8 billion were impacted by the disengagement of a major client from the Avanteos platform. Excluding Avanteos, net funds flow for the year was over $7 billion, most of which occurred in the second half.
The drivers of this strong underlying net funds flow for the year were:
• | Investors taking advantage of superannuation legislation changes which contributed to $9.2 billion FirstChoice net flows for the year ended 30 June 2007. With over $39 billion in funds under administration, FirstChoice has experienced growth of 51% in the last 12 months; and | |
• | Solid institutional flows generated by the CFS Global Asset Management business. |
During the year, a goodwill impairment of $40 million was recognised in relation to Avanteos.
Other key developments within the business include:
• | CFS Global Asset Management ongoing expansion into alternative asset classes and developing infrastructure capabilities both domestically and in Europe; | |
• | CFS Global Asset Management is the joint lead partner in a consortium which acquired AWG plc, an infrastructure company which provides water services in the UK. As at 30 June 2007 13% of the Group’s interest in AWG plc had been sold down to infrastructure funds; | |
• | CFS Global Asset Management, through its joint venture First State Media Group, acquired a major music copyright catalogue in May 2007. The purchase will be the foundation asset for a media focused investment fund to be launched later in the calendar year; | |
• | CFS Global Asset Management launched the First State Cinda Leaders Growth Equity Fund with joint venture partners China Cinda Asset Management; | |
• | New products launched by CFS during the year include a fully integrated margin lending solution, and 12 new investment options on the FirstChoice platform; | |
• | Commonwealth Financial Planner numbers increased during the year by 68 to 702. The first adviser training program was completed in early 2007 with 42 graduates and the second program commenced in February 2007 with 27 entrants. During the year referrals increased by 15%; and | |
• | CFS Global Asset Management incubated or launched in excess of 18 new products globally during the year, including long/short funds, new fixed interest products, Asian and Global Property Securities products for international distribution, and a range of institutional multi-asset products. |
Investment Performance
Investment performance has been solid with 74% of funds outperforming benchmark on a three year basis, and 66% of funds outperforming on a one year basis.
Operating Income
Operating income increased by 21% to $1,883 million for the year underpinned by an 18% increase in average funds under administration and strong investment performance driving an increase in performance fees.
During the second half of the year, Operating income increased by 10% to $985 million. This result was due to an 8% increase in average funds under administration on the prior half and an increase in margins.
Margins increased three basis points over the year due to growth in higher margin asset classes, performance fees and improved distribution margins partially offset by the general trend toward the lower margin platform offering.
Operating Expenses
Volume expenses, which predominately comprise external distribution and trail commissions, increased by 27% over the year which is in line with growth in Funds Under Administration and underlying growth and mix of retail and wholesale inflows.
Operating expenses increased by 16% on the prior year to $890 million. The key drivers of expense growth include:
• | Investment in the international expansion of the CFS Global Asset Management business; | |
• | Establishment of competitive remuneration schemes in the asset management business to attract and retain high quality talent; | |
• | Increased spend on strategic projects including the Wealth Management cross-sell initiative and new product development (eg. margin lending facility); and | |
• | Investment on system simplification initiatives. |
Despite significant investment in the expansion of CFS Global Asset Management, the expense to net operating income ratio decreased from 57.6% to 55.7% over the year.
Taxation
The corporate tax expense for the year was $232 million, representing an effective tax rate of 32.1% compared with 28.4% for the prior year. The increase in the effective tax rate is due to one-off permanent tax differences. As previously disclosed, the prior year included a tax benefit from the recognition of international losses not previously brought to account.
Market Share(1)
In the latest Plan for Life market share statistics, the Group is ranked 1st in total Australian retail market share at 14.2%. The Australian retail market share has been impacted by the disengagement of a major client from the Avanteos platform. FirstChoice increased its share of the Platform market to 8.5%.
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Australian retail(2) (3) | 14.2 | 15.4 | 15.4 | |||||||||
New Zealand retail(2) | 15.8 | 16.1 | 16.0 | |||||||||
Firstchoice platform(2) (3) | 8.5 | 8.2 | 7.7 | |||||||||
(1) | For market share definitions refer to appendix 24, page 68. | |
(2) | Prior period comparatives have been restated. | |
(3) | As at 30 March 2007. |
16 Commonwealth Bank of Australia
Table of Contents
Funds Management Analysiscontinued
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Key Performance Indicators | $M | $M | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Operating income – external | 1,874 | 1,543 | 21 | 981 | 893 | 10 | ||||||||||||||||||
Operating income – internal | 9 | 9 | — | 4 | 5 | (20 | ) | |||||||||||||||||
Total operating income | 1,883 | 1,552 | 21 | 985 | 898 | 10 | ||||||||||||||||||
Shareholder investment returns | 14 | 14 | — | 10 | 4 | large | ||||||||||||||||||
Funds management income | 1,897 | 1,566 | 21 | 995 | 902 | 10 | ||||||||||||||||||
Volume expense | 285 | 224 | (27 | ) | 141 | 144 | 2 | |||||||||||||||||
Operating expenses | 890 | 765 | (16 | ) | 467 | 423 | (10 | ) | ||||||||||||||||
Total operating expenses | 1,175 | 989 | (19 | ) | 608 | 567 | (7 | ) | ||||||||||||||||
Net profit before income tax (“cash basis”) | 722 | 577 | 25 | 387 | 335 | 16 | ||||||||||||||||||
Net profit before income tax (“underlying basis”)(1) | 708 | 563 | 26 | 377 | 331 | 14 | ||||||||||||||||||
Corporate tax expense(2) | 232 | 164 | (41 | ) | 132 | 100 | (32 | ) | ||||||||||||||||
Minority interests | — | 3 | large | — | — | — | ||||||||||||||||||
Net profit after income tax (“cash basis”) | 490 | 410 | 20 | 255 | 235 | 9 | ||||||||||||||||||
Net profit after income tax (“underlying basis”)(1) | 492 | 400 | 23 | 260 | 232 | 12 | ||||||||||||||||||
(1) | Underlying basis excludes shareholder investment returns. | |
(2) | For purpose of presentation, Policyholder tax benefit and Policyholder tax expense are shown on a net basis (2007: $175 million and 2006: $193 million). |
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Funds Under Administration | $M | $M | June 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Funds Under Administration – average | 164,404 | 139,082 | 18 | 171,264 | 158,010 | 8 | ||||||||||||||||||
Funds Under Administration – spot | 177,071 | 151,513 | 17 | 177,071 | 167,662 | 6 | ||||||||||||||||||
Funds under management – spot | 139,685 | 118,682 | 18 | 139,685 | 128,312 | 9 | ||||||||||||||||||
Net funds flows (excluding Avanteos) | 7,126 | 5,287 | 35 | 5,744 | 1,382 | large | ||||||||||||||||||
Net funds flows | 1,763 | 10,830 | (84 | ) | (313 | ) | 2,076 | large | ||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Productivity and Other Measures | % | % | Jun 06 % | % | % | Dec 06 % | ||||||||||||||||||
Operating income to average Funds Under Administration (%) | 1.15 | 1.12 | 3bpts | 1.16 | 1.13 | 3bpts | ||||||||||||||||||
Total expenses to average Funds Under Administration (%) | 0.71 | 0.71 | — | 0.72 | 0.71 | (1 | ) | |||||||||||||||||
Operating expenses to net operating income (total operating income less volume expenses) | 55.7 | 57.6 | 3 | 55.3 | 56.1 | 1 | ||||||||||||||||||
Effective corporate tax rate (%) | 32.1 | 28.4 | (370)bpts | 34.1 | 29.9 | (420)bpts | ||||||||||||||||||
Underlying Net Profit After Tax growth of 23% on the prior year
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Profit Announcement 17
Table of Contents
Funds Management Analysis continued
Full Year Ended 30 June 2007 | ||||||||||||||||||||||||
Opening | Investment | Closing | ||||||||||||||||||||||
Balance | Income & | Balance | ||||||||||||||||||||||
30/06/06 | Inflows | Outflows | Netflows | Other(5) | 30/06/07 | |||||||||||||||||||
Funds Under Administration | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
FirstChoice | 26,177 | 17,191 | (7,995 | ) | 9,196 | 4,172 | 39,545 | |||||||||||||||||
Cash management | 3,690 | 2,066 | (2,751 | ) | (685 | ) | 125 | 3,130 | ||||||||||||||||
Legacy products(1) | 34,669 | 2,757 | (7,426 | ) | (4,669 | ) | 4,022 | 34,022 | ||||||||||||||||
Retail Products(2) | 64,536 | 22,014 | (18,172 | ) | 3,842 | 8,319 | 76,697 | |||||||||||||||||
Other retail(3) | 886 | 412 | (257 | ) | 155 | 575 | 1,616 | |||||||||||||||||
Australian retail | 65,422 | 22,426 | (18,429 | ) | 3,997 | 8,894 | 78,313 | |||||||||||||||||
Wholesale | 29,815 | 12,902 | (10,037 | ) | 2,865 | 1,789 | 34,469 | |||||||||||||||||
Property | 13,909 | 1,014 | (2,411 | ) | (1,397 | ) | 2,331 | 14,843 | ||||||||||||||||
Other(4) | 3,708 | 136 | (608 | ) | (472 | ) | 399 | 3,635 | ||||||||||||||||
Domestically sourced | 112,854 | 36,478 | (31,485 | ) | 4,993 | 13,413 | 131,260 | |||||||||||||||||
Internationally sourced | 29,461 | 15,625 | (13,492 | ) | 2,133 | 8,342 | 39,936 | |||||||||||||||||
Funds Under Administration (excl Avanteos) | 142,315 | 52,103 | (44,977 | ) | 7,126 | 21,755 | 171,196 | |||||||||||||||||
Avanteos | 9,198 | 2,603 | (7,966 | ) | (5,363 | ) | 2,040 | 5,875 | ||||||||||||||||
Total – Funds Under Administration | 151,513 | 54,706 | (52,943 | ) | 1,763 | 23,795 | 177,071 | |||||||||||||||||
Full Year Ended 30 June 2006 | ||||||||||||||||||||||||
Opening | Investment | Closing | ||||||||||||||||||||||
Balance | Income & | Balance | ||||||||||||||||||||||
30/06/05 | Inflows | Outflows | Netflows | Other(5) | 30/06/06 | |||||||||||||||||||
Funds Under Administration | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
FirstChoice | 16,128 | 13,077 | (5,287 | ) | 7,790 | 2,259 | 26,177 | |||||||||||||||||
Cash management | 4,182 | 2,417 | (3,061 | ) | (644 | ) | 152 | 3,690 | ||||||||||||||||
Legacy products(1) | 35,225 | 3,268 | (7,669 | ) | (4,401 | ) | 3,845 | 34,669 | ||||||||||||||||
Retail Products(2) | 55,535 | 18,762 | (16,017 | ) | 2,745 | 6,256 | 64,536 | |||||||||||||||||
Other retail(3) | 844 | 182 | (235 | ) | (53 | ) | 95 | 886 | ||||||||||||||||
Australian retail | 56,379 | 18,944 | (16,252 | ) | 2,692 | 6,351 | 65,422 | |||||||||||||||||
Wholesale | 24,894 | 13,099 | (11,810 | ) | 1,289 | 3,632 | 29,815 | |||||||||||||||||
Property | 13,456 | 1,074 | (2,144 | ) | (1,070 | ) | 1,523 | 13,909 | ||||||||||||||||
Other(4) | 2,886 | 192 | (481 | ) | (289 | ) | 1,111 | 3,708 | ||||||||||||||||
Domestically sourced | 97,615 | 33,309 | (30,687 | ) | 2,622 | 12,617 | 112,854 | |||||||||||||||||
Internationally sourced | 22,508 | 12,097 | (9,432 | ) | 2,665 | 4,288 | 29,461 | |||||||||||||||||
Funds Under Administration (excl Avanteos) | 120,123 | 45,406 | (40,119 | ) | 5,287 | 16,905 | 142,315 | |||||||||||||||||
Avanteos | 2,941 | 6,142 | (599 | ) | 5,543 | 714 | 9,198 | |||||||||||||||||
Total – Funds Under Administration | 123,064 | 51,548 | (40,718 | ) | 10,830 | 17,619 | 151,513 | |||||||||||||||||
Half Year Ended 30 June 2007 | ||||||||||||||||||||||||
Opening | Investment | Closing | ||||||||||||||||||||||
Balance | Income & | Balance | ||||||||||||||||||||||
31/12/06 | Inflows | Outflows | Netflows | Other(5) | 30/06/07 | |||||||||||||||||||
Funds Under Administration | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
FirstChoice | 31,588 | 10,913 | (4,693 | ) | 6,220 | 1,737 | 39,545 | |||||||||||||||||
Cash management | 3,453 | 1,038 | (1,442 | ) | (404 | ) | 81 | 3,130 | ||||||||||||||||
Legacy products(1) | 34,976 | 1,634 | (4,388 | ) | (2,754 | ) | 1,800 | 34,022 | ||||||||||||||||
Retail Products(2) | 70,017 | 13,585 | (10,523 | ) | 3,062 | 3,618 | 76,697 | |||||||||||||||||
Other retail(3) | 1,242 | 330 | (139 | ) | 191 | 183 | 1,616 | |||||||||||||||||
Australian retail | 71,259 | 13,915 | (10,662 | ) | 3,253 | 3,801 | 78,313 | |||||||||||||||||
Wholesale | 32,892 | 7,288 | (5,507 | ) | 1,781 | (204 | ) | 34,469 | ||||||||||||||||
Property | 13,538 | 450 | (551 | ) | (101 | ) | 1,406 | 14,843 | ||||||||||||||||
Other(4) | 3,697 | 81 | (336 | ) | (255 | ) | 193 | 3,635 | ||||||||||||||||
Domestically sourced | 121,386 | 21,734 | (17,056 | ) | 4,678 | 5,196 | 131,260 | |||||||||||||||||
Internationally sourced | 35,087 | 8,303 | (7,237 | ) | 1,066 | 3,783 | 39,936 | |||||||||||||||||
Funds Under Administration (excl Avanteos) | 156,473 | 30,037 | (24,293 | ) | 5,744 | 8,979 | 171,196 | |||||||||||||||||
Avanteos | 11,189 | 1,459 | (7,516 | ) | (6,057 | ) | 743 | 5,875 | ||||||||||||||||
Total – Funds Under Administration | 167,662 | 31,496 | (31,809 | ) | (313 | ) | 9,722 | 177,071 | ||||||||||||||||
(1) | Includes stand alone retail and legacy retail products. | |
(2) | Retail products (excluding Avanteos) align to Plan for Life market release. | |
(3) | Includes listed equity trusts and regular premium plans. These retail products are not reported in market share data. | |
(4) | Includes life company assets sourced from retail investors but not attributable to a funds management product (e.g. premiums from risk products). These amounts do not appear in retail market share data. | |
(5) | Includes foreign exchange gains and losses from translation of international sourced business. |
18 Commonwealth Bank of Australia
Table of Contents
Fund Management Analysiscontinued
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Profit Announcement 19
Table of Contents
Insurance Analysis
Financial Performance and Business Review
Performance Highlights
Underlying net profit after tax for the Insurance business increased 18% on the prior year to $253 million. This growth rate was impacted by the inclusion of the operating results of the Hong Kong Insurance Business for part of the prior year. Another measure of Insurance business performance is planned profit margins, which increased by 26% on the prior year.
The result was driven by:
• | Solid inforce premium growth in Australia and New Zealand; | |
• | Positive claims experience; and | |
• | Increased investment in the business. |
Full year net profit after tax (“cash basis”) decreased by 16% to $351 million, impacted by the profit on sale of the Hong Kong Insurance Business of $145 million in the prior year. After adjusting the result for the sale of the Hong Kong Insurance Business, net profit after tax increased by 30%.
Underlying net profit after tax for the half year ended 30 June 2007 was up by 28% on the prior half.
The Group remains the largest life insurer in Australia, New Zealand and Fiji.
Business Review
Australia
Full year underlying net profit after tax for the Australian insurance business increased 28% on the prior year to $160 million.
Net profit after tax (“cash basis”) increased 29% on the prior year to $234 million, reflecting growth in shareholder investment returns over the year together with strong volume growth and improved operating margins.
Key performance drivers were:
• | Inforce premium growth of 20%, reflecting strong sales volumes and progress of the cross-sell initiative; | |
• | Improvement in planned life margins and operating margins on the prior year; | |
• | Good claims experience; and | |
• | Strong shareholder investment returns. |
Other highlights for the Australian Insurance business included:
• | A significant increase in new business over the year particularly in Group Life Risk; | |
• | CommInsure increased its Total risk market share to 14.2% an increase of one percentage point since 30 June 2006; | |
• | The introduction of 130 Branch Insurance Representatives as part of the cross-sell initiative positively impacting on General Insurance sales (30% increase in new business sales); | |
• | Ongoing simplification and rationalisation of systems and processes; | |
• | Launch of online quoting tool for planners aimed at reducing the time and complexity of insurance and annuity quotes to improve conversion rates; and | |
• | Continued good claims management. |
New Zealand
The Life Insurance operations in New Zealand operate predominantly under the Sovereign brand.
New Zealand’s net profit after tax (“cash basis”) increased 12% on the prior year to $105 million. The main drivers of this result were:
• | Market leading growth in new business sales with Sovereign capturing 33.8% of new business sales market share over the year compared to 32.7% in the prior year; | |
• | A continuation of positive investment returns; | |
• | Low lapse rates on existing business; offset by | |
• | A deterioration in claims experience from 2006 with a higher incidence of disability and term life claims. |
The market share of inforce premiums at 30 June 2007 was 31.8%, an increase of 40 basis points over the year.
Operating Income
Operating income increased 10% on the prior year to $817 million. The prior year was impacted by the inclusion of the operating results of the Hong Kong Insurance Business until its sale in October 2005. Excluding this, operating income increased by 17% on the prior year.
Life Insurance income increased 11% to $745 million on the prior year, and by 19% excluding the operating results of the Hong Kong Insurance Business. This reflects strong volume growth and favourable claims experience.
General Insurance income of $72 million was flat compared with the prior year despite strong sales growth. The result was impacted by claims associated with recent NSW storms in the Hunter region which had a greater financial impact than that of Cyclone Larry in the prior year.
Operating Expenses
Total operating expenses of $282 million (excluding volume related expenses) increased 3% on the prior year.
Increases in operating expenses included:
• | Increased spend on strategic projects including the Wealth Management cross-selling initiatives; | |
• | Introduction of Branch Insurance Representatives into selected Bank branches; | |
• | Product development across Life and General Insurance lines; | |
• | Investment on system migration and simplification to further reduce the number of insurance systems used and reduce ongoing costs; | |
• | Development costs in preparation for the launch of compulsory savings in New Zealand under the KiwiSaver program; offset by | |
• | Reduction in expenses since the sale of the Hong Kong Insurance Business. |
Corporate Taxation
The effective corporate tax rate for the year was 28.1% compared with 27.3% in the prior year.
20 Commonwealth Bank of Australia
Table of Contents
Insurance Analysiscontinued
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Key Performance Indicators | $M | $M(4) | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Insurance | ||||||||||||||||||||||||
Life insurance operating income | 745 | 669 | 11 | 406 | 339 | 20 | ||||||||||||||||||
General insurance operating income | 72 | 73 | (1 | ) | 29 | 43 | (33 | ) | ||||||||||||||||
Total operating income | 817 | 742 | 10 | 435 | 382 | 14 | ||||||||||||||||||
Shareholder investment returns | 135 | 87 | 55 | 54 | 81 | (33 | ) | |||||||||||||||||
Profit on sale of the Hong Kong Insurance Business | — | 145 | — | — | — | — | ||||||||||||||||||
Total insurance income | 952 | 974 | (2 | ) | 489 | 463 | 6 | |||||||||||||||||
Volume expense | 182 | 181 | (1 | ) | 93 | 89 | (4 | ) | ||||||||||||||||
Operating expenses(1) | 282 | 275 | (3 | ) | 143 | 139 | (3 | ) | ||||||||||||||||
Total expenses | 464 | 456 | (2 | ) | 236 | 228 | (4 | ) | ||||||||||||||||
Net profit before income tax | 488 | 518 | (6 | ) | 253 | 235 | 8 | |||||||||||||||||
Corporate tax expense(2) | 137 | 102 | (34 | ) | 71 | 66 | (8 | ) | ||||||||||||||||
Net profit after income tax (“cash basis”) | 351 | 416 | (16 | ) | 182 | 169 | 8 | |||||||||||||||||
Net profit after income tax (“underlying basis”)(3) | 253 | 215 | 18 | 142 | 111 | 28 | ||||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Productivity and Other Measures | % | %(4) | Jun 06 % | % | % | Dec 06 % | ||||||||||||||||||
Operating income to average inforce premiums (%) | 63. 9 | 62. 9 | 100 bpts | 64. 0 | 60. 7 | 330 bpts | ||||||||||||||||||
Expenses to average inforce premiums (%) | 36. 3 | 38. 6 | 6 | 34. 7 | 36. 2 | 4 | ||||||||||||||||||
Effective corporate tax rate excluding impact of profit on sale of Hong Kong Insurance Business (%) | 28. 1 | 27. 3 | (80)bpts | 28. 1 | 28. 1 | — | ||||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Sources of Profit from Insurance Activities | $M | $M(4) | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
The Margin on Services profit from ordinary activities after income tax is represented by: | ||||||||||||||||||||||||
Planned profit margins | 184 | 146 | 26 | 90 | 94 | (4 | ) | |||||||||||||||||
Experience variations | 56 | 48 | 17 | 49 | 7 | large | ||||||||||||||||||
General insurance operating margins | 13 | 21 | (38 | ) | 3 | 10 | (70 | ) | ||||||||||||||||
Operating margins | 253 | 215 | 18 | 142 | 111 | 28 | ||||||||||||||||||
After tax shareholder investment returns | 98 | 56 | 75 | 40 | 58 | (31 | ) | |||||||||||||||||
Profit on sale of the Hong Kong Insurance Business | — | 145 | — | — | — | — | ||||||||||||||||||
Net profit after income tax (“cash basis”) | 351 | 416 | (16 | ) | 182 | 169 | 8 | |||||||||||||||||
(1) | Operating expenses include $9 million internal expenses relating to the asset management of shareholder funds (30 June 2006: $9 million). | |
(2) | For purpose of presentation, Policyholder tax benefit and Policyholder tax expense components of corporate tax expense are shown on a net basis (30 June 2007: $91 million, 30 June 2006: $138 million). | |
(3) | Underlying basis excludes shareholder investment returns and the profit on the sale of the Hong Kong Insurance Business. | |
(4) | Includes impact of the operating performance of the Hong Kong Insurance Business until its sale in October 2005. Financial impact was set out on page 55 of the 30 June 2006 Profit Announcement. |
Geographical Analysis of Business Performance
Full Year Ended | ||||||||||||||||||||||||||||||||
Australia | New Zealand | Asia | Total | |||||||||||||||||||||||||||||
Net Profit after | 30/06/07 | 30/06/06 | 30/06/07 | 30/06/06 | 30/06/07 | 30/06/06 | 30/06/07 | 30/06/06 | ||||||||||||||||||||||||
Income Tax (“cash basis”) | $M | $M | $M | $M | $M | $M | $M | $M | ||||||||||||||||||||||||
Operating margins | 160 | 125 | 88 | 77 | 5 | 13 | 253 | 215 | ||||||||||||||||||||||||
After tax shareholder investment returns | 74 | 56 | 17 | 17 | 7 | (17 | ) | 98 | 56 | |||||||||||||||||||||||
Profit on sale of Hong Kong Insurance Business | — | — | — | — | — | 145 | — | 145 | ||||||||||||||||||||||||
Net profit after income tax | 234 | 181 | 105 | 94 | 12 | 141 | 351 | 416 | ||||||||||||||||||||||||
Half Year Ended | ||||||||||||||||||||||||||||||||
Australia | New Zealand | Asia | Total | |||||||||||||||||||||||||||||
Net Profit after Income Tax | 30/06/07 | 31/12/06 | 30/06/07 | 31/12/06 | 30/06/07 | 31/12/06 | 30/06/07 | 31/12/06 | ||||||||||||||||||||||||
(“cash basis”) | $M | $M | $M | $M | $M | $M | $M | $M | ||||||||||||||||||||||||
Operating margins | 92 | 68 | 47 | 41 | 3 | 2 | 142 | 111 | ||||||||||||||||||||||||
After tax shareholder investment returns | 27 | 47 | 8 | 9 | 5 | 2 | 40 | 58 | ||||||||||||||||||||||||
Net profit after income tax | 119 | 115 | 55 | 50 | 8 | 4 | 182 | 169 | ||||||||||||||||||||||||
Profit Announcement 21
Table of Contents
Insurance Analysiscontinued
Full Year Ended 30 June 2007 | ||||||||||||||||||||
Opening | Closing | |||||||||||||||||||
Balance | Sales/New | Other | Balance | |||||||||||||||||
30/06/06 | Balances | Lapses | Movements(2) | 30/06/07 | ||||||||||||||||
Annual Inforce Premiums(1) | $M | $M | $M | $M | $M | |||||||||||||||
General insurance(3) | 169 | 55 | (40 | ) | — | 184 | ||||||||||||||
Personal life | 732 | 153 | (87 | ) | 34 | 832 | ||||||||||||||
Group life | 255 | 206 | (79 | ) | 2 | 384 | ||||||||||||||
Total | 1,156 | 414 | (206 | ) | 36 | 1,400 | ||||||||||||||
Australia | 854 | 359 | (192 | ) | — | 1,021 | ||||||||||||||
New Zealand | 302 | 55 | (14 | ) | 36 | 379 | ||||||||||||||
Total | 1,156 | 414 | (206 | ) | 36 | 1,400 | ||||||||||||||
Full Year Ended 30 June 2006 | ||||||||||||||||||||
Opening | Closing | |||||||||||||||||||
Balance | Sales/New | Other | Balance | |||||||||||||||||
30/06/05 | Balances | Lapses | Movements(2) | 30/06/06 | ||||||||||||||||
Annual Inforce Premiums(1) | $M | $M | $M | $M | $M | |||||||||||||||
General insurance(3) | 154 | 49 | (34 | ) | — | 169 | ||||||||||||||
Personal life | 785 | 137 | (81 | ) | (109 | ) | 732 | |||||||||||||
Group life | 265 | 71 | (48 | ) | (33 | ) | 255 | |||||||||||||
Total | 1,204 | 257 | (163 | ) | (142 | ) | 1,156 | |||||||||||||
Australia | 795 | 210 | (151 | ) | — | 854 | ||||||||||||||
New Zealand | 296 | 47 | (12 | ) | (29 | ) | 302 | |||||||||||||
Asia(4) | 113 | — | — | (113 | ) | — | ||||||||||||||
Total | 1,204 | 257 | (163 | ) | (142 | ) | 1,156 | |||||||||||||
Half Year Ended 30 June 2007 | ||||||||||||||||||||
Opening | Closing | |||||||||||||||||||
Balance | Sales/New | Other | Balance | |||||||||||||||||
31/12/06 | Balances | Lapses | Movements(2) | 30/06/07 | ||||||||||||||||
Annual Inforce Premiums(1) | $M | $M | $M | $M | $M | |||||||||||||||
General insurance(3) | 179 | 26 | (21 | ) | — | 184 | ||||||||||||||
Personal life | 789 | 79 | (43 | ) | 7 | 832 | ||||||||||||||
Group life | 372 | 70 | (58 | ) | — | 384 | ||||||||||||||
Total | 1,340 | 175 | (122 | ) | 7 | 1,400 | ||||||||||||||
Australia | 988 | 148 | (115 | ) | — | 1,021 | ||||||||||||||
New Zealand | 352 | 27 | (7 | ) | 7 | 379 | ||||||||||||||
Total | 1,340 | 175 | (122 | ) | 7 | 1,400 | ||||||||||||||
(1) | Inforce premium relates to risk business. Savings products are disclosed within Funds Management. | |
(2) | Includes foreign exchange movements. | |
(3) | In the current period the basis of calculating General insurance inforce premiums was amended, the main change being the exclusion of badged premiums. Prior periods have been restated on a consistent basis. | |
(4) | Other movements for Asia in the year ended 30 June 2006 represent the sale of the Hong Kong Insurance Business. |
Inforce Premiums
Inforce premiums increased by 21% on the prior year. This was achieved through consistent growth in both Australia and New Zealand. General Insurance premiums increased by 9% on the year.
Market Share Percentage – Annual Inforce Premiums(1) | 30/06/07 | 31/12/06 | 30/06/06 | |||||||||
Australia (total risk)(2) (3) | 14. 2 | 14. 4 | 13.2 | |||||||||
Australia (individual risk)(2) (3) | 12. 7 | 12. 7 | 12.3 | |||||||||
New Zealand | 31. 8 | 31. 5 | 31.4 | |||||||||
(1) | For market share definitions refer to appendix 24, page 68. | |
(2) | As at 31 March 2007. | |
(3) | Prior period comparatives have been revised. |
22 Commonwealth Bank of Australia
Table of Contents
Shareholder Investment Returns
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Shareholder Investment Returns | $M | $M | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Funds management business | 14 | 14 | — | 10 | 4 | large | ||||||||||||||||||
Insurance business(1) | 135 | 87 | 55 | 54 | 81 | (33 | ) | |||||||||||||||||
Shareholder investment returns before tax | 149 | 101 | 48 | 64 | 85 | (25 | ) | |||||||||||||||||
Profit on sale of Hong Kong Insurance Business | — | 145 | — | — | — | — | ||||||||||||||||||
Taxation | 53 | 35 | (51 | ) | 29 | 24 | (21 | ) | ||||||||||||||||
Shareholder investment returns after tax | 96 | 211 | (55 | ) | 35 | 61 | (43 | ) | ||||||||||||||||
(1) | Excluding profit on sale of the Hong Kong Insurance Business. |
Shareholder investment returns of $149 million before tax was driven by strong positive returns across all asset classes.
As At 30 June 2007 | ||||||||||||||||
Australia | New Zealand | Asia | Total | |||||||||||||
Shareholder Investment Asset Mix (%) | % | % | % | % | ||||||||||||
Local equities | 1 | 1 | — | 1 | ||||||||||||
International equities | — | 1 | 20 | 1 | ||||||||||||
Property | 26 | — | 29 | 20 | ||||||||||||
Sub-total | 27 | 2 | 49 | 22 | ||||||||||||
Fixed interest | 29 | 52 | 50 | 35 | ||||||||||||
Cash | 44 | 46 | 1 | 43 | ||||||||||||
Sub-total | 73 | 98 | 51 | 78 | ||||||||||||
Total | 100 | 100 | 100 | 100 | ||||||||||||
As At 30 June 2007 | ||||||||||||||||
Australia | New Zealand | Asia | Total | |||||||||||||
Shareholder Investment Asset Mix ($M) | $M | $M | $M | $M | ||||||||||||
Local equities | 7 | 2 | — | 9 | ||||||||||||
International equities | — | 6 | 17 | 23 | ||||||||||||
Property | 368 | 1 | 25 | 394 | ||||||||||||
Sub-total | 375 | 9 | 42 | 426 | ||||||||||||
Fixed interest | 400 | 242 | 43 | 685 | ||||||||||||
Cash | 620 | 214 | 1 | 835 | ||||||||||||
Sub-total | 1,020 | 456 | 44 | 1,520 | ||||||||||||
Total | 1,395 | 465 | 86 | 1,946 | ||||||||||||
Profit Announcement 23
Table of Contents
Financial Statements
Consolidated Income Statement
For the year ended 30 June 2007
For the year ended 30 June 2007
Full Year Ended | Half Year Ended | |||||||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||||||
Appendix | $M | $M | $M | $M | ||||||||||||||||
Interest income | 1 | 23,862 | 19,758 | 12,297 | 11,565 | |||||||||||||||
Interest expense | 1 | 16,826 | 13,244 | 8,746 | 8,080 | |||||||||||||||
Net interest income | 1 | 7,036 | 6,514 | 3,551 | 3,485 | |||||||||||||||
Other operating income | 5 | 3,341 | 3,036 | 1,729 | 1,612 | |||||||||||||||
Net banking operating income | 10,377 | 9,550 | 5,280 | 5,097 | ||||||||||||||||
Funds management income | 1,871 | 1,589 | 966 | 905 | ||||||||||||||||
Investment revenue | 2,120 | 2,098 | 928 | 1,192 | ||||||||||||||||
Claims and policyholder liability expense | (2,020 | ) | (2,064 | ) | (858 | ) | (1,162 | ) | ||||||||||||
Net funds management operating income | 1,971 | 1,623 | 1,036 | 935 | ||||||||||||||||
Premiums from insurance contracts | 11 | 1,117 | 1,052 | 540 | 577 | |||||||||||||||
Investment revenue | 11 | 858 | 1,031 | 385 | 473 | |||||||||||||||
Claims and policyholder liability expense from insurance contracts | (932 | ) | (970 | ) | (391 | ) | (541 | ) | ||||||||||||
Insurance margin on services operating income | 1,043 | 1,113 | 534 | 509 | ||||||||||||||||
Total net operating income | 13,391 | 12,286 | 6,850 | 6,541 | ||||||||||||||||
Loan impairment expense | 434 | 398 | 239 | 195 | ||||||||||||||||
Operating expenses | 6 | 6,427 | 5,994 | 3,283 | 3,144 | |||||||||||||||
Defined benefit superannuation plan income/(expense) | 7 | 8 | (35 | ) | 3 | 5 | ||||||||||||||
Net profit before income tax | 7 | 6,538 | 5,859 | 3,331 | 3,207 | |||||||||||||||
Corporate tax expense | 7 | 1,775 | 1,569 | 910 | 865 | |||||||||||||||
Policyholder tax expense | 266 | 331 | 128 | 138 | ||||||||||||||||
Net profit after income tax | 11 | 4,497 | 3,959 | 2,293 | 2,204 | |||||||||||||||
Minority interests | 11 | (27 | ) | (31 | ) | (14 | ) | (13 | ) | |||||||||||
Net profit attributable to Equity holders of the Bank | 11 | 4,470 | 3,928 | 2,279 | 2,191 | |||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Cents per share | ||||||||||||||||
Earnings per share: | ||||||||||||||||
Statutory Basic | 344.7 | 308.2 | 175.1 | 169.6 | ||||||||||||
Statutory Diluted | 339.7 | 303.1 | 172.5 | 166.0 | ||||||||||||
Dividends per share attributable to shareholders of the Bank: | ||||||||||||||||
Ordinary shares | 256 | 224 | 149 | 107 | ||||||||||||
Trust preferred securities (TPS) — issued 8 March 2006 | 7,821 | — | 3,835 | 3,986 | ||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Net profit after income tax comprises: | ||||||||||||||||
Net profit after income tax (“underlying basis”) | 4,508 | 3,842 | 2,298 | 2,210 | ||||||||||||
Shareholder investment returns (after tax) | 96 | 66 | 35 | 61 | ||||||||||||
Profit on sale of the Hong Kong Insurance Business | — | 145 | — | — | ||||||||||||
Net profit after income tax (“cash basis”) | 4,604 | 4,053 | 2,333 | 2,271 | ||||||||||||
Defined benefit superannuation plan income/(expense) | 5 | (25 | ) | 1 | 4 | |||||||||||
Treasury shares valuation adjustment | (75 | ) | (100 | ) | (37 | ) | (38 | ) | ||||||||
One-off AIFRS mismatches | (64 | ) | — | (18 | ) | (46 | ) | |||||||||
Net profit after income tax (“statutory basis”) | 4,470 | 3,928 | 2,279 | 2,191 | ||||||||||||
24 Commonwealth Bank of Australia
Table of Contents
Financial Statementscontinued
Consolidated Balance Sheet
As at 30 June 2007
As at 30 June 2007
As At | ||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||||||
Assets | Appendix | $M | $M | $M | ||||||||||||
Cash and liquid assets(1) | 10,108 | 9,139 | 5,868 | |||||||||||||
Receivables due from other financial institutions | 5,495 | 5,686 | 7,107 | |||||||||||||
Assets at fair value through Income Statement: | ||||||||||||||||
Trading | 21,469 | 18,887 | 15,758 | |||||||||||||
Insurance | 23,519 | 24,520 | 24,437 | |||||||||||||
Other(1) | 4,073 | 3,305 | 2,207 | |||||||||||||
Derivative assets | 12,743 | 10,519 | 9,675 | |||||||||||||
Available for sale investments | 9,672 | 11,434 | 11,203 | |||||||||||||
Loans, advances and other receivables | 8 | 299,779 | 277,962 | 259,176 | ||||||||||||
Bank acceptances of customers | 18,721 | 18,395 | 18,310 | |||||||||||||
Investment property | — | 273 | 258 | |||||||||||||
Property, plant and equipment | 1,436 | 1,325 | 1,313 | |||||||||||||
Investment in associates | 836 | 216 | 190 | |||||||||||||
Intangible assets | 16 | 7,835 | 7,846 | 7,809 | ||||||||||||
Deferred tax assets | 922 | 638 | 650 | |||||||||||||
Other assets | 7,157 | 5,846 | 5,141 | |||||||||||||
423,765 | 395,991 | 369,102 | ||||||||||||||
Assets held for sale | 1,374 | 1,270 | 1 | |||||||||||||
Total assets | 425,139 | 397,261 | 369,103 | |||||||||||||
As At | ||||||||||||||||
30/06/07 | 31/12/06 | 30/60/06 | ||||||||||||||
Liabilities | $M | $M | $M | |||||||||||||
Deposits and other public borrowings | 10 | 203,382 | 188,819 | 173,227 | ||||||||||||
Payables due to other financial institutions | 14,386 | 12,432 | 11,184 | |||||||||||||
Liabilities at fair value through Income Statement | 19,431 | 17,986 | 13,811 | |||||||||||||
Derivative liabilities | 16,680 | 13,238 | 10,820 | |||||||||||||
Bank acceptances | 18,721 | 18,395 | 18,310 | |||||||||||||
Current tax liabilities | 882 | 685 | 378 | |||||||||||||
Deferred tax liabilities | 1,576 | 1,384 | 1,336 | |||||||||||||
Other provisions | 878 | 826 | 821 | |||||||||||||
Insurance policy liabilities | 15 | 21,613 | 22,729 | 22,225 | ||||||||||||
Debt issues | 85,490 | 82,561 | 78,591 | |||||||||||||
Managed funds units on issue | 310 | 438 | 1,109 | |||||||||||||
Bills payable and other liabilities | 7,346 | 5,379 | 6,053 | |||||||||||||
390,695 | 364,872 | 337,865 | ||||||||||||||
Loan capital | 10,000 | 9,902 | 9,895 | |||||||||||||
Total liabilities | 400,695 | 374,774 | 347,760 | |||||||||||||
Net assets | 24,444 | 22,487 | 21,343 | |||||||||||||
As At | ||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||||||
Shareholders’ Equity | $M | $M | $M | |||||||||||||
Share capital: | ||||||||||||||||
Ordinary share capital | 14 | 14,483 | 13,920 | 13,505 | ||||||||||||
Other equity instruments | 939 | 939 | 939 | |||||||||||||
Reserves | 2,143 | 1,979 | 1,904 | |||||||||||||
Retained profits | 18 | 6,367 | 5,141 | 4,487 | ||||||||||||
Shareholders’ equity attributable to Equity holders of the Bank | 23,932 | 21,979 | 20,835 | |||||||||||||
Minority interests: | ||||||||||||||||
Controlled entities | 512 | 508 | 508 | |||||||||||||
Total Shareholders’ equity | 24,444 | 22,487 | 21,343 | |||||||||||||
(1) | During the current year, certain ASB Bank overnight settlement account balances were reclassified from Assets at fair value through Income Statement to Cash and liquid assets. Prior periods have been restated on a consistent basis. |
Profit Announcement 25
Table of Contents
Financial Statementscontinued
Consolidated Statement of Cash Flows(1)
For the year ended 30 June 2007
For the year ended 30 June 2007
Full Year Ended | ||||||||||||
30/06/07 | 30/06/06 | |||||||||||
Appendix | $M | $M | ||||||||||
Cash Flows from Operating Activities | ||||||||||||
Interest received | 23,123 | 19,712 | ||||||||||
Interest paid | (16,405 | ) | (12,555 | ) | ||||||||
Other operating income received | 4,627 | 4,319 | ||||||||||
Expenses paid | (5,699 | ) | (5,813 | ) | ||||||||
Income taxes paid | (1,942 | ) | (1,980 | ) | ||||||||
Net (increase)/decrease in assets at fair value through Income Statement (excluding life insurance) | (1,715 | ) | (307 | ) | ||||||||
Life insurance: | ||||||||||||
Investment income | 2,296 | 2,399 | ||||||||||
Premiums received(2) | 2,431 | 2,338 | ||||||||||
Policy payments(2) | (5,346 | ) | (4,938 | ) | ||||||||
Net increase/(decrease) in liabilities at fair value through Income Statement (excluding life insurance) | 5,722 | 1,445 | ||||||||||
Cash flows from operating activities before changes in operating assets and liabilities | 7,092 | 4,620 | ||||||||||
Changes in operating assets and liabilities arising from cash flow movements | ||||||||||||
Movement in available-for-sale investments: | ||||||||||||
Purchases | (22,214 | ) | (28,189 | ) | ||||||||
Proceeds from sale | 728 | 646 | ||||||||||
Proceeds at or close to maturity | 21,891 | 24,831 | ||||||||||
Lodgement of deposits with regulatory authorities | (8 | ) | (29 | ) | ||||||||
Net (increase) in loans, advances and other receivables | (37,885 | ) | (31,996 | ) | ||||||||
Net (increase)/decrease in receivables due from other financial institutions not at call | 833 | (881 | ) | |||||||||
Net decrease in securities purchased under agreements to resell | (1,647 | ) | 537 | |||||||||
Life insurance business: | ||||||||||||
Purchase of insurance assets at fair value through Income Statement | (8,476 | ) | (8,078 | ) | ||||||||
Proceeds from sale/maturity of insurance assets at fair value through Income Statement | 8,842 | 9,398 | ||||||||||
Net increase in deposits and other borrowings | 26,361 | 12,799 | ||||||||||
Net proceeds from issuance of debt securities | 6,316 | 14,605 | ||||||||||
Net increase in payables due to other financial institutions not at call | 1,865 | 2,571 | ||||||||||
Net increase/(decrease) in securities sold under agreements to repurchase | 1,943 | 328 | ||||||||||
Changes in operating assets and liabilities arising from cash flow movements | (1,451 | ) | (3,458 | ) | ||||||||
Net cash provided by/(used in) operating activities | 19 | (a) | 5,641 | 1,162 | ||||||||
Cash Flows from Investing Activities | ||||||||||||
Payment for acquisition of entities and management rights | 19 | (e) | (7 | ) | (414 | ) | ||||||
Proceeds from disposal of controlled entities | 19 | (c) | — | 553 | ||||||||
Proceeds from disposal of entities and businesses (net of cash disposals) | 16 | 35 | ||||||||||
Dividends received | 3 | 4 | ||||||||||
Proceeds from sale of property, plant and equipment | 53 | 32 | ||||||||||
Purchases of property, plant and equipment | (314 | ) | (385 | ) | ||||||||
Payment for acquisition of investments in associates/joint ventures | (6 | ) | (152 | ) | ||||||||
Purchase of assets held for sale | (1,091 | ) | — | |||||||||
Purchases of intangible assets | (130 | ) | (90 | ) | ||||||||
Net decrease in other assets | (800 | ) | 31 | |||||||||
Net cash (used in)/provided by investing activities | (2,276 | ) | (386 | ) | ||||||||
(1) | It should be noted that the Group does not use this accounting Statement of Cash Flows in the internal management of its liquidity positions. | |
(2) | These were gross premiums and policy payments before splitting between policyholders and shareholders. |
26 Commonwealth Bank of Australia
Table of Contents
Financial Statementscontinued
Consolidated Statement of Cash Flows(1) (continued)
For the year ended 30 June 2007
For the year ended 30 June 2007
Full Year Ended | ||||||||||||
30/06/07 | 30/06/06 | |||||||||||
Appendix | $M | $M | ||||||||||
Cash Flows from Financing Activities | ||||||||||||
Buy-back of shares | — | (500 | ) | |||||||||
Proceeds from issue of shares (net of costs) | 19 | 49 | ||||||||||
Proceeds from issue of other equity instruments (net of costs) | — | 939 | ||||||||||
Dividends paid (excluding Dividend Reinvestment Plan) | (2,284 | ) | (2,163 | ) | ||||||||
Net movement in other liabilities | 219 | 139 | ||||||||||
Net sale/(purchase) of treasury shares | 55 | (10 | ) | |||||||||
Issue of loan capital | 1,865 | 2,446 | ||||||||||
Redemption of loan capital | (965 | ) | (915 | ) | ||||||||
Other | (228 | ) | 1 | |||||||||
Net cash (used in)/provided by financing activities | (1,319 | ) | (14 | ) | ||||||||
Net increase/(decrease) in cash and cash equivalents | 2,046 | 762 | ||||||||||
Cash and cash equivalents at beginning of period | 2,038 | 1,276 | ||||||||||
Cash and cash equivalents at end of period | 19 | (b) | 4,084 | 2,038 | ||||||||
(1) | It should be noted that the Group does not use this accounting Statement of Cash Flows in the internal management of its liquidity positions. |
Profit Announcement 27
Table of Contents
Appendices
29 | ||||
29 | ||||
30 | ||||
34 | ||||
36 | ||||
36 | ||||
38 | ||||
39 | ||||
40 | ||||
42 | ||||
43 | ||||
45 | ||||
47 | ||||
51 | ||||
52 | ||||
54 | ||||
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60 | ||||
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68 |
28 Commonwealth Bank of Australia
Table of Contents
Appendices
1. Net Interest Income
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
$M | $M | Jun 06 % | $M | $M | Dec 06 % | |||||||||||||||||||
Interest Income | ||||||||||||||||||||||||
Loans | 20,778 | 17,304 | 20 | 10,765 | 10,013 | 8 | ||||||||||||||||||
Other financial institutions | 470 | 333 | 41 | 226 | 244 | (7 | ) | |||||||||||||||||
Cash and liquid assets(1) | 419 | 287 | 46 | 243 | 176 | 38 | ||||||||||||||||||
Assets at fair value through Income Statement(1) | 1,470 | 1,149 | 28 | 721 | 749 | (4 | ) | |||||||||||||||||
Available-for-sale investments | 725 | 685 | 6 | 342 | 383 | (11 | ) | |||||||||||||||||
Total interest income | 23,862 | 19,758 | 21 | 12,297 | 11,565 | 6 | ||||||||||||||||||
Interest Expense | ||||||||||||||||||||||||
Deposits(1) | 9,027 | 7,385 | (22 | ) | 4,722 | 4,305 | (10 | ) | ||||||||||||||||
Other financial institutions | 674 | 475 | (42 | ) | 341 | 333 | (2 | ) | ||||||||||||||||
Liabilities at fair value through Income Statement(1) | 1,229 | 1,013 | (21 | ) | 677 | 552 | (23 | ) | ||||||||||||||||
Debt issues | 5,183 | 3,795 | (37 | ) | 2,639 | 2,544 | (4 | ) | ||||||||||||||||
Loan capital(1) | 713 | 576 | (24 | ) | 367 | 346 | (6 | ) | ||||||||||||||||
Total interest expense | 16,826 | 13,244 | (27 | ) | 8,746 | 8,080 | (8 | ) | ||||||||||||||||
Net interest income | 7,036 | 6,514 | 8 | 3,551 | 3,485 | 2 | ||||||||||||||||||
(1) | During the current year certain balances and associated interest amounts have been reclassified between categories. Further information on the specific nature of each reclassification is provided on pages 30 and 31. Prior periods have been restated on a consistent basis. |
2. Net Interest Margin
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||||||||||
% | % | % | % | |||||||||||||||||||||
Australia | ||||||||||||||||||||||||
Interest spread(1) | 2.04 | 2.21 | 1.99 | 2.08 | ||||||||||||||||||||
Benefit of interest free liabilities, provisions and equity(2) | 0.26 | 0.24 | 0.28 | 0.26 | ||||||||||||||||||||
Net interest margin(3) | 2.30 | 2.45 | 2.27 | 2.34 | ||||||||||||||||||||
Overseas | ||||||||||||||||||||||||
Interest spread(1) | 0.92 | 0.97 | 0.94 | 0.91 | ||||||||||||||||||||
Benefit of interest free liabilities, provisions and equity(2) | 0.68 | 0.67 | 0.66 | 0.69 | ||||||||||||||||||||
Net interest margin(3) | 1.60 | 1.64 | 1.60 | 1.60 | ||||||||||||||||||||
Total Bank | ||||||||||||||||||||||||
Interest spread(1) | 1.83 | 1.98 | 1.79 | 1.86 | ||||||||||||||||||||
Benefit of interest free liabilities, provisions and equity(2) | 0.36 | 0.36 | 0.37 | 0.36 | ||||||||||||||||||||
Net interest margin(3) | 2.19 | 2.34 | 2.16 | 2.22 | ||||||||||||||||||||
(1) | Difference between the average interest rate earned and the average interest rate paid on funds. | |
(2) | A portion of the Group’s interest earning assets is funded by interest free liabilities and Shareholders’ equity. The benefit to the Group of these interest free funds is the amount it would cost to replace them at the average cost of funds. | |
(3) | Net interest income divided by average interest earning assets for the year. |
Table of Contents
Appendices
3. Average Balances and Related Interest
The following table lists the major categories of interest earning assets and interest bearing liabilities of the Group together with the respective interest earned or paid and the average interest rate for each of the years ending 30 June 2007 and 30 June 2006 together with the half years ending 30 June 2007, 31 December 2006 and 30 June 2006. Averages used were predominantly daily averages. Interest is accounted for based on product yield, while all trading gains and losses are disclosed as Trading income within Other banking income.
Where assets or liabilities are hedged, the amounts are shown net of the hedge, however individual items not separately hedged may be affected by movements in exchange rates.
The overseas component comprises overseas branches of the Bank and overseas domiciled controlled entities.
Non-accrual loans were included in interest earning assets under Loans, advances and other receivables.
The official cash rate in Australia increased by 50 basis points during the year while rates in New Zealand increased by a total of 75 basis points.
In the current year, certain interest income and expense items have been reallocated across the average Balance Sheet line items to better reflect the underlying changes in yield. This reallocation is necessary due to the impact of AIFRS hedge accounting and financial instrument reclassifications. The average Balance Sheet for the year ended 30 June 2006 has been restated on a consistent basis.
Average Balances
Full Year Ended 30/06/07 | Full Year Ended 30/06/06 | |||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | |||||||||||||||||||
Interest Earning Assets | $M | $M | % | $M | $M | % | ||||||||||||||||||
Home loans excluding securitisation | 162,894 | 11,671 | 7.16 | 147,710 | 9,988 | 6.76 | ||||||||||||||||||
Personal(1) | 18,213 | 1,942 | 10.66 | 16,174 | 1,753 | 10.84 | ||||||||||||||||||
Business and corporate | 84,970 | 6,156 | 7.24 | 68,739 | 4,798 | 6.98 | ||||||||||||||||||
Loans, advances and other receivables | 266,077 | 19,769 | 7.43 | 232,623 | 16,539 | 7.11 | ||||||||||||||||||
Cash and other liquid assets(2) | 15,898 | 889 | 5.59 | 12,046 | 620 | 5.15 | ||||||||||||||||||
Assets at fair value through Income Statement (excluding life insurance)(2) | 21,484 | 1,470 | 6.84 | 18,611 | 1,149 | 6.17 | ||||||||||||||||||
Available-for-sale investments | 12,589 | 725 | 5.76 | 11,518 | 685 | 5.95 | ||||||||||||||||||
Non lending interest earning assets | 49,971 | 3,084 | 6.17 | 42,175 | 2,454 | 5.82 | ||||||||||||||||||
Total interest earning assets (excluding securitisation)(3) | 316,048 | 22,853 | 7.23 | 274,798 | 18,993 | 6.91 | ||||||||||||||||||
Securitisation home loan assets | 13,344 | 1,009 | 7.56 | 10,887 | 765 | 7.03 | ||||||||||||||||||
Non interest earning assets | 67,117 | 67,729 | ||||||||||||||||||||||
Total Average Assets | 396,509 | 353,414 | ||||||||||||||||||||||
Full Year Ended 30/06/07 | Full Year Ended 30/06/06 | |||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | |||||||||||||||||||
Interest Bearing Liabilities | $M | $M | % | $M | $M | % | ||||||||||||||||||
Transaction deposits(4) (5) | 35,991 | 1,049 | 2.91 | 32,206 | 798 | 2.48 | ||||||||||||||||||
Savings deposits(4) (5) | 46,990 | 2,089 | 4.45 | 41,588 | 1,620 | 3.90 | ||||||||||||||||||
Investment deposits(5) | 73,339 | 4,352 | 5.93 | 66,573 | 3,625 | 5.45 | ||||||||||||||||||
Certificates of deposits and other(6) (7) | 24,425 | 1,537 | 6.29 | 19,700 | 1,342 | 6.81 | ||||||||||||||||||
Total Interest Bearing Deposits | 180,745 | 9,027 | 4.99 | 160,067 | 7,385 | 4.61 | ||||||||||||||||||
Payable due to other financial Institutions | 12,351 | 674 | 5.46 | 9,631 | 475 | 4.93 | ||||||||||||||||||
Liabilities at fair value through Income Statement(5) | 18,051 | 1,229 | 6.81 | 15,304 | 1,013 | 6.62 | ||||||||||||||||||
Debt issues | 73,380 | 4,289 | 5.84 | 60,918 | 3,124 | 5.13 | ||||||||||||||||||
Loan Capital(7) | 10,265 | 713 | 6.95 | 9,180 | 576 | 6.27 | ||||||||||||||||||
Total Interest Bearing Liabilities | 294,792 | 15,932 | 5.40 | 255,100 | 12,573 | 4.93 | ||||||||||||||||||
Securitisation debt issues | 13,861 | 894 | 6.45 | 11,541 | 671 | 5.81 | ||||||||||||||||||
Non interest bearing liabilities | 65,098 | 64,780 | ||||||||||||||||||||||
Total Average Liabilities | 373,751 | 331,421 | ||||||||||||||||||||||
(1) | Personal includes personal loans, credit cards, and margin loans. | |
(2) | During the current period, certain ASB Bank overnight settlement account balances and associated interest income were reclassified from Assets at fair value through Income Statement to Cash and other liquid assets. Prior periods have been restated on a consistent basis. | |
(3) | Used for calculating net interest margin. | |
(4) | As disclosed in the prior half, certain ASB Bank customer account balances and associated interest expense were reclassified from transaction deposits to savings deposits. Prior periods have been restated on a consistent basis. | |
(5) | During the current period product mapping of certain ASB account balances and associated interest expense were amended to align more closely with the Bank. Prior periods have been restated on a consistent basis. | |
(6) | Comparisons between reporting periods are impacted by hedge accounting. | |
(7) | During the current period, the impact on yield of economic hedges of loan capital has been reclassified to Certificates of deposits and other category. Prior periods have been restated on a consistent basis. |
30 Commonwealth Bank of Australia
Table of Contents
Appendices
3. Average Balances and Related Interest(continued)
Average Balances
Half Year Ended 30/06/07 | Half Year Ended 31/12/06 | Half Year Ended 30/06/06 | ||||||||||||||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | Avg Bal | Income | Yield | ||||||||||||||||||||||||||||
Interest Earning Assets | $M | $M | % | $M | $M | % | $M | $M | % | |||||||||||||||||||||||||||
Home loans excluding securitisation | 165,434 | 5,976 | 7.28 | 160,395 | 5,695 | 7.04 | 150,588 | 5,063 | 6.78 | |||||||||||||||||||||||||||
Personal(1) | 18,862 | 995 | 10.64 | 17,574 | 947 | 10.69 | 16,475 | 885 | 10.83 | |||||||||||||||||||||||||||
Business and corporate | 88,755 | 3,224 | 7.33 | 81,248 | 2,932 | 7.16 | 72,565 | 2,468 | 6.86 | |||||||||||||||||||||||||||
Loans, Advances and Other Receivables | 273,051 | 10,195 | 7.53 | 259,217 | 9,574 | 7.33 | 239,628 | 8,416 | 7.08 | |||||||||||||||||||||||||||
Cash and other liquid assets(2) | 17,115 | 469 | 5.53 | 14,701 | 420 | 5.67 | 12,988 | 337 | 5.23 | |||||||||||||||||||||||||||
Assets at fair value through Income | ||||||||||||||||||||||||||||||||||||
Statement (ex life insurance)(2) | 22,263 | 721 | 6.53 | 20,717 | 749 | 7.17 | 18,553 | 613 | 6.66 | |||||||||||||||||||||||||||
Available-for-sale investments | 12,951 | 342 | 5.33 | 12,233 | 383 | 6.21 | 11,384 | 341 | 6.04 | |||||||||||||||||||||||||||
Non Lending Interest Earning Assets | 52,329 | 1,532 | 5.90 | 47,651 | 1,552 | 6.46 | 42,925 | 1,291 | 6.06 | |||||||||||||||||||||||||||
Total interest earning assets (excluding securitisation)(3) | 325,380 | 11,727 | 7.27 | 306,868 | 11,126 | 7.19 | 282,553 | 9,707 | 6.93 | |||||||||||||||||||||||||||
Securitisation home loan assets | 15,069 | 570 | 7.63 | 11,647 | 439 | 7.48 | 11,775 | 413 | 7.07 | |||||||||||||||||||||||||||
Non interest earning assets | 66,672 | 67,555 | 67,847 | |||||||||||||||||||||||||||||||||
Total Average Assets | 407,121 | 386,070 | 362,175 | |||||||||||||||||||||||||||||||||
Half Year Ended 30/06/07 | Half Year Ended 31/12/06 | Half Year Ended 30/06/06 | ||||||||||||||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | Avg Bal | Income | Yield | ||||||||||||||||||||||||||||
Interest Bearing Liabilities | $M | $M | % | $M | $M | % | $M | $M | % | |||||||||||||||||||||||||||
Transaction deposits(4) (5) | 37,204 | 593 | 3.21 | 34,798 | 456 | 2.60 | 31,483 | 360 | 2.31 | |||||||||||||||||||||||||||
Savings deposits(4) (5) | 48,551 | 1,107 | 4.60 | 45,454 | 982 | 4.29 | 43,796 | 897 | 4.13 | |||||||||||||||||||||||||||
Investment deposits(5) | 75,559 | 2,248 | 6.00 | 71,155 | 2,104 | 5.87 | 68,226 | 1,823 | 5.39 | |||||||||||||||||||||||||||
Certificates of deposits and other(6) (7) | 26,052 | 774 | 5.99 | 22,825 | 763 | 6.63 | 19,901 | 685 | 6.94 | |||||||||||||||||||||||||||
Total Interest Bearing Deposits | 187,366 | 4,722 | 5.08 | 174,232 | 4,305 | 4.90 | 163,406 | 3,765 | 4.65 | |||||||||||||||||||||||||||
Payable due to other financial Institutions | 12,691 | 341 | 5.42 | 12,017 | 333 | 5.50 | 10,290 | 262 | 5.13 | |||||||||||||||||||||||||||
Liabilities at fair value through Income | ||||||||||||||||||||||||||||||||||||
Statement(5) | 20,254 | 677 | 6.74 | 15,884 | 552 | 6.89 | 15,529 | 530 | 6.88 | |||||||||||||||||||||||||||
Debt issues | 72,361 | 2,131 | 5.94 | 74,382 | 2,158 | 5.76 | 64,193 | 1,655 | 5.20 | |||||||||||||||||||||||||||
Loan Capital(7) | 10,499 | 367 | 7.05 | 10,033 | 346 | 6.84 | 9,785 | 293 | 6.04 | |||||||||||||||||||||||||||
Total Interest Bearing Liabilities | 303,171 | 8,238 | 5.48 | 286,548 | 7,694 | 5.33 | 263,203 | 6,505 | 4.98 | |||||||||||||||||||||||||||
Securitisation debt issues | 15,954 | 508 | 6.42 | 11,802 | 386 | 6.49 | 11,856 | 356 | 6.06 | |||||||||||||||||||||||||||
Non interest bearing liabilities | 64,596 | 65,594 | 64,393 | |||||||||||||||||||||||||||||||||
Total Average Liabilities | 383,721 | 363,944 | 339,452 | |||||||||||||||||||||||||||||||||
(1) | Personal includes personal loans, credit cards, and margin loans. | |
(2) | During the current period, certain ASB Bank overnight settlement account balances and associated interest income were reclassified from Assets at fair value through Income Statement to Cash and other liquid assets. Prior periods have been restated on a consistent basis. | |
(3) | Used for calculating net interest margin. | |
(4) | As disclosed in the prior half, certain ASB Bank customer account balances and associated interest expense were reclassified from transaction deposits to savings deposits. Prior periods have been restated on a consistent basis. | |
(5) | During the current period, product mapping of certain ASB account balances and associated interest expense were amended to align more closely with the Bank. Prior periods have been restated on a consistent basis. | |
(6) | Comparisons between reporting periods are impacted by hedge accounting. | |
(7) | During the current period, the impact on yield of economic hedges of loan capital has been reclassified to Certificates of deposits and other category. Prior periods have been restated on a consistent basis. |
Profit Announcement 31
Table of Contents
Appendices
3. Average Balances and Related Interest(continued)
Full Year Ended 30/06/07 | Full Year Ended 30/06/06 | |||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | |||||||||||||||||||
Net Interest Margin | $M | $M | % | $M | $M | % | ||||||||||||||||||
Total interest earning assets excluding securitisation | 316,048 | 22,853 | 7.23 | 274,798 | 18,993 | 6.91 | ||||||||||||||||||
Total interest bearing liabilities excluding securitisation | 294,792 | 15,932 | 5.40 | 255,100 | 12,573 | 4.93 | ||||||||||||||||||
Net interest income & interest spread (excluding securitisation) | 6,921 | 1.83 | 6,420 | 1.98 | ||||||||||||||||||||
Benefit of free funds | 0.36 | 0.36 | ||||||||||||||||||||||
Net interest margin | 2.19 | 2.34 | ||||||||||||||||||||||
Geographical analysis of key categories
Full Year Ended 30/06/07 | Full Year Ended 30/06/06 | ||||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | ||||||||||||||||||||
Loans, Advances and Other Receivables | $M | $M | % | $M | $M | % | |||||||||||||||||||
Australia | 217,128 | 16,066 | 7.40 | 192,086 | 13,527 | 7.04 | |||||||||||||||||||
Overseas | 48,949 | 3,703 | 7.57 | 40,537 | 3,012 | 7.43 | |||||||||||||||||||
Total | 266,077 | 19,769 | 7.43 | 232,623 | 16,539 | 7.11 | |||||||||||||||||||
Non Lending Interest Earning Assets | |||||||||||||||||||||||||
Australia | 30,008 | 1,855 | 6.18 | 24,123 | 1,462 | 6.06 | |||||||||||||||||||
Overseas | 19,963 | 1,229 | 6.16 | 18,052 | 992 | 5.50 | |||||||||||||||||||
Total | 49,971 | 3,084 | 6.17 | 42,175 | 2,454 | 5.82 | |||||||||||||||||||
Total Interest Bearing Deposits(1) | |||||||||||||||||||||||||
Australia | 154,073 | 7,415 | 4.81 | 137,101 | 6,041 | 4.41 | |||||||||||||||||||
Overseas | 26,672 | 1,612 | 6.04 | 22,966 | 1,344 | 5.85 | |||||||||||||||||||
Total | 180,745 | 9,027 | 4.99 | 160,067 | 7,385 | 4.61 | |||||||||||||||||||
Other Interest Bearing Liabilities | |||||||||||||||||||||||||
Australia | 72,269 | 4,413 | 6.11 | 58,271 | 3,308 | 5.68 | |||||||||||||||||||
Overseas | 41,778 | 2,492 | 5.96 | 36,762 | 1,880 | 5.11 | |||||||||||||||||||
Total | 114,047 | 6,905 | 6.05 | 95,033 | 5,188 | 5.46 | |||||||||||||||||||
(1) | Comparisons between reporting periods are impacted by hedge accounting. |
The overseas component comprises overseas branches of the Bank and overseas domiciled controlled entities. Overseas intragroup borrowings have been adjusted into the interest spread and margin calculations to more appropriately reflect the overseas cost of funds. Non–accrual loans were included in interest earning assets under loans, advances and other receivables.
In calculating net interest margin, assets, liabilities, interest income and interest expense related to securitisation vehicles have been excluded. This has been done to more accurately reflect the Group’s underlying net margin.
32 Commonwealth Bank of Australia
Table of Contents
3. Average Balances and Related Interest(continued)
Half Year Ended 30/06/07 | Half Year Ended 31/12/06 | Half Year Ended 30/06/06 | ||||||||||||||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | Avg Bal | Income | Yield | ||||||||||||||||||||||||||||
Net Interest Margin | $M | $M | % | $M | $M | % | $M | $M | % | |||||||||||||||||||||||||||
Total interest earning assets excluding securitisation | 325,380 | 11,727 | 7.27 | 306,868 | 11,126 | 7.19 | 282,553 | 9,707 | 6.93 | |||||||||||||||||||||||||||
Total interest bearing liabilities excluding securitisation | 303,171 | 8,238 | 5.48 | 286,548 | 7,694 | 5.33 | 263,203 | 6,505 | 4.98 | |||||||||||||||||||||||||||
Net interest income & interest spread (excluding securitisation) | 3,489 | 1.79 | 3,432 | 1.86 | 3,202 | 1.95 | ||||||||||||||||||||||||||||||
Benefit of free funds | 0.37 | 0.36 | 0.34 | |||||||||||||||||||||||||||||||||
Net interest margin | 2.16 | 2.22 | 2.29 | |||||||||||||||||||||||||||||||||
Geographical analysis of key categories
Half Year Ended 30/06/07 | Half Year Ended 31/12/06 | Half Year Ended 30/06/06 | ||||||||||||||||||||||||||||||||||
Avg Bal | Income | Yield | Avg Bal | Income | Yield | Avg Bal | Income | Yield | ||||||||||||||||||||||||||||
Loans, Advances and Other Receivables | $M | $M | % | $M | $M | % | $M | $M | % | |||||||||||||||||||||||||||
Australia | 221,731 | 8,253 | 7.51 | 212,600 | 7,813 | 7.29 | 197,262 | 6,810 | 6.96 | |||||||||||||||||||||||||||
Overseas | 51,320 | 1,942 | 7.63 | 46,617 | 1,761 | 7.49 | 42,366 | 1,606 | 7.64 | |||||||||||||||||||||||||||
Total | 273,051 | 10,195 | 7.53 | 259,217 | 9,574 | 7.33 | 239,628 | 8,416 | 7.08 | |||||||||||||||||||||||||||
Non Lending Interest Earning Assets | ||||||||||||||||||||||||||||||||||||
Australia | 31,872 | 895 | 5.66 | 28,174 | 960 | 6.76 | 24,695 | 754 | 6.16 | |||||||||||||||||||||||||||
Overseas | 20,457 | 637 | 6.28 | 19,477 | 592 | 6.03 | 18,230 | 537 | 5.94 | |||||||||||||||||||||||||||
Total | 52,329 | 1,532 | 5.90 | 47,651 | 1,552 | 6.46 | 42,925 | 1,291 | 6.06 | |||||||||||||||||||||||||||
Total Interest Bearing Deposits(1) | ||||||||||||||||||||||||||||||||||||
Australia | 159,818 | 3,879 | 4.89 | 148,422 | 3,536 | 4.73 | 140,037 | 3,046 | 4.39 | |||||||||||||||||||||||||||
Overseas | 27,548 | 843 | 6.17 | 25,810 | 769 | 5.91 | 23,369 | 719 | 6.20 | |||||||||||||||||||||||||||
Total | 187,366 | 4,722 | 5.08 | 174,232 | 4,305 | 4.90 | 163,406 | 3,765 | 4.65 | |||||||||||||||||||||||||||
Other Interest Bearing Liabilities | ||||||||||||||||||||||||||||||||||||
Australia | 71,933 | 2,227 | 6.24 | 72,598 | 2,186 | 5.97 | 60,216 | 1,693 | 5.67 | |||||||||||||||||||||||||||
Overseas | 43,872 | 1,289 | 5.92 | 39,718 | 1,203 | 6.01 | 39,581 | 1,047 | 5.33 | |||||||||||||||||||||||||||
Total | 115,805 | 3,516 | 6.12 | 112,316 | 3,389 | 5.99 | 99,797 | 2,740 | 5.54 | |||||||||||||||||||||||||||
(1) | Comparisons between reporting periods are impacted by hedge accounting. |
The overseas component comprises overseas branches of the Bank and overseas domiciled controlled entities. Overseas intragroup borrowings have been adjusted into the interest spread and margin calculations to more appropriately reflect the overseas cost of funds. Non–accrual loans were included in interest earning assets under loans, advances and other receivables.
In calculating net interest margin, assets, liabilities, interest income and interest expense related to securitisation vehicles have been excluded. This has been done to more accurately reflect the Group’s underlying net margin.
Profit Announcement 33
Table of Contents
4. Interest Rate and Volume Analysis
Full Year Ended Jun 07 vs Jun 06 | Full Year Ended Jun 06 vs Jun 05 | |||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Interest Earning Assets | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
Home loans | 1,057 | 626 | 1,683 | 1,047 | 172 | 1,219 | ||||||||||||||||||
Personal | 219 | (30 | ) | 189 | 167 | 45 | 212 | |||||||||||||||||
Business and Corporate | 1,154 | 203 | 1,358 | 685 | 174 | 859 | ||||||||||||||||||
Loans, advances and other receivables | 2,432 | 798 | 3,230 | 1,910 | 380 | 2,290 | ||||||||||||||||||
Cash and other liquid assets | 207 | 62 | 269 | 48 | 145 | 193 | ||||||||||||||||||
Assets at fair value through Income Statement (excluding life insurance) | 187 | 134 | 321 | 182 | 182 | 364 | ||||||||||||||||||
Investment securities | — | — | — | (362 | ) | (361 | ) | (723 | ) | |||||||||||||||
Available-for-sale investments | 63 | (23 | ) | 40 | 343 | 342 | 685 | |||||||||||||||||
Non lending interest earning assets | 467 | 163 | 630 | 156 | 363 | 519 | ||||||||||||||||||
Total interest earning assets | 2,917 | 943 | 3,860 | 2,035 | 774 | 2,809 | ||||||||||||||||||
Securitisation home loan assets | 179 | 65 | 244 | 162 | 6 | 168 | ||||||||||||||||||
Full Year Ended Jun 07 vs Jun 06 | Full Year Ended Jun 06 vs Jun 05 | |||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Interest Bearing Liabilities | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
Transaction deposits | 102 | 149 | 251 | 10 | 18 | 28 | ||||||||||||||||||
Savings deposits | 225 | 244 | 469 | 122 | 224 | 346 | ||||||||||||||||||
Investment deposits | 385 | 342 | 727 | 141 | (134 | ) | 7 | |||||||||||||||||
Certificates of deposits and other | 310 | (115 | ) | 195 | (375 | ) | 316 | (59 | ) | |||||||||||||||
Total interest bearing deposits | 993 | 649 | 1,642 | 9 | 313 | 322 | ||||||||||||||||||
Payable due to other financial institutions | 141 | 58 | 199 | 66 | 152 | 218 | ||||||||||||||||||
Liabilities at fair value through Income Statement | 184 | 32 | 216 | 507 | 506 | 1,013 | ||||||||||||||||||
Debt issues | 684 | 481 | 1,165 | 481 | 86 | 567 | ||||||||||||||||||
Loan capital | 72 | 65 | 137 | 168 | 57 | 225 | ||||||||||||||||||
Total interest bearing liabilities | 2,051 | 1,308 | 3,359 | 1,396 | 949 | 2,345 | ||||||||||||||||||
Securitised debt issues | 142 | 81 | 223 | 91 | 53 | 144 | ||||||||||||||||||
Full Year Ended | ||||
Jun 07 vs Jun 06 | ||||
Increase/(Decrease) | ||||
Change in Net Interest Income | $M | |||
Due to changes in average volume of interest earning assets and interest bearing liabilities | 934 | |||
Due to changes in interest margin | (433 | ) | ||
Due to variation in time period | — | |||
Change in net interest income | 501 | |||
“Volume” reflects the change in net interest income over the period due to balance growth (assuming rates held constant), and “Rate” reflects the change due to movements in yield (assuming volumes were held constant). “Variation in time periods” only applies to reporting periods of differing lengths (e.g. between half years). The volume and rate variances for total interest earning assets and liabilities have been calculated separately (rather than being the sum of the individual categories).
Full Year Ended Jun 07 vs Jun 06 | Full Year Ended Jun 06 vs Jun 05 | |||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Geographical analysis of key categories | $M | $M | $M | SM | $M | $M | ||||||||||||||||||
Loans, Advances and Other Receivables | ||||||||||||||||||||||||
Australia | 1,808 | 731 | 2,539 | 1,453 | 252 | 1,705 | ||||||||||||||||||
Overseas | 631 | 60 | 691 | 462 | 123 | 585 | ||||||||||||||||||
Total | 2,432 | 798 | 3,230 | 1,910 | 380 | 2,290 | ||||||||||||||||||
Non Lending Interest Earning Assets | ||||||||||||||||||||||||
Australia | 360 | 33 | 393 | 118 | 206 | 324 | ||||||||||||||||||
Overseas | 111 | 126 | 237 | 40 | 155 | 195 | ||||||||||||||||||
Total | 467 | 163 | 630 | 156 | 363 | 519 | ||||||||||||||||||
Total Interest Bearing Deposits | ||||||||||||||||||||||||
Australia | 782 | 592 | 1,374 | 115 | 504 | 619 | ||||||||||||||||||
Overseas | 220 | 48 | 268 | (156 | ) | (141 | ) | (297 | ) | |||||||||||||||
Total | 993 | 649 | 1,642 | 9 | 313 | 322 | ||||||||||||||||||
Other Interest Bearing Liabilities | ||||||||||||||||||||||||
Australia | 825 | 280 | 1,105 | 931 | (89 | ) | 842 | |||||||||||||||||
Overseas | 278 | 334 | 612 | 531 | 650 | 1,181 | ||||||||||||||||||
Total | 1,095 | 622 | 1,717 | 1,505 | 518 | 2,023 | ||||||||||||||||||
34 Commonwealth Bank of Australia
Table of Contents
4. Interest Rate and Volume Analysis(continued)
Half Year Ended Jun 07 vs Dec 06 | Half Year Ended Jun 07 vs Jun 06 | |||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Interest Earning Assets | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
Home loans | 180 | 101 | 281 | 518 | 395 | 913 | ||||||||||||||||||
Personal | 69 | (21 | ) | 48 | 127 | (17 | ) | 110 | ||||||||||||||||
Business and corporate | 272 | 20 | 292 | 569 | 187 | 756 | ||||||||||||||||||
Loans, advances and other receivables | 514 | 107 | 621 | 1,211 | 568 | 1,779 | ||||||||||||||||||
Cash and other liquid assets | 68 | (19 | ) | 49 | 110 | 22 | 132 | |||||||||||||||||
Assets at fair value through Income Statement (excluding life insurance) | 53 | (81 | ) | (28 | ) | 121 | (13 | ) | 108 | |||||||||||||||
Available-for-sale investments | 21 | (62 | ) | (41 | ) | 44 | (43 | ) | 1 | |||||||||||||||
Non lending interest earning assets | 145 | (165 | ) | (20 | ) | 279 | (38 | ) | 241 | |||||||||||||||
Total interest earning assets | 669 | (68 | ) | 601 | 1,507 | 513 | 2,020 | |||||||||||||||||
Securitisation home loan assets | 129 | 2 | 131 | 120 | 37 | 157 | ||||||||||||||||||
Half Year Ended Jun 07 vs Dec 06 | Half Year Ended Jun 07 vs Jun 06 | |||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Interest Bearing Liabilities | $M | $M | $M | $M | $M | $M | ||||||||||||||||||
Transaction deposits | 35 | 102 | 137 | 78 | 155 | 233 | ||||||||||||||||||
Savings deposits | 69 | 56 | 125 | 103 | 107 | 210 | ||||||||||||||||||
Investment deposits | 131 | 13 | 144 | 207 | 218 | 425 | ||||||||||||||||||
Certificates of deposits and other | 102 | (91 | ) | 11 | 197 | (108 | ) | 89 | ||||||||||||||||
Total interest bearing deposits | 328 | 89 | 417 | 578 | 379 | 957 | ||||||||||||||||||
Payable due to other financial institutions | 18 | (10 | ) | 8 | 63 | 16 | 79 | |||||||||||||||||
Liabilities at fair value through Income Statement | 149 | (24 | ) | 125 | 160 | (13 | ) | 147 | ||||||||||||||||
Debt issues | (59 | ) | 32 | (27 | ) | 226 | 250 | 476 | ||||||||||||||||
Loan capital | 16 | 5 | 21 | 23 | 51 | 74 | ||||||||||||||||||
Total interest bearing liabilities | 449 | 95 | 544 | 1,037 | 696 | 1,733 | ||||||||||||||||||
Securitised debt issues | 134 | (12 | ) | 122 | 127 | 25 | 152 | |||||||||||||||||
Half Year Ended | ||||||||
Jun 07 vs Dec 06 | Jun 07 vs Jun 06 | |||||||
Increase/(Decrease) | Increase/ (Decrease) | |||||||
Change in Net Interest Income | $M | $M | ||||||
Due to changes in average volume of interest earning assets and interest bearing liabilities | 201 | 472 | ||||||
Due to changes in interest margin | (88 | ) | (185 | ) | ||||
Due to variation in time period | (56 | ) | — | |||||
Change in net interest income | 57 | 287 | ||||||
Half Year Ended Jun 07 vs Dec 06 | Half Year Ended Jun 07 vs Jun 06 | |||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Geographical analysis of key categories | $M | $M | $M | SM | $M | $M | ||||||||||||||||||
Loans, Advances and Other | ||||||||||||||||||||||||
Australia | 338 | 102 | 440 | 878 | 565 | 1,443 | ||||||||||||||||||
Overseas | 178 | 3 | 181 | 339 | (3 | ) | 336 | |||||||||||||||||
Total | 514 | 107 | 621 | 1,211 | 568 | 1,779 | ||||||||||||||||||
Non Lending Interest Earning Assets | ||||||||||||||||||||||||
Australia | 115 | (180 | ) | (65 | ) | 210 | (69 | ) | 141 | |||||||||||||||
Overseas | 30 | 15 | 45 | 67 | 33 | 100 | ||||||||||||||||||
Total | 145 | (165 | ) | (20 | ) | 279 | (38 | ) | 241 | |||||||||||||||
Total Interest Bearing Deposits | ||||||||||||||||||||||||
Australia | 274 | 69 | 343 | 455 | 378 | 833 | ||||||||||||||||||
Overseas | 52 | 22 | 74 | 128 | (4 | ) | 124 | |||||||||||||||||
Total | 328 | 89 | 417 | 578 | 379 | 957 | ||||||||||||||||||
Other Interest Bearing Liabilities | ||||||||||||||||||||||||
Australia | (20 | ) | 61 | 41 | 346 | 188 | 534 | |||||||||||||||||
Overseas | 124 | (38 | ) | 86 | 120 | 122 | 242 | |||||||||||||||||
Total | 106 | 21 | 127 | 463 | 313 | 776 | ||||||||||||||||||
These volume and rate analyses were for half year periods. The calculations were based on balances over the half year. The volume and rate variances for total interest earning assets and liabilities have been calculated separately (rather than being the sum of the individual categories).
Profit Announcement 35
Table of Contents
Appendices
5. Other Banking Operating Income
Full Year Ended | Half Year Ended | |||||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||||
$M | $M | Jun 06 % | $M | $M | Dec 06 % | |||||||||||||||||||||
Lending fees | 896 | 800 | 12 | 479 | 417 | 15 | ||||||||||||||||||||
Commission and other fees | 1,729 | 1,635 | 6 | 870 | 859 | 1 | ||||||||||||||||||||
Trading income | 555 | 505 | 10 | 249 | 306 | (19 | ) | |||||||||||||||||||
Net gain/(loss) on disposal of non-trading instruments(1) | 147 | 45 | large | 65 | 82 | (21 | ) | |||||||||||||||||||
Dividends | 3 | 4 | (25 | ) | 2 | 1 | large | |||||||||||||||||||
Net (loss)/gain on sale of property, plant and equipment | (15 | ) | 4 | large | (11 | ) | (4 | ) | large | |||||||||||||||||
Other income | 136 | 122 | 11 | 56 | 80 | (30 | ) | |||||||||||||||||||
3,451 | 3,115 | 11 | 1,710 | 1,741 | (2 | ) | ||||||||||||||||||||
Loss on other financial instruments (including non-trading derivatives)(2) | (110 | ) | (79 | ) | 39 | 19 | (129 | ) | large | |||||||||||||||||
Total other banking operating income | 3,341 | 3,036 | 10 | 1,729 | 1,612 | 7 | ||||||||||||||||||||
(1) | June 2007 half includes $58 million profit on sale Mastercard shares; December 2006 half includes $79 million profit on sale of the Bank’s share in Greater Energy Alliance Corporation Pty Limited (“Loy Yang”). June 2006 includes $32 million profit related to MasterCard IPO. | |
(2) | June 2007 half includes an accounting loss of $25 million ($18 million after tax) and December 2006 half includes an accounting loss of $66 million ($46 million after tax) due to the unwinding of structured transactions (entered into prior to AIFRS transition) at the request of the counterparties. The offsetting gains were recognised as an adjustment to opening retained earnings on the adoption of AIFRS on 1 July 2005. No economic loss has been incurred by the Group. |
Loss on other financial instruments – Hedging and AIFRS volatility
The table below sets out various accounting impacts arising from the application of “AASB 139 Financial Instruments: Recognition and Measurement” to the Group’s derivative hedging activities.
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Reclassification of yield to Other banking income(1) | 107 | 46 | 78 | 29 | ||||||||||||
Net interest income | 107 | 46 | 78 | 29 | ||||||||||||
Reclassification of yield from Net interest income | (107 | ) | (46 | ) | (78 | ) | (29 | ) | ||||||||
Hedging and AIFRS volatility(2) | 120 | (55 | ) | 119 | 1 | |||||||||||
Revenue hedge of New Zealand operations(3) | (32 | ) | 22 | 3 | (35 | ) | ||||||||||
Other banking income (“cash basis”) | (19 | ) | (79 | ) | 44 | (63 | ) | |||||||||
One-off AIFRS hedging mismatches(4) | (91 | ) | — | (25 | ) | (66 | ) | |||||||||
Other banking income (“statutory basis”) | (110 | ) | (79 | ) | 19 | (129 | ) | |||||||||
(1) | Yield related to certain economic hedges which do not qualify for AIFRS hedge accounting is reclassified from Net interest income to Other banking income. | |
(2) | Relates to mark to market accounting volatility on economic hedges which do not qualify for hedge accounting, together with hedge ineffectiveness. | |
(3) | Relates to accounting gains and losses on the hedge of the New Zealand operations. | |
(4) | Refer to footnote 2 in the table “Other Banking Operating Income” above. |
6. Operating Expenses
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Expenses by Segment | $M | $M | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Banking | 4,797 | 4,558 | (5 | ) | 2,443 | 2,354 | (4 | ) | ||||||||||||||||
Funds management | 1,175 | 989 | (19 | ) | 608 | 567 | (7 | ) | ||||||||||||||||
Insurance | 455 | 447 | (2 | ) | 232 | 223 | (4 | ) | ||||||||||||||||
Total | 6,427 | 5,994 | (7 | ) | 3,283 | 3,144 | (4 | ) | ||||||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||||||||||
30/06/07 | 30/06/06 | Jun 07 vs | 30/06/07 | 31/12/06 | Jun 07 vs | |||||||||||||||||||
Expenses by Category | $M | $M | Jun 06 % | $M | $M | Dec 06 % | ||||||||||||||||||
Staff | 3,229 | 2,823 | (14 | ) | 1,642 | 1,587 | (3 | ) | ||||||||||||||||
Occupancy and equipment | 688 | 621 | (11 | ) | 353 | 335 | (5 | ) | ||||||||||||||||
Information technology services | 907 | 985 | 8 | 468 | 439 | (7 | ) | |||||||||||||||||
Other expenses | 1,603 | 1,565 | (2 | ) | 820 | 783 | (5 | ) | ||||||||||||||||
Total | 6,427 | 5,994 | (7 | ) | 3,283 | 3,144 | (4 | ) | ||||||||||||||||
Capitalisation of Computer Software Costs
Capitalised computer software costs (net of amortisation) totalled $297 million as at 30 June 2007 (December 2006: $267 million and June 2006: $229 million). Expenditure in the year principally comprises development of customer focussed systems.
36 Commonwealth Bank of Australia
Table of Contents
6. Operating Expenses(continued)
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Staff Expenses | ||||||||||||||||
Salaries and wages | 2,746 | 2,419 | 1,406 | 1,340 | ||||||||||||
Share based compensation | 89 | 39 | 33 | 56 | ||||||||||||
Superannuation contributions | 8 | 8 | 4 | 4 | ||||||||||||
Provisions for employee entitlements | 61 | 66 | 29 | 32 | ||||||||||||
Payroll tax | 139 | 123 | 65 | 74 | ||||||||||||
Fringe benefits tax | 34 | 34 | 18 | 16 | ||||||||||||
Other staff expenses | 152 | 134 | 87 | 65 | ||||||||||||
Total staff expenses | 3,229 | 2,823 | 1,642 | 1,587 | ||||||||||||
Occupancy and Equipment Expenses | ||||||||||||||||
Operating lease rentals | 367 | 338 | 188 | 179 | ||||||||||||
Depreciation | ||||||||||||||||
Buildings | 22 | 22 | 11 | 11 | ||||||||||||
Leasehold improvements | 59 | 56 | 29 | 30 | ||||||||||||
Equipment | 73 | 64 | 39 | 34 | ||||||||||||
Operating lease assets | 22 | 9 | 9 | 13 | ||||||||||||
Repairs and maintenance | 71 | 73 | 39 | 32 | ||||||||||||
Other | 74 | 59 | 38 | 36 | ||||||||||||
Total occupancy and equipment expenses | 688 | 621 | 353 | 335 | ||||||||||||
Information Technology Services | ||||||||||||||||
Application maintenance and development | 304 | 364 | 174 | 130 | ||||||||||||
Data processing | 206 | 227 | 96 | 110 | ||||||||||||
Desktop | 119 | 137 | 60 | 59 | ||||||||||||
Communications | 192 | 201 | 95 | 97 | ||||||||||||
Amortisation of software assets | 62 | 43 | 32 | 30 | ||||||||||||
IT equipment depreciation | 24 | 13 | 11 | 13 | ||||||||||||
Total information technology services | 907 | 985 | 468 | 439 | ||||||||||||
Other Expenses | ||||||||||||||||
Postage | 109 | 118 | 53 | 56 | ||||||||||||
Stationery | 104 | 98 | 51 | 53 | ||||||||||||
Fees and commissions | 691 | 636 | 375 | 316 | ||||||||||||
Advertising, marketing and loyalty | 326 | 307 | 178 | 148 | ||||||||||||
Amortisation of other intangible assets (excluding software) | 8 | 6 | 4 | 4 | ||||||||||||
Non lending losses | 97 | 116 | 40 | 57 | ||||||||||||
Other | 268 | 284 | 119 | 149 | ||||||||||||
Total other expenses | 1,603 | 1,565 | 820 | 783 | ||||||||||||
Total operating expenses | 6,427 | 5,994 | 3,283 | 3,144 | ||||||||||||
Profit Announcement 37
Table of Contents
Appendices
7. Income Tax Expense
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Profit from Ordinary Activities before Income Tax | ||||||||||||||||
Banking | 5,146 | 4,594 | 2,599 | 2,547 | ||||||||||||
Funds management | 805 | 643 | 432 | 373 | ||||||||||||
Insurance | 579 | 657 | 297 | 282 | ||||||||||||
Defined benefit superannuation plan expense | 8 | (35 | ) | 3 | 5 | |||||||||||
6,538 | 5,859 | 3,331 | 3,207 | |||||||||||||
Prima Facie Income Tax at 30% | ||||||||||||||||
Banking | 1,544 | 1,378 | 779 | 765 | ||||||||||||
Funds management | 241 | 193 | 129 | 112 | ||||||||||||
Insurance | 174 | 197 | 89 | 85 | ||||||||||||
Defined benefit superannuation plan expense | 3 | (11 | ) | 2 | 1 | |||||||||||
1,962 | 1,757 | 999 | 963 | |||||||||||||
Tax effect of expenses that are non-deductible/income non-assessable in determining taxable profit: | ||||||||||||||||
Current period | ||||||||||||||||
Taxation offsets and other dividend adjustments(1) | (55 | ) | (57 | ) | (28 | ) | (27 | ) | ||||||||
Tax adjustment referable to policyholder income | 186 | 232 | 90 | 96 | ||||||||||||
Non–assessable gains | — | (43 | ) | — | — | |||||||||||
Tax losses recognised | (24 | ) | (35 | ) | (20 | ) | (4 | ) | ||||||||
Difference in overseas and offshore banking unit(2) | (43 | ) | (13 | ) | (21 | ) | (22 | ) | ||||||||
Other(1) (2) | 35 | 44 | 48 | (13 | ) | |||||||||||
99 | 128 | 69 | 30 | |||||||||||||
Prior periods | ||||||||||||||||
Other | (20 | ) | 15 | (30 | ) | 10 | ||||||||||
Total income tax expense | 2,041 | 1,900 | 1,038 | 1,003 | ||||||||||||
Income Tax Attributable to Profit from Ordinary Activities | ||||||||||||||||
Banking | 1,423 | 1,328 | 709 | 714 | ||||||||||||
Funds management | 215 | 139 | 130 | 85 | ||||||||||||
Insurance | 137 | 102 | 71 | 66 | ||||||||||||
Corporate tax | 1,775 | 1,569 | 910 | 865 | ||||||||||||
Policyholder tax | 266 | 331 | 128 | 138 | ||||||||||||
Total income tax expense | 2,041 | 1,900 | 1,038 | 1,003 | ||||||||||||
% | % | % | % | |||||||||||||
Effective Tax Rate | ||||||||||||||||
Total – corporate | 28.3 | 28.4 | 28.4 | 28.2 | ||||||||||||
Banking – corporate | 27.6 | 29.1 | 27.2 | 28.0 | ||||||||||||
Funds management – corporate | 34.1 | 30.8 | 37.4 | 30.1 | ||||||||||||
Insurance – corporate | 28.1 | 19.7 | 28.1 | 28.1 | ||||||||||||
(1) | During the current year, exempt and concessionally taxed dividends received by overseas entities have been included in Taxation offsets and other dividend adjustments. Prior periods have been restated on a consistent basis. | |
(2) | During the current year tax rate differences in foreign jurisdictions and the Australian offshore banking unit have been separately disclosed. Prior periods have been restated on a consistent basis. |
New Zealand Subsidiaries
Assessments have been received from the IRD in respect of two structured finance investments in relation to the 2001 and 2002 financial years. Notices of Proposed Adjustment have been received for other similar investments for later years.
The Group is confident that the tax treatment it has adopted for these investments is correct, and any assessments received will be disputed.
38 Commonwealth Bank of Australia
Table of Contents
Appendices
8. Loans, Advances and Other Receivables
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
$M | $M | $M | ||||||||||
Australia | ||||||||||||
Overdrafts | 2,902 | 2,272 | 2,672 | |||||||||
Housing loans (includes securitisation) | 161,406 | 150,834 | 144,834 | |||||||||
Credit card outstandings | 7,185 | 7,071 | 6,997 | |||||||||
Lease financing | 4,532 | 4,617 | 4,924 | |||||||||
Bills discounted | 3,640 | 3,303 | 2,779 | |||||||||
Term loans | 68,577 | 62,613 | 56,950 | |||||||||
Redeemable preference share financing | — | — | 1 | |||||||||
Other lending | 1,339 | 386 | 597 | |||||||||
Other securities | 11 | 4 | — | |||||||||
Total Australia | 249,592 | 231,100 | 219,754 | |||||||||
Overseas | ||||||||||||
Overdrafts | 1,605 | 2,064 | 2,435 | |||||||||
Housing loans | 28,931 | 25,887 | 22,287 | |||||||||
Credit card outstandings | 533 | 518 | 428 | |||||||||
Lease financing | 531 | 329 | 139 | |||||||||
Bills discounted | 33 | 24 | 7 | |||||||||
Term loans | 20,027 | 19,020 | 15,282 | |||||||||
Redeemable preference share financing | 1,194 | 1,194 | 1,194 | |||||||||
Other lending | 183 | 74 | 8 | |||||||||
Other securities | 303 | 480 | 438 | |||||||||
Total Overseas | 53,340 | 49,590 | 42,218 | |||||||||
Gross loans, advances and other receivables | 302,932 | 280,690 | 261,972 | |||||||||
Less: | ||||||||||||
Provisions for impairment: | ||||||||||||
Collective provision | (1,034 | ) | (1,040 | ) | (1,046 | ) | ||||||
Individually assessed provisions against loans and advances | (199 | ) | (171 | ) | (171 | ) | ||||||
Unearned income: | ||||||||||||
Term loans | (941 | ) | (931 | ) | (934 | ) | ||||||
Lease financing | (979 | ) | (586 | ) | (645 | ) | ||||||
(3,153 | ) | (2,728 | ) | (2,796 | ) | |||||||
Net loans, advances and other receivables | 299,779 | 277,962 | 259,176 | |||||||||
Profit Announcement 39
Table of Contents
Appendices
9. Asset Quality
As At | ||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
$M | $M | $M | ||||||||||
Total Impaired Assets | ||||||||||||
Gross non–accruals | 421 | 338 | 326 | |||||||||
Less individually assessed provisions for impairment | (199 | ) | (171 | ) | (171 | ) | ||||||
Total net impaired assets | 222 | 167 | 155 | |||||||||
Net impaired assets by geographical segment | ||||||||||||
Australia | 213 | 159 | 146 | |||||||||
Overseas | 9 | 8 | 9 | |||||||||
Total | 222 | 167 | 155 | |||||||||
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Provisions for impairment Losses | ||||||||||||||||
Collective provision | ||||||||||||||||
Opening balance | 1,046 | 1,021 | 1,040 | 1,046 | ||||||||||||
Total charge against profit and loss for impairment losses | 434 | 398 | 239 | 195 | ||||||||||||
Net transfer to individually assessed provisions | (507 | ) | (440 | ) | (268 | ) | (239 | ) | ||||||||
Transfer from other credit provisions | — | — | (5 | ) | 5 | |||||||||||
Impairment losses recovered | 103 | 127 | 48 | 55 | ||||||||||||
Adjustments for foreign exchange movements and other items | 9 | (7 | ) | 4 | 5 | |||||||||||
1,085 | 1,099 | 1,058 | 1,067 | |||||||||||||
Impairment losses written off | (51 | ) | (53 | ) | (24 | ) | (27 | ) | ||||||||
Closing balance | 1,034 | 1,046 | 1,034 | 1,040 | ||||||||||||
Individually assessed provisions | ||||||||||||||||
Opening balance | 171 | 191 | 171 | 171 | ||||||||||||
Change against profit and loss for: | ||||||||||||||||
New and increased provisioning | 523 | 468 | 274 | 249 | ||||||||||||
Less write–back of provisions no longer required | (16 | ) | (28 | ) | (6 | ) | (10 | ) | ||||||||
Net transfer from collective provisions | 507 | 440 | 268 | 239 | ||||||||||||
Discount unwind to interest income | (6 | ) | (13 | ) | (3 | ) | (3 | ) | ||||||||
Adjustments for foreign exchange movements and other items | (5 | ) | (3 | ) | (1 | ) | (4 | ) | ||||||||
Impairment losses | (468 | ) | (444 | ) | (236 | ) | (232 | ) | ||||||||
Closing balance | 199 | 171 | 199 | 171 | ||||||||||||
Total provisions for impairment | 1,233 | 1,217 | 1,233 | 1,211 | ||||||||||||
Other credit provisions | 23 | 24 | 23 | 19 | ||||||||||||
Total provisions for impairment | 1,256 | 1,241 | 1,256 | 1,230 | ||||||||||||
% | % | % | % | |||||||||||||
Provision Ratios | ||||||||||||||||
Collective provisions as a % of gross loans and acceptances | 0.32 | 0.37 | 0.32 | 0.35 | ||||||||||||
Collective provisions as a % of risk weighted assets | 0.42 | 0.48 | 0.42 | 0.44 | ||||||||||||
Individually assessed provisions for impairment as a % of gross impaired assets(1) | 23.8 | 24.5 | 23.8 | 23.4 | ||||||||||||
Total provisions for impairment losses as a % of gross impaired assets | 298.3 | 380.7 | 298.3 | 363.9 | ||||||||||||
(1) | Bulk portfolio provisions of $99 million at 30 June 2007 ($92 million at 31 December 2006 and $91 million at 30 June 2006) to cover unsecured personal loans and credit card lending have been deducted from individually assessed provisions to calculate this ratio. These provisions are deducted due to the exclusion of the related assets from gross impaired assets. The related asset amounts are instead included in the 90 days or more past due disclosure. |
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
% | % | % | % | |||||||||||||
Impaired Asset Ratios | ||||||||||||||||
Gross impaired assets as % of risk weighted assets | 0.17 | 0.15 | 0.17 | 0.14 | ||||||||||||
Net impaired assets as % of: | ||||||||||||||||
Risk weighted assets | 0.09 | 0.07 | 0.09 | 0.07 | ||||||||||||
Total shareholders’ equity | 0.91 | 0.73 | 0.91 | 0.74 | ||||||||||||
40 Commonwealth Bank of Australia
Table of Contents
Appendices
9. Asset Quality (continued)
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Impaired Assets | ||||||||||||||||
Total income received | 7 | 11 | 3 | 4 | ||||||||||||
Interest income forgone | 5 | 11 | 2 | 3 | ||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/6/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Movement in Impaired Asset Balances | ||||||||||||||||
Gross impaired assets at period beginning | 326 | 395 | 338 | 326 | ||||||||||||
New and increased | 928 | 745 | 527 | 401 | ||||||||||||
Balances written off | (482 | ) | (450 | ) | (241 | ) | (241 | ) | ||||||||
Returned to performing or repaid | (351 | ) | (364 | ) | (203 | ) | (148 | ) | ||||||||
Gross impaired assets at period end | 421 | 326 | 421 | 338 | ||||||||||||
The following amounts comprising loans less than $250,000 are reported in accordance with regulatory returns to APRA. They are not classified as impaired assets and therefore not included within the above impaired asset summary.
As At | ||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
$M | $M | $M | ||||||||||
Loans Accruing but Past Due 90 Days or More (consumer segment) | ||||||||||||
Housing loans | 198 | 161 | 155 | |||||||||
Other loans | 144 | 133 | 137 | |||||||||
Total | 342 | 294 | 292 | |||||||||
Provisioning Policy
Provisions for impairment are maintained at an amount adequate to cover incurred credit related losses.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If there is objective evidence of impairment, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the expected future cash flows discounted at the financial asset’s original effective interest rate. Short term balances are not discounted.
Profit Announcement 41
Table of Contents
Appendices
10. Deposits and Other Public Borrowings
Half Year Ended | ||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
$M | $M | $M | ||||||||||
Australia | ||||||||||||
Certificates of deposits | 20,165 | 20,590 | 18,185 | |||||||||
Term deposits | 50,888 | 46,004 | 43,210 | |||||||||
On demand and short-time deposits | 93,994 | 85,691 | 81,547 | |||||||||
Deposits not bearing interest | 6,662 | 6,617 | 5,872 | |||||||||
Securities sold under agreements to repurchase | 3,323 | 2,478 | 1,380 | |||||||||
Total Australia | 175,032 | 161,380 | 150,194 | |||||||||
Overseas | ||||||||||||
Certificates of deposits | 903 | 2,414 | 959 | |||||||||
Term deposits | 16,416 | 14,987 | 13,790 | |||||||||
On demand and short-term deposits | 9,183 | 8,351 | 7,088 | |||||||||
Deposits not bearing interest | 1,818 | 1,672 | 1,166 | |||||||||
Securities sold under agreements to repurchase | 30 | 15 | 30 | |||||||||
Total Overseas | 28,350 | 27,439 | 23,033 | |||||||||
Total deposits and other public borrowings | 203,382 | 188,819 | 173,227 | |||||||||
42 Commonwealth Bank of Australia
Table of Contents
Appendices
11. Financial Reporting by Segments
This note sets out segment reporting in accordance with statutory reporting requirements. Refer to the business analysis at the front of this report for detailed profit and loss accounts by segment.
Full Year Ended 30 June 2007 | ||||||||||||||||
Primary Segment | Funds | |||||||||||||||
Business Segments | Banking | Management | Insurance | Total | ||||||||||||
Income Statement | $M | $M | $M | $M | ||||||||||||
Interest income | 23,862 | — | — | 23,862 | ||||||||||||
Insurance premium and related revenue | — | — | 1,117 | 1,117 | ||||||||||||
Other income | 3,341 | 3,991 | 858 | 8,190 | ||||||||||||
Total revenue | 27,203 | 3,991 | 1,975 | 33,169 | ||||||||||||
Interest expense | 16,826 | — | — | 16,826 | ||||||||||||
Segment result before income tax | 5,154 | 805 | 579 | 6,538 | ||||||||||||
Income tax expense | (1,423 | ) | (390 | ) | (228 | ) | (2,041 | ) | ||||||||
Segment result after income tax | 3,731 | 415 | 351 | 4,497 | ||||||||||||
Minority interests | (27 | ) | — | — | (27 | ) | ||||||||||
Segment result after income tax and minority interests | 3,704 | 415 | 351 | 4,470 | ||||||||||||
Net profit attributable to Equity holders of the Bank | 3,704 | 415 | 351 | 4,470 | ||||||||||||
Non—Cash Expenses | ||||||||||||||||
Intangible asset amortisation | 69 | — | 1 | 70 | ||||||||||||
Loan impairment expense | 434 | — | — | 434 | ||||||||||||
Depreciation | 191 | 3 | 6 | 200 | ||||||||||||
Defined benefit superannuation plan (income)/expense | (8 | ) | — | — | (8 | ) | ||||||||||
Other | 60 | 41 | — | 101 | ||||||||||||
Balance Sheet | ||||||||||||||||
Total assets | 397,093 | 18,237 | 9,809 | 425,139 | ||||||||||||
Acquisition of property, plant & equipment, intangibles and other non—current assets | 410 | 2 | 38 | 450 | ||||||||||||
Investments in associates | 145 | 680 | 11 | 836 | ||||||||||||
Total liabilities | 377,467 | 15,397 | 7,831 | 400,695 | ||||||||||||
Full Year Ended 30 June 2007 | ||||||||||||||||
Primary Segment | Funds | |||||||||||||||
Business Segments | Banking | Management | Insurance | Total | ||||||||||||
Income Statement | $M | $M | $M | $M | ||||||||||||
Interest income | 19,758 | — | — | 19,758 | ||||||||||||
Insurance premium and related revenue | — | — | 1,052 | 1,052 | ||||||||||||
Other income | 3,036 | 3,687 | 1,031 | 7,754 | ||||||||||||
Total revenue | 22,794 | 3,687 | 2,083 | 28,564 | ||||||||||||
Interest expense | 13,244 | — | — | 13,244 | ||||||||||||
Segment result before income tax | 4,559 | 643 | 657 | 5,859 | ||||||||||||
Income tax expense | (1,328 | ) | (331 | ) | (241 | ) | (1,900 | ) | ||||||||
Segment result after income tax | 3,231 | 312 | 416 | 3,959 | ||||||||||||
Minority interest | (28 | ) | (3 | ) | — | (31 | ) | |||||||||
Segment result after income tax and minority interests | 3,203 | 309 | 416 | 3,928 | ||||||||||||
Net profit attributable to Equity holders of the Bank | 3,203 | 309 | 416 | 3,928 | ||||||||||||
Non—Cash Expenses | ||||||||||||||||
Intangible asset amortisation | 49 | — | — | 49 | ||||||||||||
Loan impairment expense | 398 | — | — | 398 | ||||||||||||
Depreciation | 157 | 2 | 5 | 164 | ||||||||||||
Defined benefit superannuation plan (income)/expense | 35 | — | — | 35 | ||||||||||||
Other | 65 | 1 | — | 66 | ||||||||||||
Balance sheet | ||||||||||||||||
Total assets | 340,254 | 19,201 | 9,648 | 369,103 | ||||||||||||
Acquisition of property, plant & equipment, intangibles and other non—current assets | 510 | 94 | 8 | 612 | ||||||||||||
Investments in associates | 106 | 52 | 32 | 190 | ||||||||||||
Total liabilities | 324,185 | 16,423 | 7,152 | 347,760 | ||||||||||||
Profit Annoucement 43
Table of Contents
Appendices
11. Financial Reporting by Segments (continued)
Secondary Segment | Full Year Ended | |||||||||||||||
Geographical Segments | 30/06/07 | 30/06/06 | ||||||||||||||
Financial Performance | $M | % | $M | % | ||||||||||||
Revenue | ||||||||||||||||
Australia | 26,350 | 79.5 | 22,802 | 79.8 | ||||||||||||
New Zealand | 4,517 | 13.6 | 4,021 | 14.1 | ||||||||||||
Other countries(1) | 2,302 | 6.9 | 1,741 | 6.1 | ||||||||||||
33,169 | 100.0 | 28,564 | 100.0 | |||||||||||||
Net profit attributable to Equity holders of the Bank | ||||||||||||||||
Australia | 3,538 | 79.2 | 3,200 | 81.5 | ||||||||||||
New Zealand | 492 | 11.0 | 387 | 9.8 | ||||||||||||
Other countries(1) | 440 | 9.8 | 341 | 8.7 | ||||||||||||
4,470 | 100.0 | 3,928 | 100.0 | |||||||||||||
Assets | ||||||||||||||||
Australia | 341,588 | 80.3 | 304,831 | 82.6 | ||||||||||||
New Zealand | 55,916 | 13.2 | 43,318 | 11.7 | ||||||||||||
Other countries(1) | 27,635 | 6.5 | 20,954 | 5.7 | ||||||||||||
425,139 | 100.0 | 369,103 | 100.0 | |||||||||||||
Acquisition of Property, Plant & Equipment and Intangibles and Other non—current assets | ||||||||||||||||
Australia | 360 | 80.0 | 564 | 92.2 | ||||||||||||
New Zealand | 80 | 17.8 | 34 | 5.5 | ||||||||||||
Other countries(1) | 10 | 2.2 | 14 | 2.3 | ||||||||||||
450 | 100.0 | 612 | 100.0 | |||||||||||||
(1) | Other countries were: United Kingdom, United States of America, Japan, Singapore, Malta, Hong Kong, Grand Cayman, Fiji, Indonesia, China and Vietnam. |
The geographical segment represents the location in which the transaction was booked.
44 Commonwealth Bank of Australia
Table of Contents
Appendices
12. Integrated Risk Management(Excludes Insurance and Funds Management)
The major categories of risk actively managed by the Group include credit risk, liquidity and funding risk, market risk and other operational risks. The 2006 Annual Report pages 29 to 32, Integrated Risk Management, details the major risks managed by a diversified financial institution.
Credit Risk
The Group uses a portfolio approach for the management of its credit risk. A key element is a well diversified portfolio. The Group is using various portfolio management tools to assist in diversifying the credit portfolio.
The commercial portfolio remains well rated and low actual Loan impairment were experienced during the year.
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Industry On Balance Sheet Exposure | % | % | % | |||||||||
Accommodation, cafes and restaurants | 1.0 | 1.0 | 1.0 | |||||||||
Agriculture, forestry and fishing | 2.8 | 2.8 | 2.8 | |||||||||
Communication services | 0.2 | 0.3 | 0.4 | |||||||||
Construction | 1.2 | 1.2 | 1.4 | |||||||||
Cultural and recreational services | 0.6 | 0.5 | 0.6 | |||||||||
Electricity, gas and water supply | 1.5 | 1.5 | 1.6 | |||||||||
Finance and insurance | 13.6 | 13.0 | 12.2 | |||||||||
Government administration and defence | 1.1 | 1.4 | 1.2 | |||||||||
Health and community services | 1.8 | 1.5 | 1.5 | |||||||||
Manufacturing | 3.3 | 3.3 | 3.1 | |||||||||
Mining | 1.1 | 1.2 | 0.8 | |||||||||
Personal and other services | 0.7 | 0.6 | 0.6 | |||||||||
Property and business services | 7.9 | 8.1 | 8.3 | |||||||||
Retail trade | 1.9 | 1.6 | 1.7 | |||||||||
Transport and storage | 2.6 | 2.8 | 2.5 | |||||||||
Wholesale trade | 1.2 | 1.3 | 1.4 | |||||||||
Consumer | 57.5 | 57.9 | 58.9 | |||||||||
100.0 | 100.0 | 100.0 | ||||||||||
The Group has the bulk of committed exposures concentrated in Australia and New Zealand.
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Regional Credit Exposure | % | % | % | |||||||||
Australia | 80.6 | 81.0 | 82.6 | |||||||||
New Zealand | 15.2 | 14.6 | 13.6 | |||||||||
Europe | 2.2 | 2.1 | 1.8 | |||||||||
Americas | 1.0 | 1.5 | 1.2 | |||||||||
Asia | 0.8 | 0.6 | 0.6 | |||||||||
Other | 0.2 | 0.2 | 0.2 | |||||||||
100.0 | 100.0 | 100.0 | ||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Commercial Portfolio Quality | % | % | % | |||||||||
AAA/AA | 30 | 30 | 31 | |||||||||
A | 17 | 17 | 20 | |||||||||
BBB | 20 | 20 | 17 | |||||||||
Other | 33 | 33 | 32 | |||||||||
As a measure of individually risk rated commercial portfolio exposure (including finance and insurance), the Group has 67% of commercial exposures at investment grade quality.
Profit Annoucement 45
Table of Contents
Appendices
12. Integrated Risk Management (continued)
The Group in its daily operations is exposed to a number of market risks which are detailed in the 2006 Annual Report under Integrated Risk Management (pages 29 to 32) and Note 43 Market Risk.
Interest Rate Risk
Interest rate risk in the Balance Sheet is discussed within Note 43 of the 2006 Annual Report.
Next 12 months’ Earnings
The potential impact on net interest earnings of a 1% parallel rate shock and the expected change in price of assets and liabilities held for purposes other than trading is as follows:
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Interest Rate Risk | % | % | % | |||||||||
(expressed as a % of expected next 12 months’ earnings) | ||||||||||||
Average monthly exposure | 1.3 | 1.2 | 1.1 | |||||||||
High month exposure | 2.2 | 2.2 | 2.1 | |||||||||
Low month exposure | 0.4 | 0.3 | 0.2 | |||||||||
Value at Risk (VaR)
VaR within Financial Markets Trading is discussed in the 2006 Annual Report (page 30 Integrated Risk Management). The following table provides a summary of VaR by type.
In the June 2007 half year, the Group implemented a new methodology for the measurement of credit spread VaR. The new methodology now captures the diversification benefit between credit spread risk and other risk types. Prior periods credit spread risk are reported in undiversified risk.
Average VaR | Average VaR | Average VaR | ||||||||||
During | During | During | ||||||||||
June 2007 | December 2006 | June 2006 | ||||||||||
Half Year | Half Year | Half Year | ||||||||||
VaR Expressed based on 97. 5% confidence | $M | $M | $M | |||||||||
Group | ||||||||||||
Interest rate risk | 3.61 | 3.08 | 2.95 | |||||||||
Exchange rate risk | 0.78 | 0.54 | 0.65 | |||||||||
Implied volatility risk | 0.69 | 0.57 | 0.61 | |||||||||
Equities risk | 0.15 | 0.14 | 0.09 | |||||||||
Commodities risk | 0.65 | 0.71 | 1.20 | |||||||||
Credit spread risk(1) | 4.22 | — | — | |||||||||
Diversification benefit(1) | (4.17 | ) | (1.73 | ) | (2.24 | ) | ||||||
Total general market risk | 5.93 | 3.31 | 3.26 | |||||||||
Undiversified risk(1) | 1.60 | 6.75 | 6.53 | |||||||||
ASB Bank | 0.45 | 0.27 | 0.30 | |||||||||
Total | 7.98 | 10.33 | 10.09 | |||||||||
The 97.5% confidence interval is used internally by management for operational monitoring of traded market risk. The 99.0% confidence interval is shown to enable external comparison.
Average VaR | Average VaR | Average VaR | ||||||||||
During | During | During | ||||||||||
June 2007 | December 2006 | June 2006 | ||||||||||
Half Year | Half Year | Half Year | ||||||||||
VaR Expressed based on 99. 0% confidence | $M | $M | $M | |||||||||
Group | ||||||||||||
Interest rate risk | 4.60 | 4.07 | 3.76 | |||||||||
Exchange rate risk | 0.95 | 0.72 | 0.77 | |||||||||
Implied volatility risk | 0.88 | 0.74 | 0.80 | |||||||||
Equities risk | 0.19 | 0.18 | 0.11 | |||||||||
Commodities risk | 0.81 | 0.93 | 1.61 | |||||||||
Credit spread risk(1) | 6.19 | — | — | |||||||||
Diversification benefit(1) | (6.24 | ) | (2.38 | ) | (3.03 | ) | ||||||
Total general market risk | 7.38 | 4.26 | 4.02 | |||||||||
Undiversified risk(1) | 1.72 | 7.93 | 7.68 | |||||||||
ASB Bank | 0.55 | 0.34 | 0.40 | |||||||||
Total | 9.65 | 12.53 | 12.10 | |||||||||
(1) | In the half year to 30 June 2007, the Group implemented a new methodology for the measurement of credit spread VaR. The new methodology now captures the diversification benefit between credit spread risk and other risk types. Prior periods’ credit spread risk are reported in undiversified risk. |
46 Commonwealth Bank of Australia
Table of Contents
Appendices
13. Capital Adequacy
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Risk-Weighted Capital Ratios | % | % | % | |||||||||
Tier One | 7.14 | 7.06 | 7.56 | |||||||||
Tier Two | 3.41 | 3.49 | 3.10 | |||||||||
Less deductions | (0.79 | ) | (0.77 | ) | (1.00 | ) | ||||||
Total Capital | 9.76 | 9.78 | 9.66 | |||||||||
Adjusted Common Equity(1) | 4.79 | 4.70 | 4.50 | |||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Regulatory Capital | $M | $M | $M | |||||||||
Tier One Capital | ||||||||||||
Shareholders’ Equity | 24,444 | 22,487 | 21,343 | |||||||||
Reverse effect to Shareholders’ Equity of AIFRS transition(2) | — | — | 7,183 | |||||||||
Reverse effect of AIFRS during the period to 30 June 2006:(2) | - | |||||||||||
Purchase/(sale) and vesting of treasury shares | — | — | 10 | |||||||||
Actuarial (gains) and losses from defined benefit superannuation plans | — | — | (387 | ) | ||||||||
Realised gains and dividend income on treasury shares held within the Group’s life insurance statutory funds | — | — | (85 | ) | ||||||||
Cash flow hedge reserve | — | — | (20 | ) | ||||||||
Employee compensation reserve | — | — | (11 | ) | ||||||||
General reserve for credit losses | — | — | (92 | ) | ||||||||
Available-for-sale investments | — | — | (9 | ) | ||||||||
Defined benefit superannuation plans expense | — | — | 25 | |||||||||
Treasury shares valuation adjustment | — | — | 100 | |||||||||
Preference share capital | — | — | (687 | ) | ||||||||
Issue of hybrid instruments | — | — | 1,147 | |||||||||
Other | — | — | (6 | ) | ||||||||
Adjusted Shareholders’ equity | 24,444 | 22,487 | 28,511 | |||||||||
Treasury shares | 255 | 294 | — | |||||||||
Estimated reinvestment under Dividend Reinvestment Plan(3) | 485 | 248 | 303 | |||||||||
Irredeemable non-cumulative preference shares(4) | 2,535 | 2,582 | — | |||||||||
Eligible loan capital | 245 | 263 | 281 | |||||||||
Deferred fees | 97 | 123 | — | |||||||||
Retained earnings(5) | 752 | 752 | — | |||||||||
Employee compensation reserve | 51 | 73 | — | |||||||||
Cash flow hedge reserve | (440 | ) | (182 | ) | — | |||||||
General reserve for credit losses (after tax) | (350 | ) | (350 | ) | — | |||||||
Available-for-sale investments reserve | 35 | (38 | ) | — | ||||||||
Foreign currency translation reserve related to non-consolidated subsidiaries | (8 | ) | (25 | ) | 160 | |||||||
Asset revaluation reserve | (185 | ) | (130 | ) | (131 | ) | ||||||
Expected dividend | (1,939 | ) | (1,380 | ) | (1,668 | ) | ||||||
Goodwill(6) | (7,632 | ) | (7,579 | ) | (4,416 | ) | ||||||
Intangible component of investment in non—consolidated subsidiaries(6) | — | — | (5,397 | ) | ||||||||
Minority interests in life insurance statutory funds and other funds | — | — | (1,158 | ) | ||||||||
Capitalised expenses | (136 | ) | (100 | ) | (122 | ) | ||||||
Capitalised computer software costs | (297 | ) | (267 | ) | — | |||||||
Equity investments in other companies(7) | (700 | ) | (820 | ) | — | |||||||
Defined benefit superannuation plans surplus(8) | (1,270 | ) | (1,018 | ) | — | |||||||
Deferred tax | (37 | ) | (39 | ) | — | |||||||
Other | (34 | ) | 18 | (9 | ) | |||||||
Transitional Tier One Capital relief on adoption of AIFRS(9) | 1,641 | 1,641 | — | |||||||||
Total Tier One Capital | 17,512 | 16,553 | 16,354 | |||||||||
(1) | Adjusted Common Equity (“ACE”) is one measure considered by Standard & Poor’s in evaluating the Group’s credit rating. The ACE ratio has been calculated in accordance with Standard & Poor’s methodology at 30 June 2007. | |
(2) | APRA required regulatory capital to continue to be calculated in accordance with AGAAP accounting principles until 1 July 2006. As such, all material changes to capital resulting from the Group adopting AIFRS accounting standards on 1 July 2005 have been reversed from regulatory capital for 2006. | |
(3) | Based on reinvestment experience related to the Bank’s Dividend Reinvestment Plan and approved by APRA. | |
(4) | Represents capital instruments classified as debt under AIFRS but approved by APRA as capital instruments. | |
(5) | Represents the write down in retained earnings upon adoption of AIFRS within the non-consolidated subsidiaries. | |
(6) | 30 June 2007 and 31 December 2006 balances represents total Goodwill and other intangibles (excluding capitalised computer software costs) under AIFRS which is required to be deducted from Tier One Capital. The increase from 30 June 2006 principally represents the intangible component of the carrying value of the life insurance and funds management business which was transferred to Goodwill on adoption of AIFRS. | |
(7) | Represents the Group’s non-controlling equity interest in a major infrastructure asset. | |
(8) | In accordance with APRA regulations, the surplus (net of tax) in the Bank’s defined benefit superannuation fund which is included in shareholders’ equity must be deducted from Tier One Capital. | |
(9) | APRA has granted transitional relief for Tier One and Two Capital (including the value of acquired inforce business of $1,339 million) on adoption of AIFRS, which expires 1 January 2008. |
Profit Annoucement 47
Table of Contents
Appendices
13. Capital Adequacy(continued)
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Regulatory Capital | $M | $M | $M | |||||||||
Tier Two Capital | ||||||||||||
Collective provision for impairment losses(1) | 1,034 | 1,040 | 1,046 | |||||||||
Other credit provisions(1) | 23 | 19 | — | |||||||||
Fair value credit adjustments(1) | 24 | 31 | — | |||||||||
General reserve for credit losses (pre-tax equivalent)(1) | 500 | 500 | 500 | |||||||||
Prudential general reserve for credit losses(1) | 1,581 | 1,590 | 1,546 | |||||||||
Future income tax benefit related to prudential general reserve for credit losses | (474 | ) | (477 | ) | (464 | ) | ||||||
Asset revaluation reserve(2) | 83 | 59 | 131 | |||||||||
Upper Tier Two note and bond issues | 191 | 212 | 235 | |||||||||
Lower Tier Two note and bond issues(3) (4) | 6,922 | 6,780 | 5,335 | |||||||||
Other | (12 | ) | (62 | ) | (58 | ) | ||||||
Transitional Tier Two Capital relief on adoption of AIFRS(5) | 74 | 74 | — | |||||||||
Total Tier Two Capital | 8,365 | 8,176 | 6,725 | |||||||||
Total Tier One and Tier Two Capital | 25,877 | 24,729 | 23,079 | |||||||||
(1) | Prior to 1 July 2006 APRA required a minimum ratio of 0.5% (after tax) of risk weighted assets which comprised the collective provision for impairment losses and the General Reserve for Credit Losses. From 1 July 2006 there is no longer a minimum regulatory requirement. The Prudential General Reserve for Credit Losses is now comprised of the collective provision for impairment losses, other credit provisions, fair value credit adjustments and a general reserve for credit losses within shareholders’ equity which is an additional amount reserved over and above APRA requirements. | |
(2) | From 1 July 2006 APRA allows only 45% of the asset revaluation reserve to be included in Tier Two Capital. | |
(3) | APRA requires these Lower Tier Two note and bond issues to be included as if they were unhedged. | |
(4) | For regulatory capital purposes, Lower Tier Two note and bond issues are amortised by 20% of the original amount during each of the last four years to maturity. | |
(5) | APRA has granted transitional relief for Tier One and Two Capital on adoption of AIFRS, which expires 1 January 2008. |
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Regulatory Capital | $M | $M | $M | |||||||||
Total Capital before deductions | 25,877 | 24,729 | 23,079 | |||||||||
Deduct: | ||||||||||||
Investment in non–consolidated subsidiaries (net of intangible component deducted from Tier One Capital): | ||||||||||||
Shareholders’ net tangible assets in life and funds management businesses | (1,946 | ) | (2,068 | ) | (1,902 | ) | ||||||
Reverse effect of transition to AIFRS | (592 | ) | (592 | ) | (592 | ) | ||||||
Capital in other non-consolidated subsidiaries | (836 | ) | (456 | ) | (256 | ) | ||||||
Value of acquired inforce business(1) | — | — | (1,339 | ) | ||||||||
Less: non-recourse debt | 2,265 | 2,133 | 2,077 | |||||||||
Funds Management Securities(2) | 700 | 700 | — | |||||||||
(409 | ) | (283 | ) | (2,012 | ) | |||||||
Value of acquired inforce business(1) | (1,339 | ) | (1,339 | ) | — | |||||||
(1,748 | ) | (1,622 | ) | (2,012 | ) | |||||||
Other deductions | (178 | ) | (166 | ) | (151 | ) | ||||||
Total Capital | 23,951 | 22,941 | 20,916 | |||||||||
(1) | Value of acquired inforce business (excess of market value over net assets), which was transferred to Goodwill upon adoption of AIFRS. | |
(2) | Funds Management Securities issued September 2006. |
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Adjusted Common Equity(1) | $M | $M | $M | |||||||||
Tier One Capital | 17,512 | 16,553 | 16,354 | |||||||||
Add: | ||||||||||||
Deferred Income Tax | 37 | 39 | �� | |||||||||
Equity investments in other companies(2) | 700 | 820 | — | |||||||||
Deduct: | ||||||||||||
Eligible loan capital | (245 | ) | (263 | ) | (281 | ) | ||||||
Other hybrid equity instruments | (3,474 | ) | (3,522 | ) | (3,659 | ) | ||||||
Minority interest (net of minority interest component deducted from Tier One Capital) | (512 | ) | (508 | ) | (508 | ) | ||||||
Investment in non–consolidated subsidiaries (net of intangible component deducted from Tier One Capital)(3) | (409 | ) | (283 | ) | (2,012 | ) | ||||||
Other deductions | (178 | ) | (166 | ) | (151 | ) | ||||||
Impact upon adoption of AIFRS(4) | (1,641 | ) | (1,641 | ) | — | |||||||
Total Adjusted Common Equity | 11,790 | 11,029 | 9,743 | |||||||||
(1) | Adjusted Common Equity (“ACE”) is one measure considered by Standard & Poor’s in evaluating the Group’s credit rating. The ACE ratio has been calculated in accordance with Standard & Poor’s methodology at 30 June 2007. | |
(2) | Represents the Bank’s non-controlling interest in a major infrastructure asset. | |
(3) | Balance at 30 June 2007 and 31 December 2006 excludes $1,339 million associated with excess of market value over net assets which was transferred to goodwill upon adoption of AIFRS. | |
(4) | Standards and Poor’s calculation of ACE Capital did not allow for any relief upon adoption of AIFRS. |
48 Commonwealth Bank of Australia
Table of Contents
Appendices
13. Capital Adequacy(continued)
Risk | ||||||||||||||||||||||||||||
Face Value | Weights | Risk–Weighted Balance | ||||||||||||||||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | 30/06/07 | 31/12/06 | 30/06/06 | |||||||||||||||||||||||
$M | $M | $M | % | $M | $M | $M | ||||||||||||||||||||||
Risk-Weighted Assets | ||||||||||||||||||||||||||||
On Balance Sheet assets | ||||||||||||||||||||||||||||
Cash, claims on Reserve Bank of Australia, short term claims on Australian Commonwealth and State Government and Territories, and other zero–weighted assets | 27,844 | 29,442 | 23,301 | 0 | — | — | — | |||||||||||||||||||||
Claims on OECD Banks and local governments | 15,903 | 14,227 | 16,742 | 20 | 3,181 | 2,845 | 3,348 | |||||||||||||||||||||
Advances secured by residential property | 174,435 | 170,377 | 157,962 | 50 | 87,217 | 85,189 | 78,981 | |||||||||||||||||||||
All other assets | 129,247 | 122,858 | 110,971 | 100 | 129,247 | 122,858 | 110,971 | |||||||||||||||||||||
Total on Balance Sheet assets – credit risk | 347,429 | 336,904 | 308,976 | 219,645 | 210,892 | 193,300 | ||||||||||||||||||||||
Total off Balance Sheet exposures – credit risk | 21,579 | 20,032 | 19,691 | |||||||||||||||||||||||||
Risk-weighted assets – market risk | 4,123 | 3,645 | 3,447 | |||||||||||||||||||||||||
Total risk-weighted assets (regulatory)(1) | 245,347 | 234,569 | 216,438 | |||||||||||||||||||||||||
(1) | In calculating risk weighted assets in accordance with Standard and Poor’s agreed methodology, the equity investment in other companies (June 2007: $0.7 billion, December 2006: $0.8 billion) is required to be added to regulatory risk weighted assets as this amount is not deducted from ACE Capital. On an unrelated transaction, in December 2006 an amount of $0.8 billion was required to be deducted from risk weighted assets in calculation of the ACE Capital ratio due difference in treatment between Standard and Poor’s and APRA on the treatment of set-off arrangements where they are recognised from a legal and accounting perspective. This difference no longer applies at 30 June 2007. The risk weighted asset balance as used for the purpose of ACE Capital ratio for 2007 is $246,047 million. |
Active Capital Management
The Group maintains a strong capital position. The Total Capital Ratio increased from 9.66% at 30 June 2006 to 9.76% at 30 June 2007. The Tier One Capital ratio decreased from 7.56% to 7.14% during the year reflecting the acquisition of a major infrastructure asset in the United Kingdom and growth in Risk Weighted Assets.
During the second half of the financial year both the Total and the Tier One Capital ratios have remained fairly stable.
Risk Weighted Assets increased to $245 billion at 30 June 2007 due to strong growth in lending assets particularly in the business/corporate sector.
In February 2007, the Group’s long term credit rating was upgraded by Standard and Poor’s to ‘AA’ from ‘AA-’ with the short term rating affirmed at ‘A-1+’. Moody’s Investor Services upgraded the Group’s long term rating from ‘Aa3’ to ‘Aa1’ and reaffirmed the short term rating at ‘P-1’ in May 2007.
Adoption of IFRS and Transitional Relief
The Group adopted the Australian equivalent to International Financial Reporting Standards (“AIFRS”) on 1 July 2005. However, APRA required reporting under AGAAP accounting principles to continue for regulatory capital purposes until the introduction of revised prudential standards, which took effect on 1 July 2006.
With the introduction of the revised prudential standards, APRA granted transitional relief in relation to changes to their prudential regulations from 1 July 2006 until 31 December 2007.
Total transitional relief of $1,715 million is comprised of $1,641 million relief for Tier One Capital and $74 million of relief for Upper Tier Two Capital.
Adjusted Common Equity
The Adjusted Common Equity (“ACE”) ratio at 30 June 2007 is 4.79%, an increase from 4.39% at 1 July 2006 (on an AIFRS basis). Standard & Poor’s did not grant any transition relief for the impact of AIFRS adjustments.
Significant Initiatives
The following significant initiatives were undertaken to actively manage the Group’s capital:
Tier One Capital
• | Issue of $300 million and $518 million worth of shares in October 2006 and April 2007 respectively to satisfy the Dividend Reinvestment Plan (“DRP”) in respect of the final dividend for 2005/06 and interim dividend for 2006/07. The large increase in shares issued in April 2007 as part of the DRP was primarily as a result of the change in the DRP rules approved by the Board in September 2006. |
• | In accordance with APRA guidelines, the estimated issue of $485 million of shares to satisfy the DRP in respect of the final dividend for 2006/07. This estimate represents a 25% participation in the DRP in respect of the final dividend. |
Tier Two Capital
• | Issue of the equivalent of $2,331 million of Lower Tier Two in Capital, including $500 million during the second half of the financial year; offset by |
• | The call and maturity of the equivalent of $206 million of Tier Two note and bond issues (all in relation to the first half of the financial year); |
• | Decrease in the value of Tier Two note and bond issues of $467 million resulting from changes in foreign exchange movements (whilst these notes are hedged, the unhedged value is included in the calculation of regulatory capital in accordance with the APRA regulations); and |
• | The reduction in Tier Two note and bond issues of $71 million due to amortisation. |
Other Capital Initiatives
Issue of $700 million hybrid securities, called Funds Management Securities (“FMS”) in September 2006. The coupons on the FMS, and in some cases repayment of capital, will depend on the fees generated by the Australian Funds Management business of the Group. The issue of FMS forms part of the Group’s ongoing commitment to efficient innovative capital management.
Deductions from Total Capital
During the year a decrease in deductions for investment in non-consolidated subsidiaries primarily reflects up-streaming of dividends from the Colonial group of companies.
Profit Announcement 49
Table of Contents
Appendices
13. Capital Adequacy(continued)
Life & Funds Management Activities
As required by APRA, the Group’s investment in its life insurance and funds management companies is deducted from regulatory capital to arrive at the Banking Group Capital Ratios. The Group’s insurance and funds management companies held an estimated $738 million excess over regulatory capital requirements at 30 June 2007 in aggregate.
Events Subsequent to Balance Date
On 1 June 2007, the Group announced an offer of Perpetual Exchangeable Resaleable Listed Securities (PERLS IV). The offer raised $1,465 million in July 2007. The issue of PERLS IV forms part of the Group’s capital management strategy, structured to meet APRA’s new regulatory capital requirements for Non-Innovative Residual Tier One Capital, effective January 2008. At 30 June 2007, this would have increased Tier One Capital to 7.72% and Total Capital to 10.35%.
50 Commonwealth Bank of Australia
Table of Contents
Appendices
14. Share Capital
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Ordinary Share Capital | $M | $M | $M | $M | ||||||||||||
Opening balance (excluding Treasury Shares deduction) | 13,901 | 13,872 | 14,214 | 13,901 | ||||||||||||
Dividend reinvestment plan: Final dividend prior year | 300 | 262 | — | 300 | ||||||||||||
Dividend reinvestment plan: Interim dividend | 518 | 219 | 518 | — | ||||||||||||
Share buy-back | — | (500 | ) | — | — | |||||||||||
Exercise of executive options | 19 | 50 | 6 | 13 | ||||||||||||
Issue costs | — | (2 | ) | — | — | |||||||||||
Closing balance (excluding Treasury Shares deduction) | 14,738 | 13,901 | 14,738 | 14,214 | ||||||||||||
Less Treasury Shares | (255 | ) | (396 | ) | (255 | ) | (294 | ) | ||||||||
Closing Balance | 14,483 | 13,505 | 14,483 | 13,920 | ||||||||||||
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Shares on Issue | Number | Number | Number | Number | ||||||||||||
Opening balance (excluding treasury share deduction) | 1,282,904,909 | 1,280,276,172 | 1,290,017,862 | 1,282,904,909 | ||||||||||||
Dividend reinvestment plan issue: | — | |||||||||||||||
2004/2005 Final dividend fully paid ordinary shares at $37.19 | — | 7,032,857 | — | — | ||||||||||||
2005/2006 Interim dividend fully paid ordinary shares at $43.89 | — | 4,979,668 | — | — | ||||||||||||
2005/2006 Final dividend fully paid ordinary shares at $45.24 | 6,638,553 | — | — | 6,638,553 | ||||||||||||
2006/2007 Interim dividend fully paid ordinary shares at $50.02 | 10,343,514 | — | 10,343,514 | — | ||||||||||||
Share buy-back | — | (11,139,988 | ) | — | — | |||||||||||
Exercise under executive option plan | 696,400 | 1,756,200 | 222,000 | 474,400 | ||||||||||||
Closing balance (excluding Treasury Shares deduction) | 1,300,583,376 | 1,282,904,909 | 1,300,583,376 | 1,290,017,862 | ||||||||||||
Less Treasury Shares | (7,611,744 | ) | (11,085,258 | ) | (7,611,744 | ) | (9,235,153 | ) | ||||||||
Closing balance | 1,292,971,632 | 1,271,819,651 | 1,292,971,632 | 1,280,782,709 | ||||||||||||
Terms and Conditions of Ordinary Share Capital
Ordinary shares have the right to receive dividends as declared and in the event of winding up the Company, to participating in the proceeds from sale of surplus assets in proportion to the number of and amounts paid up on shares held.
A shareholder has one vote on a show of hands and one vote for each fully paid share on a poll. A shareholder may be present at a general meeting in person or by proxy or attorney, and if a body corporate, it may also authorise a representative.
Dividend Franking Account
After fully franking the final dividend to be paid for the year ended 30 June 2007 the amount of credits available, as at 30 June 2007 to frank dividends for subsequent financial years is $559 million (June 2006: nil). This figure is based on the combined franking accounts of the Bank at 30 June 2007, which have been adjusted for franking credits that will arise from the payment of income tax payable on profits for the year ended 30 June 2007, franking debits that will arise from the payment of dividends proposed for the year and franking credits that the Bank may be prevented from distributing in subsequent financial periods. The Bank expects the future tax payments will generate sufficient franking credits for the Bank to be able to fully frank future dividend payments. These calculations have been based on the taxation law as at 30 June 2007.
Dividends
The Directors have declared a fully franked final dividend of 149 cents per share amounting to $1,939 million. The dividend will be payable on 5 October 2007 to shareholders on the register at 5pm on 24 August 2007.
The Board determines the dividends per share based on net profit after tax (“cash basis”) per share, having regard to a range of factors including:
• | Current and expected rates of business growth and the mix of business; |
• | Capital needs to support economic, regulatory and credit ratings requirements; |
• | The rate of return on assets; |
• | Investments and/or divestments to support business development; and |
• | Periodic accounting volatility due to the application of “AASB 139 Financial Instruments: Recognition and Measurement”. |
Dividends paid since the end of the previous financial year:
• | As declared in the 31 December 2006 Profit Announcement, a fully franked interim dividend of 107 cents per share amounting to $1,380 million was paid on 5 April 2007. The payment comprised cash disbursements of $862 million with $518 million being reinvested by participants through the Dividend Reinvestment Plan. |
Dividend Reinvestment Plan
The Bank expects to issue around $485 million of shares in respect of the Dividend Reinvestment Plan for the final dividend for 2006/07.
Record Date
The register closes for determination of dividend entitlement and for participation in the DRP at 5:00pm on 24 August 2007 at Link Market Services, Locked Bag A14, Sydney South, 1235.
Ex Dividend Date
The ex-dividend date is 20 August 2007.
Profit Announcement 51
Table of Contents
Appendices
15. Life Insurance Business
Life Insurance Contract liabilities
Appropriately qualified actuaries have been appointed in respect of each life insurance business and they have reviewed and satisfied themselves as to the accuracy of the policy liabilities included in this Financial Report, including compliance with the regulations of the Life Insurance Act (“Life Act”) 1995 where appropriate. Details are set out in the various statutory returns of these life insurance entities.
Life Investment Contract liabilities
Investment contracts consist of a financial instrument and an investment management services element, both of which are measured at fair value. The resulting liabilities to policyholders are closely linked to the performance and the value of the assets (after tax) that back those liabilities. The fair value of such liabilities is therefore the same as the fair value of those assets, after tax on the basis charged to the policyholders.
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
Components of Policy Liabilities(1) | $M | $M | $M | |||||||||
Future policy benefits(2) | 23,569 | 24,666 | 23,916 | |||||||||
Future bonuses | 1,304 | 1,197 | 1,128 | |||||||||
Future expenses | 2,120 | 1,997 | 1,844 | |||||||||
Future profit margins | 1,490 | 1,517 | 1,388 | |||||||||
Future charges for acquisition expenses | (438 | ) | (442 | ) | (434 | ) | ||||||
Balance of future premiums | (6,544 | ) | (6,290 | ) | (5,706 | ) | ||||||
Provisions for bonuses not allocated to participating policyholders | 112 | 84 | 89 | |||||||||
Total policy liabilities | 21,613 | 22,729 | 22,225 | |||||||||
(1) | Includes both investment and insurance business. | |
(2) | Including bonuses credited to policyholders in prior years. |
Taxation
Taxation has been allowed for in the determination of policy liabilities in accordance with the relevant legislation applicable in each market.
Actuarial Methods and Assumptions
Insurance contract policy liabilities have been calculated in accordance with AASB 1038 (“Life Insurance Contracts”) and the Margin on Services (“MoS”) methodology as set out in Actuarial Standard 1.04 – Valuation Standard (“AS1.04”) issued by the Life Insurance Actuarial Standards Board (“LIASB”). The principal methods and profit carriers used for particular product groups were as follows:
Product Type | Method | Profit Carrier | ||
Individual | ||||
Conventional | Projection | Bonuses or expected claim payments | ||
Investment account | Projection | Bonuses or funds under management | ||
Lump sum risk | Projection | Premiums/Expected claim payment | ||
Income stream risk | Projection | Expected claim payments | ||
Immediate annuities | Projection | Annuity payments | ||
Group | ||||
Investment account | Projection | Bonuses or funds under management | ||
Lump sum risk | Accumulation/Projection | Expected claim payments | ||
Income stream risk | Accumulation/Projection | Expected claim payments | ||
The “Projection Method” measures the present values of estimated future policy cash flows to calculate policy liabilities. The policy cash flows incorporate investment income, premiums, expenses, redemptions and benefit payments.
Bonuses are amounts added, at the discretion of the life insurer, to the benefits currently payable under Participating Business. Bonuses may take a number of forms including reversionary bonuses, interest credits and terminal bonuses (payable on the termination of the policy).
Actuarial assumptions
Set out below is a summary of the material assumptions used in the calculation of policy liabilities.
Discount rates
Discount rates are used to discount future cash flows in the determination of policy liabilities. Where insurance contract benefits are linked to the performance of the underlying assets, the discount rates are based on the expected earnings rate on the assets held (Traditional and Investment Account contracts). For all other insurance contracts, the discount rates are based on risk free rates of return. Allowance is made for taxation where relevant and for the nature and term of the liabilities. The following table shows the appreciation rates for the major classes of business in Australia and New Zealand. The changes relate to changes in long term earnings rates and asset mix.
52 Commonwealth Bank of Australia
Table of Contents
Appendices
15. Life Insurance Business(continued)
June 2007 | December 2006 | June 2006 | ||||||||||
Class of Business – Australia(1) | Rate Range % | Rate Range % | Rate Range % | |||||||||
Traditional – ordinary business (after tax) | 4. 38 – 6. 34 | 4. 12 – 6. 07 | 6. 00 – 6. 75 | |||||||||
Traditional – superannuation business (after tax) | 5. 32 – 7. 75 | 5. 01 – 7. 42 | 7. 33 – 8. 26 | |||||||||
Annuity – term and lifetime (exempt from tax) | 6. 52 – 7. 09 | 6. 17 – 6. 63 | 5. 79 – 6. 30 | |||||||||
Term insurance (before tax) | 6. 25 – 6. 46 | 5. 86 – 6. 25 | 5. 58 – 5. 81 | |||||||||
Income protection (before tax) | 6. 25 – 6. 46 | 5. 86 – 6. 25 | 5. 58 – 5. 81 | |||||||||
Investment account – ordinary (after tax) | 4.55 | 4.29 | 4.21 | |||||||||
Investment account – superannuation (after tax) | 5.53 | 5.22 | 5.12 | |||||||||
Investment account – annuities (exempt from tax) | 6.46 | 6.09 | 5.98 | |||||||||
(1) | For New Zealand, investment earning rates assumed were 3.9% to 5.6% net of tax. |
Bonuses
The calculation assumes that the long-term supportable bonuses will be paid, which is in line with company bonus philosophy. There have been no significant changes to these assumptions.
Maintenance expenses
The maintenance expenses are based on an internal analysis of experience and are assumed to increase in line with inflation each year and to be sufficient to cover the cost of servicing the business in the coming year after adjusting for one-off expenses. For Australian Participating Business, expenses continue on the previous charging basis with adjustments for actual experience and are assumed to increase in line with inflation each year.
Investment management expenses
Investment management expense assumptions now vary by asset classes and are based on the recently negotiated investment fees as set out in Fund Management Arrangements. There has been no significant change to overall investment fees.
Inflation
The inflation assumption is consistent with the investment earning assumptions.
Benefit indexation
The indexation rates were based on an analysis of past experience and estimated long term inflation and vary by business and product type. There have been no significant changes to these assumptions.
Taxation
The taxation basis and rates assumed vary by market and product type.
Voluntary discontinuance
Discontinuance rates were based on recent company and industry experience and vary by market, product, age and duration inforce. The experience has been broadly in line with assumptions. There have been no significant changes to these assumptions.
Surrender values
Current surrender value bases were assumed to apply in the future. There have been no significant changes to these assumptions.
Mortality and morbidity
Rates vary by sex, age, product type and smoker status. Rates were based on standard mortality tables applicable to each market (e.g. IA95-97 in Australia for retail risk, IM/IF80 for annuities), adjusted for recent company and industry experience where appropriate.
Solvency
Australian life insurers
Australian life insurers are required to hold prudential reserves in excess of the amount of policy liabilities. These reserves are required to support solvency requirements and provide protection against adverse experience. Actuarial Standard AS2.04 “Solvency Standard” (“S2.04”) prescribes a minimum solvency requirement and the minimum level of assets required to be held in each insurance fund. All controlled Australian insurance entities complied with the solvency requirements of AS2.04.
Overseas life insurers
Overseas insurance subsidiaries were required to hold reserves in excess of policy liabilities in accordance with local Acts and prudential rules. Each of the overseas subsidiaries complied with local requirements.
Managed assets & fiduciary activities
Arrangements were in place to ensure that asset management and other fiduciary activities of controlled entities were independent of the insurance funds and other activities of the Group.
Disaggregated information
Life Insurance business is conducted through a number of life insurance entities in Australia and overseas. Under the Australian Life Insurance Act 1995, life insurance business is conducted within one or more separate statutory funds, which are distinguished from each other and from the shareholders’ funds. The financial statements of Australian life insurers, which are lodged with the relevant Australian regulators show all major components of the financial statements disaggregated between the various life insurance statutory funds and their shareholders’ funds and as well as between investment linked business and non-investment linked business.
Profit Announcement 53
Table of Contents
Appendices
16. Intangible Assets
As At | ||||||||||||
30/06/07 | 31/12/06 | 30/06/06 | ||||||||||
$M | $M | $M | ||||||||||
Total Intangible Assets | ||||||||||||
Goodwill | 7,163 | 7,203 | 7,200 | |||||||||
Computer software costs | 297 | 267 | 229 | |||||||||
Management fee rights | 311 | 311 | 311 | |||||||||
Other | 64 | 65 | 69 | |||||||||
Total intangible assets | 7,835 | 7,846 | 7,809 | |||||||||
Goodwill | ||||||||||||
Purchased goodwill – Colonial | 6,705 | 6,705 | 6,705 | |||||||||
Purchased goodwill – other | 458 | 498 | 495 | |||||||||
Total goodwill | 7,163 | 7,203 | 7,200 | |||||||||
Computer Software Costs | ||||||||||||
Cost | 420 | 353 | 290 | |||||||||
Accumulated amortisation | (123 | ) | (86 | ) | (61 | ) | ||||||
Total computer software costs | 297 | 267 | 229 | |||||||||
Management Fee Rights | ||||||||||||
Cost | 311 | 311 | 311 | |||||||||
Total management fee rights | 311 | 311 | 311 | |||||||||
Other | ||||||||||||
Cost | 85 | 82 | 82 | |||||||||
Accumulated amortisation | (21 | ) | (17 | ) | (13 | ) | ||||||
Total other | 64 | 65 | 69 | |||||||||
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
$M | $M | $M | $M | |||||||||||||
Goodwill (reconciliation) | ||||||||||||||||
Opening balance | 7,200 | 7,214 | 7,203 | 7,200 | ||||||||||||
Additions | 3 | 7 | — | 3 | ||||||||||||
Impairment | (40 | ) | (21 | ) | (40 | ) | — | |||||||||
Closing balance | 7,163 | 7,200 | 7,163 | 7,203 | ||||||||||||
Computer Software Costs (reconciliation) | ||||||||||||||||
Opening balance | 229 | 182 | 267 | 229 | ||||||||||||
Additions: | ||||||||||||||||
From acquisitions | 20 | — | 20 | — | ||||||||||||
From internal development | 110 | 90 | 42 | 68 | ||||||||||||
Amortisation | (62 | ) | (43 | ) | (32 | ) | (30 | ) | ||||||||
Closing balance | 297 | 229 | 297 | 267 | ||||||||||||
Management Fee Rights (reconciliation) | ||||||||||||||||
Opening balance | 311 | 224 | 311 | 311 | ||||||||||||
Additions: | ||||||||||||||||
From revaluations | — | 87 | — | — | ||||||||||||
Closing balance | 311 | 311 | 311 | 311 | ||||||||||||
Other (reconciliation) | ||||||||||||||||
Opening balance | 69 | 36 | 65 | 69 | ||||||||||||
Additions: | ||||||||||||||||
From acquisitions | 3 | 39 | 3 | — | ||||||||||||
Amortisation | (8 | ) | (6 | ) | (4 | ) | (4 | ) | ||||||||
Closing balance | 64 | 69 | 64 | 65 | ||||||||||||
54 Commonwealth Bank of Australia
Table of Contents
Appendices
17. ASB Bank Group – Statutory View
Full Year Ended | ||||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 30/06/06 | |||||||||||||
Income Statement(1) | NZDM | NZDM | $M | $M | ||||||||||||
Interest income | 3,816 | 3,210 | 3,340 | 2,861 | ||||||||||||
Interest expense | 2,926 | 2,406 | 2,561 | 2,144 | ||||||||||||
Net interest earnings | 890 | 804 | 779 | 717 | ||||||||||||
Other income | 420 | 344 | 368 | 307 | ||||||||||||
Total operating income | 1,310 | 1,148 | 1,147 | 1,024 | ||||||||||||
Impairment losses on advances | 18 | 19 | 16 | 17 | ||||||||||||
Total operating income after debt provisions expense | 1,292 | 1,129 | 1,131 | 1,007 | ||||||||||||
Total operating expense | 533 | 495 | 467 | 442 | ||||||||||||
Salaries and other staff expense | 314 | 276 | 275 | 246 | ||||||||||||
Building occupancy and equipment expense | 91 | 85 | 80 | 76 | ||||||||||||
Information technology expense | 50 | 50 | 44 | 45 | ||||||||||||
Other expenses | 78 | 84 | 68 | 75 | ||||||||||||
Net surplus before taxation | 759 | 634 | 664 | 565 | ||||||||||||
Taxation | 227 | 194 | 199 | 173 | ||||||||||||
Net surplus after taxation(2) | 532 | 440 | 465 | 392 | ||||||||||||
As At | ||||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 30/06/06 | |||||||||||||
Balance Sheet(3) | NZDM | NZDM | $M | $M | ||||||||||||
Assets | ||||||||||||||||
Cash and liquid assets | 3,013 | 911 | 2,734 | 750 | ||||||||||||
Due from other banks | 1,126 | 834 | 1,022 | 688 | ||||||||||||
Money market advances | 2,264 | 966 | 2,054 | 796 | ||||||||||||
Securities at fair value through Income Statement | 2,437 | 3,021 | 2,211 | 2,489 | ||||||||||||
Derivative assets | 761 | 511 | 691 | 421 | ||||||||||||
Advances to customers | 42,856 | 37,989 | 38,889 | 31,304 | ||||||||||||
Property, plant and equipment | 159 | 152 | 144 | 125 | ||||||||||||
Intangible assets | 36 | 20 | 33 | 16 | ||||||||||||
Other assets(4) | 241 | 164 | 219 | 135 | ||||||||||||
Total assets | 52,893 | 44,568 | 47,997 | 36,724 | ||||||||||||
Total interest earning and discount bearing assets | 51,658 | 43,682 | 46,877 | 35,994 | ||||||||||||
Liabilities | ||||||||||||||||
Money and market deposits | 17,334 | 14,390 | 15,730 | 11,857 | ||||||||||||
Derivative liabilities | 984 | 241 | 893 | 199 | ||||||||||||
Deposits from customers | 24,523 | 21,145 | 22,253 | 17,423 | ||||||||||||
Due to other banks | 5,935 | 5,531 | 5,386 | 4,558 | ||||||||||||
Other liabilities | 412 | 361 | 373 | 297 | ||||||||||||
Deferred taxation liabilities | 134 | 13 | 122 | 11 | ||||||||||||
Current tax liabilities | — | 15 | — | 12 | ||||||||||||
Subordinated debt | 451 | 183 | 409 | 151 | ||||||||||||
Total liabilities | 49,773 | 41,879 | 45,166 | 34,508 | ||||||||||||
Shareholders’ Equity | ||||||||||||||||
Contributed capital – ordinary shareholder | 1,563 | 1,013 | 1,418 | 835 | ||||||||||||
Asset revaluation reserve | 27 | 23 | 25 | 19 | ||||||||||||
Cash flow hedge reserves | 251 | 50 | 228 | 41 | ||||||||||||
Accumulated surplus | 729 | 1,053 | 661 | 868 | ||||||||||||
Ordinary shareholders’ equity | 2,570 | 2,139 | 2,332 | 1,763 | ||||||||||||
Contributed capital – perpetual preference shareholders | 550 | 550 | 499 | 453 | ||||||||||||
Total shareholders’ equity | 3,120 | 2,689 | 2,831 | 2,216 | ||||||||||||
Total liabilities and shareholders’ equity | 52,893 | 44,568 | 47,997 | 36,724 | ||||||||||||
Total interest and discount bearing liabilities | 46,277 | 39,852 | 41,994 | 32,838 | ||||||||||||
(1) | Income Statement has been translated at AUD 1.00= NZD 1.1426 for the year ended 30 June 2007 (AUD 1.00= NZD 1.122 for year ended 30 June 2006). | |
(2) | On a statutory basis, reported net surplus after taxation has increased by 21% in New Zealand dollar terms. It should be noted that the current year is impacted by mark to market accounting gains on hedging swaps that are not reflective of the underlying economic reality. Excluding these gains, statutory basis net surplus after taxation has increased by 8% in New Zealand dollar terms. | |
(3) | Refer to appendix 22 for rates at which Balance Sheet has been translated. | |
(4) | Includes tax assets of NZD $38 million in the current year. |
Profit Announcement 55
Table of Contents
Appendices
18. ASX Appendix 4E
Cross Reference Index | Page | |
Results for Announcement to the Market (Rule 4.3A Item No. 2) | Inside front cover | |
Income Statement (Rule 4.3A Item No. 3) | 24 | |
Balance Sheet (Rule 4.3A Item No. 4) | 25 | |
Statement of Cash Flows (Rule 4.3A Item No. 5) | 26 | |
Dividends (Rule 4.3A Item No. 6) | 51 | |
Dividend dates (Rule 4.3A Item No. 7) | Inside front cover | |
Statement of changes in Equity (Rule 4.3A Item No. 8) | 57 | |
Net tangible assets per security (Rule 4.3A Item No. 9) | 64 | |
Details of entities over which control was lost during the year (Rule 4.3A Item No. 10) | 58 | |
Details of associates and joint ventures (Rule 4.3A Item No. 11) | 58 | |
Other significant information (Rule 4.3A Item No. 12) | 58 | |
Foreign entities (Rule 4.3A Item No. 13) | 58 | |
Commentary on Results (Rule 4.3A Item No. 14) | 2 | |
Compliance Statement
This preliminary final report for the year ended 30 June 2007 is prepared in accordance with the ASX listing rules. It should be read in conjunction with any announcements to the market made by the Group during the year.
The preliminary final report has been prepared in accordance with Accounting Standards in Australia.
The Financial Statements of the Group have been audited.
![-s- John Hatton](https://capedge.com/proxy/6-K/0000950123-07-011583/y38490y3849014.gif)
John Hatton
Company Secretary
15 August 2007
56 Commonwealth Bank of Australia
Table of Contents
Appendices
18. ASX Appendix 4E(continued)
Consolidated retained profits reconciliation (Rule 4.3A Item No. 8)
2007 | 2006 | |||||||
$M | $M | |||||||
Retained profits | ||||||||
Opening balance | 4,487 | 3,063 | ||||||
Actuarial gains and losses from defined benefit superannuation plan | 414 | 387 | ||||||
Realised gains and dividend income on treasury shares held within the Bank’s life insurance statutory funds(1) | 45 | 85 | ||||||
Operating profit attributable to Equity holders of the Bank | 4,470 | 3,928 | ||||||
Total available for appropriation | 9,416 | 7,463 | ||||||
Transfers to general reserve | 54 | (239 | ) | |||||
Transfers to general reserve for credit loss | — | (92 | ) | |||||
Interim 2007 dividend – cash component | (862 | ) | (992 | ) | ||||
Interim 2007 dividend – dividend reinvestment plan | (518 | ) | (219 | ) | ||||
Payment of 2006 final dividend – cash component | (1,368 | ) | (1,172 | ) | ||||
Payment of 2006 final dividend – dividend reinvestment plan | (300 | ) | (262 | ) | ||||
Other dividends | (55 | ) | — | |||||
Closing balance | 6,367 | 4,487 | ||||||
(1) | Relates to movements in treasury shares held within life insurance statutory funds and the employee share scheme trust. |
Profit Announcement 57
Table of Contents
Appendices
18. ASX Appendix 4E(continued)
Details of entities over which control was lost during the year
Ownership Interest | ||||||||
(Rule 4.3A Item No. 10) | Date control lost | Held (%) | ||||||
IDI (No.1) Limited | 25 November 2006 | 100 | % | |||||
IDI (No.2) Limited | 25 November 2006 | 100 | % | |||||
Riley Investments Limited | 25 November 2006 | 100 | % | |||||
Riley International Limited | 25 November 2006 | 100 | % | |||||
Details of associates and joint ventures (Rule 4.3A Item No. 11)
As at 30 June 2007 | Ownership Interest Held (%) | |||
Equigroup Pty Limited (formerly Computer Fleet Management) | 50 | % | ||
Cyberlynx Procurement Services Pty Limited | 50 | % | ||
AMTD Group Limited | 30 | % | ||
China Life CMG Life Assurance Company Limited | 49 | % | ||
CMG CH China Funds Management Limited | 50 | % | ||
Hangzhou City Commercial Bank Limited | 19.9 | % | ||
452 Capital Pty Limited | 30 | % | ||
First State Cinda Fund Management Company Limited | 46 | % | ||
Healthcare Support (Newcastle) Limited | 40 | % | ||
Equion Health (Barts) Limited | 50 | % | ||
Acadian Asset Management (Australia) Limited | 50 | % | ||
Five D Holdings Pty Limited | 50 | % | ||
First State Media (Ireland) Limited | 50 | % | ||
CFS Retail Property Trust | 9.5 | % | ||
Colonial Property Office Trust | 7 | % | ||
Forth Valley Investment Company Limited | 50 | % | ||
Other significant information (Rule 4.3A Item No. 12)
There is no other significant information.
Post Balance Date Events
On 1 June 2007, the Group announced an offer of Perpetual Exchangeable Resaleable Listed Securities (PERLS IV). The offer raised $1,465 million in July 2007. The issue of PERLS IV forms part of the Group’s capital management strategy, structured to meet APRA’s new regulatory capital requirements for Non-Innovative Residual Tier One Capital, effective January 2008. At 30 June 2007, this would have increased Tier One to 7.72% and Total Capital to 10.35%.
On 1 August 2007 the Group announced its intention to acquire all of the issued capital in IWL Ltd (“IWL”). The retail base of IWL is considered to be a strong fit with the existing equities business of Commsec, the Group’s broking business. The transaction is subject to a number of conditions, including IWL shareholder approval at a meeting expected to be held in October 2007, and various regulatory approvals including the ACCC.
Foreign Entities (Rule 4.3A Item No. 13)
Not Applicable
58 Commonwealth Bank of Australia
Table of Contents
Appendices
19. Notes to the Statement of Cash Flows
2007 | 2006 | |||||||
$M | $M | |||||||
19 (a) Reconciliation of Net Profit after Income Tax to Net Cash Provided by/(used in) Operating Activities | ||||||||
Net profit after income tax | 4,497 | 3,959 | ||||||
Net (increase)/decrease in interest receivable | (745 | ) | (99 | ) | ||||
Increase/(decrease) in interest payable | 362 | 784 | ||||||
Net (increase)/decrease in assets at fair value through Income Statement (excluding life insurance) | (7,272 | ) | (53 | ) | ||||
Net (gain)/loss on sale of controlled entities and associates | — | (163 | ) | |||||
Net (increase)/decrease in derivative assets | (3,068 | ) | 128 | |||||
Net (gain)/loss on sale of property, plant and equipment | 16 | (4 | ) | |||||
Loan impairment expense | 434 | 398 | ||||||
Depreciation and amortisation | 270 | 213 | ||||||
Increase/(decrease) in liabilities at fair value through Income Statement (excluding life insurance) | 6,690 | 1,374 | ||||||
Increase/(decrease) in derivative liabilities | 5,860 | (445 | ) | |||||
Increase/(decrease) in other provisions | 57 | (92 | ) | |||||
Increase/(decrease) in income taxes payable | 297 | (455 | ) | |||||
Increase/(decrease) in deferred income taxes payable | 175 | 182 | ||||||
Decrease/(increase) in deferred tax assets | (272 | ) | 184 | |||||
(Increase)/decrease in accrued fees/reimbursements receivable | (163 | ) | (88 | ) | ||||
Increase/(decrease) in accrued fees and other items payable | 386 | 133 | ||||||
Unrealised loss/(gain) on revaluation of assets at fair value through Income Statement (excluding life insurance) | 92 | (112 | ) | |||||
(Decrease) in life insurance contract policy liabilities | (1,460 | ) | (1,211 | ) | ||||
Increase in cash flow hedge reserve | 547 | 31 | ||||||
Changes in operating assets and liabilities arising from cash flow movements | (1,451 | ) | (3,458 | ) | ||||
Other | 389 | (44 | ) | |||||
Net cash provided by/(used in) operating activities | 5,641 | 1,162 | ||||||
19 (b) Reconciliation of Cash:For the purposes of the Statement of Cash Flows, cash includes cash, money at short call, at call deposits with other financial institutions and settlement account balances with other banks. | ||||||||
Notes, coins and cash at bank | 4,557 | 1,703 | ||||||
Other short term liquid assets | 967 | 491 | ||||||
Receivables due from other financial institutions – at call(1) | 4,607 | 4,657 | ||||||
Payables due to other financial institutions – at call(1) | (6,047 | ) | (4,813 | ) | ||||
Cash and cash equivalents at end of year | 4,084 | 2,038 | ||||||
19 (c) Disposal of Controlled Entities | ||||||||
Fair value of net tangible assets disposed | ||||||||
Cash and liquid assets | — | 55 | ||||||
Assets at fair value through Income Statement | — | 2,297 | ||||||
Other assets | — | 148 | ||||||
Life insurance policy liabilities | — | (1,996 | ) | |||||
Bills payable and other liabilities | — | (41 | ) | |||||
Profit on sale | — | 145 | ||||||
Cash consideration received | — | 608 | ||||||
Less cash and cash equivalents disposed | — | (55 | ) | |||||
Net cash inflow on disposal | — | 553 | ||||||
19 (d) Non Cash Financing and Investing Activities:Shares issued under the Dividend Reinvestment Plan for 2007 were $818 million. | ||||||||
19 (e) Acquisition of Controlled Entities | ||||||||
Fair value of assets acquired: | ||||||||
Minority interests | 4 | 126 | ||||||
Goodwill | 3 | 7 | ||||||
Other intangibles | — | 122 | ||||||
Other assets | — | 167 | ||||||
Bills payable and other liabilities | — | (8 | ) | |||||
Cash consideration paid | 7 | 414 | ||||||
Less cash and cash equivalents acquired | — | — | ||||||
Net cash outflow on acquisition | 7 | 414 | ||||||
19 (f) Financing Facilities :Standby funding lines are immaterial | ||||||||
(1) | At call includes certain receivables and payables due from and to financial institutions within three months. |
Profit Announcement 59
Table of Contents
Appendices
20. Analysis Template
Full Year Ended | Half Year Ended | |||||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | Page | ||||||||||||||
Profit Summary – Input Schedule | $M | $M | $M | $M | References | |||||||||||||
Income – Cash Basis | ||||||||||||||||||
Net interest income | 7,036 | 6,514 | 3,551 | 3,485 | Page 3 | |||||||||||||
Other banking operating income | 3,432 | 3,036 | 1,754 | 1,678 | Page 3 | |||||||||||||
Total banking Income | 10,468 | 9,550 | 5,305 | 5,163 | Page 3 | |||||||||||||
Operating income | 1,874 | 1,543 | 981 | 893 | Page 17 | |||||||||||||
Shareholder investment returns | 14 | 14 | 10 | 4 | Page 17 | |||||||||||||
Funds management income | 1,888 | 1,557 | 991 | 897 | — | |||||||||||||
Operating income – life insurance | 745 | 669 | 406 | 339 | Page 21 | |||||||||||||
Operating income – general insurance | 72 | 73 | 29 | 43 | Page 21 | |||||||||||||
Operating income insurance | 817 | 742 | 435 | 382 | Page 21 | |||||||||||||
Shareholder investment returns | 135 | 87 | 54 | 81 | Page 21 | |||||||||||||
Profit on sale of the Hong Kong Insurance Business | — | 145 | — | — | Page 21 | |||||||||||||
Insurance income | 952 | 974 | 489 | 463 | Page 21 | |||||||||||||
Total income | 13,308 | 12,081 | 6,785 | 6,523 | Page 3 | |||||||||||||
Expenses – Cash Basis | — | |||||||||||||||||
Banking | 4,797 | 4,558 | 2,443 | 2,354 | Page 36 | |||||||||||||
Funds management | 1,175 | 989 | 608 | 567 | Page 36 | |||||||||||||
Insurance | 455 | 447 | 232 | 223 | Page 36 | |||||||||||||
Total operating expenses | 6,427 | 5,994 | 3,283 | 3,144 | Page 36 | |||||||||||||
Profit before Loan impairment expense | 6,881 | 6,087 | 3,502 | 3,379 | — | |||||||||||||
Loan impairment expense | 434 | 398 | 239 | 195 | Page 3 | |||||||||||||
Profit before income tax | 6,447 | 5,689 | 3,263 | 3,184 | Page 3 | |||||||||||||
Income tax – corporate | 1,816 | 1,605 | 916 | 900 | Page 3 | |||||||||||||
Operating profit after tax | 4,631 | 4,084 | 2,347 | 2,284 | — | |||||||||||||
Minority interests | 27 | 31 | 14 | 13 | Page 3 | |||||||||||||
Net profit after tax – cash basis | 4,604 | 4,053 | 2,333 | 2,271 | Page 3 | |||||||||||||
Defined benefit superannuation plan income/(expense) | 5 | (25 | ) | 1 | 4 | Page 3 | ||||||||||||
Treasury share valuation adjustment | (75 | ) | (100 | ) | (37 | ) | (38 | ) | Page 3 | |||||||||
One-off AIFRS mismatches | (64 | ) | — | (18 | ) | (46 | ) | Page 3 | ||||||||||
Net profit after tax – statutory basis | 4,470 | 3,928 | 2,279 | 2,191 | Page 3 | |||||||||||||
Investment return on Shareholder funds | 149 | 246 | 64 | 85 | Page 23 | |||||||||||||
Tax expense on shareholder investment returns | 53 | 35 | 29 | 24 | Page 23 | |||||||||||||
Shareholder investment returns – after tax | 96 | 211 | 35 | 61 | Page 23 | |||||||||||||
Net profit after tax – underlying basis | 4,508 | 3,842 | 2,298 | 2,210 | Page 3 | |||||||||||||
60 Commonwealth Bank of Australia
Table of Contents
Appendices
20. Analysis Template(continued)
Full Year Ended | Half Year Ended | |||||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | Page | ||||||||||||||
Profit Summary – Input Schedule | $M | $M | $M | $M | References | |||||||||||||
Other Data | ||||||||||||||||||
Net interest income (excluding securitisation) | 6,921 | 6,420 | 3,489 | 3,432 | Page 32/33 | |||||||||||||
Average interest earning assets | 316,048 | 274,798 | 325,380 | 306,868 | Page 32/33 | |||||||||||||
Average net assets(1) | 22,758 | 21,994 | 23,466 | 21,915 | Page 25 | |||||||||||||
Average minority interest(1) | 509 | 1,148 | 510 | 508 | Page 25 | |||||||||||||
Average preference shares & other equity instruments(1) | 939 | 1,600 | 939 | 939 | Page 25 | |||||||||||||
Average treasury shares(1) | (315 | ) | (390 | ) | (274 | ) | (345 | ) | Page 51 | |||||||||
Average defined benefit superannuation plan net surplus(1) | 1,013 | 631 | 1,111 | 896 | — | |||||||||||||
Distributions – other equity instruments | 55 | — | 27 | 28 | — | |||||||||||||
Interest expense (after tax) – Perls I | — | 32 | — | — | ||||||||||||||
Interest expense (after tax) – Perls II | 25 | 23 | 12 | 13 | ||||||||||||||
Interest expense (after tax) – Perls III | 60 | 13 | 31 | 29 | ||||||||||||||
Interest expense (after tax) – TPS | 26 | 29 | 12 | 14 | ||||||||||||||
Interest expense (after tax) – Convertible notes | 39 | 3 | 20 | 19 | ||||||||||||||
Weighted average number of shares – statutory basic | 1,281 | 1,275 | 1,286 | 1,276 | Page 3 | |||||||||||||
Weighted average number of shares – fully diluted – statutory | 1,344 | 1,329 | 1,349 | 1,348 | — | |||||||||||||
Weighted average number of shares – cash and underlying | 1,289 | 1,283 | 1,293 | 1,284 | Page 3 | |||||||||||||
Weighted average number of shares – fully diluted – cash and underlying | 1,351 | 1,338 | 1,356 | 1,357 | — | |||||||||||||
Weighted average number of shares – Perls I | — | 12 | — | — | ||||||||||||||
Weighted average number of shares – Perls II | 13 | 17 | 13 | 15 | ||||||||||||||
Weighted average number of shares – Perls III | 21 | 6 | 21 | 24 | ||||||||||||||
Weighted average number of shares – TPS | 11 | 17 | 11 | 14 | ||||||||||||||
Weighted average number of shares – Convertible notes | 17 | 2 | 17 | 19 | ||||||||||||||
Weighted average number of shares – Executive Options | — | 1 | — | 1 | ||||||||||||||
Dividends per share (cents) | 256 | 224 | 149 | 107 | Page 3 | |||||||||||||
No. of shares at end of period | 1,301 | 1,283 | 1,301 | 1,290 | Page 51 | |||||||||||||
Average funds under administration | 164,404 | 139,082 | 171,264 | 158,010 | Page 17 | |||||||||||||
Operating income – internal | 9 | 9 | 4 | 5 | Page 17 | |||||||||||||
Average inforce premiums(1) | 1,278 | 1,180 | 1,370 | 1,248 | Page 22 | |||||||||||||
Net assets | 24,444 | 21,343 | 24,444 | 22,487 | Page 25 | |||||||||||||
Total intangible assets | 7,835 | 7,809 | 7,835 | 7,846 | Page 25 | |||||||||||||
Minority interests | 512 | 508 | 512 | 508 | Page 25 | |||||||||||||
Other equity instruments | 939 | 939 | 939 | 939 | Page 25 | |||||||||||||
Tier One capital | 17,512 | 16,354 | 17,512 | 16,553 | Page 48 | |||||||||||||
Deferred income tax | 37 | — | 37 | 39 | Page 48 | |||||||||||||
Equity investments in other companies | 700 | — | 700 | 820 | Page 48 | |||||||||||||
Eligible loan capital | 245 | 281 | 245 | 263 | Page 48 | |||||||||||||
Other equity instruments | 3,474 | 3,659 | 3,474 | 3,522 | Page 48 | |||||||||||||
Minority interests (net of minority interest component deducted from Tier One capital) | 512 | 508 | 512 | 508 | Page 48 | |||||||||||||
Investment in non consolidated subsidiaries (net of Intangible component deducted from Tier One capital) | 409 | 2,012 | 409 | 283 | Page 48 | |||||||||||||
Other deductions | 178 | 151 | 178 | 166 | Page 48 | |||||||||||||
Transitional Tier One Capital relief granted on adoption of AIFRS | 1,641 | — | 1,641 | 1,641 | Page 48 | |||||||||||||
Risk-weighted assets used for ACE ratio | 246,047 | 216,438 | 246,047 | 234,569 | Page 49 | |||||||||||||
(1) | Average of reporting period balances. |
Profit Announcement 61
Table of Contents
Appendices
20. Analysis Template(continued)
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Ratios – Output Summary | $M | $M | $M | $M | ||||||||||||
EPS | ||||||||||||||||
Net profit after tax – cash basis | 4,604 | 4,053 | 2,333 | 2,271 | ||||||||||||
Less distribution – other equity instruments | 55 | — | 27 | 28 | ||||||||||||
Less profit on sale of Hong Kong Insurance Business | — | 145 | — | — | ||||||||||||
Adjusted profit for EPS calculation | 4,549 | 3,908 | 2,306 | 2,243 | ||||||||||||
Average number of shares (M) | 1,289 | 1,283 | 1,293 | 1,284 | ||||||||||||
Earnings per share – cash basis adjusted for sale of Hong Kong Insurance Business (cents) | 353.0 | 304.6 | 178.3 | 174.7 | ||||||||||||
Net profit after tax – cash basis | 4,604 | 4,053 | 2,333 | 2,271 | ||||||||||||
Less distributions – other equity instruments | 55 | — | 27 | 28 | ||||||||||||
Adjusted cash profit for EPS calculation | 4,549 | 4,053 | 2,306 | 2,243 | ||||||||||||
Average number of shares (M) | 1,289 | 1,283 | 1,293 | 1,284 | ||||||||||||
Earnings per share – cash basis (cents) | 353.0 | 315.9 | 178.3 | 174.7 | ||||||||||||
Earnings per share – dilutions Interest expense (after tax) – Perls I | — | 32 | — | — | ||||||||||||
Interest expense (after tax) – Perls II | 25 | 23 | 12 | 13 | ||||||||||||
Interest expense (after tax) – Perls III | 60 | 13 | 31 | 29 | ||||||||||||
Interest expense (after tax) – TPS | 26 | 29 | 12 | 14 | ||||||||||||
Interest expense (after tax) – Convertible notes | 39 | 3 | 20 | 19 | ||||||||||||
Profit impact of assumed conversions (after tax) | 150 | 100 | 75 | 75 | ||||||||||||
Weighted average number of shares – Perls I (M) | — | 12 | — | — | ||||||||||||
Weighted average number of shares – Perls II (M) | 13 | 17 | 13 | 15 | ||||||||||||
Weighted average number of shares – Perls III (M) | 21 | 6 | 21 | 24 | ||||||||||||
Weighted average number of shares – TPS (M) | 11 | 17 | 11 | 14 | ||||||||||||
Weighted average number of shares – Convertible Notes (M) | 17 | 2 | 17 | 19 | ||||||||||||
Weighted average number of shares – Executive Options (M) | — | 1 | — | 1 | ||||||||||||
Weighted average number of shares – Dilutive securities (M) | 62 | 55 | 62 | 73 | ||||||||||||
Adjusted cash profit for EPS calculation | 4,549 | 4,053 | 2,306 | 2,243 | ||||||||||||
Add back profit impact of assumed conversions (after tax) (M) | 150 | 100 | 75 | 75 | ||||||||||||
Adjusted diluted profit for EPS calculation | 4,699 | 4,153 | 2,381 | 2,318 | ||||||||||||
Average number of shares (M) | 1,289 | 1,283 | 1,293 | 1,284 | ||||||||||||
Add back weighted average number of shares (M) | 62 | 55 | 62 | 73 | ||||||||||||
Diluted average number of shares (M) | 1,351 | 1,338 | 1,355 | 1,357 | ||||||||||||
EPS diluted – cash basis (cents) | 347.8 | 310.5 | 175.6 | 170.9 | ||||||||||||
Net profit after tax – underlying | 4,508 | 3,842 | 2,298 | 2,210 | ||||||||||||
Less distributions – other equity instruments | 55 | — | 27 | 28 | ||||||||||||
Adjusted profit for EPS calculation | 4,453 | 3,842 | 2,271 | 2,182 | ||||||||||||
Average number of shares (M) | 1,289 | 1,283 | 1,293 | 1,284 | ||||||||||||
Earnings per share – underlying basis (cents) | 345.6 | 299.4 | 175.6 | 169.9 | ||||||||||||
62 Commonwealth Bank of Australia
Table of Contents
Appendices
20. Analysis Template(continued)
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Ratios – Output Summary | $M | $M | $M | $M | ||||||||||||
DPS | ||||||||||||||||
Dividends | ||||||||||||||||
Dividends per share (cents) | 256 | 224 | 149 | 107 | ||||||||||||
No of shares at end of period (M) | 1,301 | 1,283 | 1,301 | 1,290 | ||||||||||||
Total dividends | 3,319 | 2,879 | 1,939 | 1,380 | ||||||||||||
Dividend payout ratio – cash basis | ||||||||||||||||
Net profit after tax – cash basis | 4,604 | 4,053 | 2,333 | 2,271 | ||||||||||||
NPAT – available for distribution to ordinary shareholders | 4,549 | 4,053 | 2,306 | 2,243 | ||||||||||||
Total dividends | 3,319 | 2,879 | 1,939 | 1,380 | ||||||||||||
Payout ratio – cash basis (%) | 73.0 | 71.0 | 84.1 | 61.5 | ||||||||||||
Dividend cover | ||||||||||||||||
NPAT – available for distribution to ordinary shareholders | 4,549 | 4,053 | 2,306 | 2,243 | ||||||||||||
Total dividends | 3,319 | 2,879 | 1,939 | 1,380 | ||||||||||||
Dividend cover – cash basis | 1.4 | 1.4 | 1.2 | 1.6 | ||||||||||||
ROE | ||||||||||||||||
Return on equity – cash basis | ||||||||||||||||
Average net assets | 22,758 | 21,993 | 23,466 | 21,915 | ||||||||||||
Less: | ||||||||||||||||
Average minority interests | (509 | ) | (1,148 | ) | (510 | ) | (508 | ) | ||||||||
Average preference shares | (939 | ) | (1,600 | ) | (939 | ) | (939 | ) | ||||||||
Average equity | 21,310 | 19,245 | 22,016 | 20,468 | ||||||||||||
Add average treasury shares | 315 | 390 | 274 | 345 | ||||||||||||
Less average defined benefit superannuation plan net surplus | (1,013 | ) | (631 | ) | (1,111 | ) | (896 | ) | ||||||||
Net average equity | 20,612 | 19,004 | 21,179 | 19,917 | ||||||||||||
NPAT (“cash basis”) | 4,604 | 4,053 | 2,333 | 2,271 | ||||||||||||
Less distributions – other equity instruments | 55 | — | 27 | 28 | ||||||||||||
Adjusted profit for ROE calculation | 4,549 | 4,053 | 2,306 | 2,243 | ||||||||||||
Return on equity – cash basis (%) | 22.1 | 21.3 | 22.0 | 22.3 | ||||||||||||
Return on equity – underlying basis | ||||||||||||||||
Average net assets | 22,758 | 21,993 | 23,466 | 21,915 | ||||||||||||
Average minority interests | (509 | ) | (1,148 | ) | (510 | ) | (508 | ) | ||||||||
Average preference shares | (939 | ) | (1,600 | ) | (939 | ) | (939 | ) | ||||||||
Average equity | 21,310 | 19,245 | 22,016 | 20,468 | ||||||||||||
Add average treasury shares | 315 | 390 | 274 | 345 | ||||||||||||
Less average defined benefit superannuation plan net surplus | (1,013 | ) | (631 | ) | (1,111 | ) | (896 | ) | ||||||||
Net average equity | 20,612 | 19,004 | 21,179 | 19,917 | ||||||||||||
NPAT (“underlying basis”) | 4,508 | 3,842 | 2,298 | 2,210 | ||||||||||||
Less distribution other equity instruments | 55 | — | 27 | 28 | ||||||||||||
Adjusted profit for ROE calculation | 4,453 | 3,842 | 2,271 | 2,182 | ||||||||||||
Return on equity – underlying basis (%) | 21.6 | 20.2 | 21.6 | 21.7 | ||||||||||||
NIM | ||||||||||||||||
Net interest income (excluding securitisation) | 6,921 | 6,420 | 3,489 | 3,432 | ||||||||||||
Average interest earning assets (excluding securitisation) | 316,048 | 274,798 | 325,380 | 306,868 | ||||||||||||
NIM (% pa) | 2.19 | 2.34 | 2.16 | 2.22 | ||||||||||||
Profit Announcement 63
Table of Contents
Appendices
20. Analysis Template(continued)
Full Year Ended | Half Year Ended | |||||||||||||||
30/06/07 | 30/06/06 | 30/06/07 | 31/12/06 | |||||||||||||
Ratios – Output Summary | $M | $M | $M | $M | ||||||||||||
Productivity | ||||||||||||||||
Banking expense to income ratio | ||||||||||||||||
Expenses | 4,797 | 4,558 | 2,443 | 2,354 | ||||||||||||
Banking Income | 10,468 | 9,550 | 5,305 | 5,163 | ||||||||||||
Expense to Income – cash basis (%) | 45.8 | 47.7 | 46. 1 | 45.6 | ||||||||||||
Funds management expenses to average FUA ratio | ||||||||||||||||
Expenses | 1,175 | 989 | 608 | 567 | ||||||||||||
Average funds under administration | 164,404 | 139,082 | 171,264 | 158,010 | ||||||||||||
Expenses to average FUA – cash basis (%) | 0.71 | 0.71 | 0. 72 | 0.71 | ||||||||||||
Insurance expenses to average inforce premiums ratio | ||||||||||||||||
Operating expenses | 455 | 447 | 232 | 223 | ||||||||||||
Operating expenses – internal | 9 | 9 | 4 | 5 | ||||||||||||
Total expenses | 464 | 456 | 236 | 228 | ||||||||||||
Average inforce premiums | 1,278 | 1,180 | 1,370 | 1,248 | ||||||||||||
Expenses to average inforce premiums ratio (%) | 36.3 | 38.6 | 34. 7 | 36.2 | ||||||||||||
Net Tangible Assets (NTA) per share | ||||||||||||||||
Net assets | 24,444 | 21,343 | 24,444 | 22,487 | ||||||||||||
Less: | ||||||||||||||||
Intangible assets | (7,835 | ) | (7,809 | ) | (7,835 | ) | (7,846 | ) | ||||||||
Minority interests | (512 | ) | (508 | ) | (512 | ) | (508 | ) | ||||||||
Other equity instruments | (939 | ) | (939 | ) | (939 | ) | (939 | ) | ||||||||
Total net tangible assets | 15,158 | 12,087 | 15,158 | 13,194 | ||||||||||||
No of shares at end of period (M) | 1,301 | 1,283 | 1,301 | 1,290 | ||||||||||||
Net tangible assets (NTA) per share ($) | 11.65 | 9.42 | 11. 65 | 10.23 | ||||||||||||
ACE ratio | ||||||||||||||||
Tier One capital | 17,512 | 16,354 | 17,512 | 16,553 | ||||||||||||
Add: | ||||||||||||||||
Deferred income tax | 37 | — | 37 | 39 | ||||||||||||
Equity investments in other companies | 700 | — | 700 | 820 | ||||||||||||
Deduct: | ||||||||||||||||
Eligible loan capital | (245 | ) | (281 | ) | (245 | ) | (263 | ) | ||||||||
Other hybrid equity instruments | (3,474 | ) | (3,659 | ) | (3,474 | ) | (3,522 | ) | ||||||||
Minority Interest (net of minority interest component deducted from Tier One capital) | (512 | ) | (508 | ) | (512 | ) | (508 | ) | ||||||||
Investment in non-consolidated subsidiaries (net of intangible component deducted from Tier One capital) | (409 | ) | (2,012 | ) | (409 | ) | (283 | ) | ||||||||
Other deductions | (178 | ) | (151 | ) | (178 | ) | (166 | ) | ||||||||
Impact upon adoption of AIFRS | (1,641 | ) | — | (1,641 | ) | (1,641 | ) | |||||||||
Total Adjusted Common Equity | 11,790 | 9,743 | 11,790 | 11,029 | ||||||||||||
Risk weighted assets used for ACE ratio | 246,047 | 216,438 | 246,047 | 234,569 | ||||||||||||
ACE ratio (%) | 4.79 | 4.50 | 4. 79 | 4.70 | ||||||||||||
64 Commonwealth Bank of Australia
Table of Contents
Appendices
21. Summary
Full Year Ended | Half Year Ended | |||||||||||||||||||||||||||||||
Jun 07 vs | Jun 07 vs | |||||||||||||||||||||||||||||||
Total | Page | 30/06/07 | 30/06/06 | Jun 06 % | 30/06/07 | 31/12/06 | Dec 06 % | |||||||||||||||||||||||||
Net profit after tax – underlying | $ | M | 3 | 4,508 | 3,842 | 17 | 2,298 | 2,210 | 4 | |||||||||||||||||||||||
Net profit after tax – cash basis | $ | M | 3 | 4,604 | 4,053 | 14 | 2,333 | 2,271 | 3 | |||||||||||||||||||||||
Defined benefit superannuation plan income/(expense) – after tax | $ | M | 3 | 5 | (25 | ) | large | 1 | 4 | (75 | ) | |||||||||||||||||||||
Treasury shares valuation adjustment – after tax | $ | M | 3 | (75 | ) | (100 | ) | 25 | (37 | ) | (38 | ) | 3 | |||||||||||||||||||
One-off AIFRS mismatches | $ | M | 3 | (64 | ) | — | — | (18 | ) | (46 | ) | 61 | ||||||||||||||||||||
Net profit after tax – statutory | $ | M | 3 | 4,470 | 3,928 | 14 | 2,279 | 2,191 | 4 | |||||||||||||||||||||||
Earnings per share – cash basis – basic | cents | 3 | 353.0 | 315.9 | 12 | 178.3 | 174.7 | 2 | ||||||||||||||||||||||||
Dividends per share | cents | 3 | 256 | 224 | 14 | 149 | 107 | 39 | ||||||||||||||||||||||||
Dividend pay-out ratio – cash basis (adjusted for sale of Hong Kong Insurance Business) | % | 3 | 73.0 | 73.7 | (70)bpts | 84.1 | 61.5 | large | ||||||||||||||||||||||||
Tier One capital | % | 47 | 7.14 | 7.56 | (42)bpts | 7.14 | 7.06 | 8bpts | ||||||||||||||||||||||||
Total capital | % | 47 | 9.76 | 9.66 | 10bpts | 9.76 | 9.78 | (2)bpts | ||||||||||||||||||||||||
Adjusted common equity | % | 47 | 4.79 | 4.50 | 29bpts | 4.79 | 4.70 | 9bpts | ||||||||||||||||||||||||
Number of full time equivalent staff | No. | — | 37,873 | 36,664 | 3 | 37,873 | 37,216 | 2 | ||||||||||||||||||||||||
Return on equity – cash | % | 3 | 22.1 | 21.3 | 80bpts | 22.0 | 22.3 | (30)bpts | ||||||||||||||||||||||||
Return on equity – underlying | % | 63 | 21.6 | 20.2 | 140bpts | 21.6 | 21.7 | (10)bpts | ||||||||||||||||||||||||
Weighted average number of shares – statutory | M | 3 | 1,281 | 1,275 | — | 1,286 | 1,276 | 1 | ||||||||||||||||||||||||
Net tangible assets per share | $ | 64 | 11.65 | 9.42 | 24 | 11.65 | 10.23 | 14 | ||||||||||||||||||||||||
Banking | ||||||||||||||||||||||||||||||||
Net profit after tax – underlying | $ | M | 7 | 3,763 | 3,227 | 17 | 1,896 | 1,867 | 2 | |||||||||||||||||||||||
Net profit after tax – cash basis | $ | M | 7 | 3,763 | 3,227 | 17 | 1,896 | 1,867 | 2 | |||||||||||||||||||||||
Net Interest Income | $ | M | 7 | 7,036 | 6,514 | 8 | 3,551 | 3,485 | 2 | |||||||||||||||||||||||
Net Interest Margin | % | 7 | 2.19 | 2.34 | (15)bpts | 2.16 | 2.22 | (6)bpts | ||||||||||||||||||||||||
Other banking income | $ | M | 7 | 3,432 | 3,036 | 13 | 1,754 | 1,678 | 5 | |||||||||||||||||||||||
Other banking income/total banking income | % | — | 32.8 | 31.8 | 3 | 33.1 | 32.5 | 2 | ||||||||||||||||||||||||
Expense to income ratio | % | 7 | 45.8 | 47.7 | 4 | 46.1 | 45.6 | (1 | ) | |||||||||||||||||||||||
Average interest earning assets | $ | M | 4 | 316,048 | 274,798 | 15 | 325,380 | 306,868 | 6 | |||||||||||||||||||||||
Average interest earning liabilities | $ | M | 4 | 294,792 | 255,100 | 16 | 303,171 | 286,548 | 6 | |||||||||||||||||||||||
Loan impairment expense | $ | M | 7 | 434 | 398 | (9 | ) | 239 | 195 | (23 | ) | |||||||||||||||||||||
Loan impairment expense to average risk-weighted assets (annualised) | % | 9 | 0.19 | 0.20 | 1bpt | 0.20 | 0.17 | (3)bpts | ||||||||||||||||||||||||
Total provisions for impairment losses to gross impaired assets | % | 40 | 298.3 | 380.7 | — | 298.3 | 363.9 | — | ||||||||||||||||||||||||
Individually assessed provisions for impairment to gross impaired assets | % | 40 | 23.8 | 24.5 | (70)bpts | 23.8 | 23.4 | 40bpts | ||||||||||||||||||||||||
Risk weighted assets | $ | M | 49 | 245,347 | 216,438 | 13 | 245,347 | 234,569 | 5 | |||||||||||||||||||||||
Funds Management | ||||||||||||||||||||||||||||||||
Net profit after tax – underlying | $ | M | 17 | 492 | 400 | 23 | 260 | 232 | 12 | |||||||||||||||||||||||
Net profit after tax – cash basis | $ | M | 17 | 490 | 410 | 20 | 255 | 235 | 9 | |||||||||||||||||||||||
Shareholder investment returns | $ | M | 17 | 14 | 14 | — | 10 | 4 | large | |||||||||||||||||||||||
Average funds under administration | $ | M | 17 | 164,404 | 139,082 | 18 | 171,264 | 158,010 | 8 | |||||||||||||||||||||||
Net inflows | $ | M | 17 | 1,763 | 10,830 | (84 | ) | (313 | ) | 2,076 | large | |||||||||||||||||||||
Operating income to average funds under administration | % | 17 | 1.15 | 1.12 | 3bpts | 1.16 | 1.13 | 3bpts | ||||||||||||||||||||||||
Expenses to average funds under administration | % | 17 | 0.71 | 0.71 | — | 0.72 | 0.71 | (1 | ) | |||||||||||||||||||||||
Insurance | ||||||||||||||||||||||||||||||||
Net profit after tax – underlying | $ | M | 21 | 253 | 215 | 18 | 142 | 111 | 28 | |||||||||||||||||||||||
Net profit after tax – cash basis | $ | M | 21 | 351 | 416 | (16 | ) | 182 | 169 | 8 | ||||||||||||||||||||||
Shareholder investment returns | $ | M | 21 | 135 | 232 | (42 | ) | 54 | 81 | (33 | ) | |||||||||||||||||||||
Inforce premiums | $ | M | 22 | 1,400 | 1,156 | 21 | 1,400 | 1,340 | 4 | |||||||||||||||||||||||
Total expenses to Average Inforce premiums | % | 21 | 36.3 | 38.6 | 6 | 34.7 | 36.2 | 4 | ||||||||||||||||||||||||
Profit Announcement 65
Table of Contents
Appendices
22. Foreign Exchange Rates
Exchange Rates Utilised | ||||||||||||||||
As At | 30/06/07 | 31/12/06 | 30/06/06 | |||||||||||||
AUD 1. 00 = | USD | 0.8497 | 0.7913 | 0.7428 | ||||||||||||
GBP | 0.4241 | 0.4027 | 0.4053 | |||||||||||||
JPY | 104.889 | 94.024 | 85.276 | |||||||||||||
NZD | 1.102 | 1.121 | 1.214 | |||||||||||||
HKD | 6.6426 | 6.151 | 5.770 | |||||||||||||
EUR | 0.6319 | 0.6007 | 0.5848 | |||||||||||||
66 Commonwealth Bank of Australia
Table of Contents
Appendices
23. Definitions
Term | Description | |
Banking | Banking operations includes retail; business, corporate, institutional and treasury; Asia Pacific banking and centre support functions. Australian Retail banking operations include banking services which were distributed through the Business and Retail distribution divisions. Business, Corporate and Institutional banking includes banking services which were distributed to all business customers through the Premium Business Services division and the small business customers which were serviced through the Premium and Retail divisions and funding operations. Asia Pacific banking includes offshore banking subsidiaries, primarily ASB Bank operations in New Zealand. | |
Dividend Payout Ratio | Dividends paid on ordinary shares divided by earnings (earnings are net of dividends on other equity instruments). | |
DRP | Dividend reinvestment plan. | |
DRP Participation | The percentage of total issued capital participating in the dividend reinvestment plan. | |
Earnings Per Share | Calculated in accordance with the revised AASB 133: Earnings per Share. | |
Expense to Income Ratio | Represents operating expenses as a percentage of total operating revenue. | |
Funds Management | Funds management business includes funds management within the Wealth Management division and International Financial Services division. | |
Insurance | Insurance business includes the life risk business within the Wealth Management division and the International Financial Services division and general insurance financial results. The insurance segment as reported on page 21 includes the operating performance of the Hong Kong Insurance Business up to the effective date of sale (18 October 2005). | |
Net Profit after Tax (“Cash Basis”) | Represents profit after tax and minority interests, before defined benefit superannuation plan income/expense, treasury shares valuation adjustment and one-off AIFRS mismatches. | |
Net Profit after Tax (“Statutory Basis”) | Represents profit after tax, minority interests, defined benefit superannuation plan income/expense, treasury shares valuation adjustment and one-off AIFRS mismatches. This is equivalent to the statutory item “Net Profit attributable to Equity holders of the Group”. | |
Net Profit after Tax (“Underlying Basis”) | Represents net profit after tax (“cash basis”) excluding shareholder investment returns and the profit on sale of the Hong Kong Insurance Business. | |
Net Tangible Assets per Share | Net assets excluding intangible assets, minority interests, preference shares and other equity instruments divided by ordinary shares on issue at the end of the period. | |
Overseas | “Overseas” represents amounts booked in branches and controlled entities outside Australia. | |
Return on Average Shareholders’ Equity | Based on net profit after tax and minority interests less other equity instrument distributions applied to average shareholders’ equity, excluding minority interests and other equity instruments. | |
Return on Average Shareholders’ Equity - Cash Basis | As per the return on average shareholder equity, excluding the effect of Defined benefit superannuation plan interest expense, treasury shares valuation adjustment and one-off AIFRS mismatches. | |
Staff Numbers | Staff numbers include all permanent full time staff, part time staff equivalents and external contractors employed by 3rd party agencies. | |
Weighted Average Number of Shares (“Statutory Basic”) | Includes an adjustment to exclude “Treasury Shares” related to investments in the Bank’s shares held by both the life insurance statutory funds and by the employee share scheme trust. | |
Weighted Average Number of Shares (“Cash Basic”) | Includes an adjustment to deduct from ordinary shares only those “Treasury Shares” related to the investment in the Bank’s shares held by the employee share scheme trust. |
Profit Announcement 67
Table of Contents
Appendices
24. Market Share Definitions
Banking
Australian Retail | ||
Home Loans | Total Housing Loans(APRA) – MISA (Pre Sep 04) + Securitised Assets (APRA) + Homepath. | |
Total Housing Loans (incl securitisations) (from RBA which includes NBFI’s unlike APRA).(1) | ||
Credit Cards | CBA Total Credit Card Lending (APRA). | |
Total Credit Cards with Interest Free + Total Credit Cards without Interest Free (from RBA which includes NBFI’s unlike APRA).(1) | ||
Retail Deposits | CBA Current Deposits + Term (excl CD’s) + Other (All as reported to RBA) | |
Total RBA: Current Deposits with banks + Term (excl CD’s) + Other with banks.(from RBA monthly bulletin statistics)(1) | ||
Household Deposits | CBA Household Deposits (as reported to APRA) — MISA (Pre Sep 04) | |
Total Bank Household Deposits (from APRA monthly banking statistics) | ||
APRA Other Household Lending | CBA Term Personal Lending + Margin Lending net balances + Personal Leasing + Revolving credit | |
Total Market Term Personal Lending + Margin Lending + Personal Leasing + Revolving credit from APRA | ||
Business | ||
Business Lending (RBA) | CBA business lending and credit (specific ‘business lending’ categories in lodged APRA returns — 320.0, 320.1 and 320.4) | |
Total of business lending and credit to the private non-financial sector by all financial intermediaries (sourced from RBA table Lending & Credit Aggregates which is in turn sourced from specific ‘business lending’ categories in lodged APRA returns — 320.0, 320.1 and 320.4) (includes bills on issue and securitised business loans).(1) | ||
Business Lending (APRA) | Loans and advances to residents that are recorded on the domestic books of CBA within the non-financial corporations sector, where this sector comprises private trading corporations, private unincorporated businesses and commonwealth, state, territory and local government non-financial corporations (as per lending balances submitted to APRA in ARF 320.0) | |
Total loans and advances to the non-financial corporations sector for all licensed banks that submit to APRA | ||
Business Deposits (APRA) | Total transaction and non-transaction account deposit balances recorded on the domestic books of CBA from residents within the non-financial corporations sector, where this sector comprises private trading corporations, private unincorporated businesses and commonwealth, state, territory and local government non-financial corporations (as per deposit balances submitted to APRA in ARF 320.0) | |
Total transaction and non-transaction deposit balances from the non-financial corporations sector for all licensed banks that submit to APRA | ||
Asset Finance | Total end of month asset finance net receivables excluding repossessed assets, non-accrual receivables, progressive fundings and the consumer loan balance | |
Total market as determined by Australian Equipment Lessors Association (AELA) | ||
Equities Trading (CommSec) | 12 months rolling average of total value of CommSec equities trades | |
12 months rolling average of total value of equities market trades as measured by ASX SEATS | ||
Asia Pacific | ||
NZ Lending | All retail, business, commercial, corporate, and rural deposits on ASB Balance Sheet | |
Total retail, business, commercial, corporate, and rural deposits in New Zealand (from NZ Reserve Bank) | ||
NZ Deposits | All retail, business, commercial, corporate, and rural loans on ASB Balance Sheet | |
Total retail, business, commercial, corporate, and rural deposits in New Zealand (from NZ Reserve Bank) | ||
Funds Management | ||
Retail Australian | Total funds in CBA Wealth Management retail investment products (including WM products badged by other parties) | |
Total funds in retail investment products market (from Plan for Life) | ||
FirstChoice Platform | Total funds in FirstChoice platform | |
Total funds in platform/masterfund market (from Plan for life) | ||
New Zealand retail | Total ASB + Sovereign + JMNZ Net Retail Funds under Management | |
Total Market net Retail Funds under Management (from Fund Source Research Limited) |
68 Commonwealth Bank of Australia
Table of Contents
24. Market Share Definitions (continued)
Insurance
Australia (Total Risk) | Total risk inforce premium of all CBA Group Australian life insurance companies | |
Total risk inforce premium for all Australian life insurance companies (from Plan for Life) | ||
Australia (Individual Risk) | (Individual lump sum + individual risk income) inforce premium of all CBA Group Australian life insurance companies | |
Individual risk inforce premium for all Australian life insurance companies (from Plan for Life) | ||
New Zealand | Total Sovereign (inforce annual premium income + new business – exits – other) | |
Total inforce premium for New Zealand (from ISI statistics) |
(1) | The RBA restates the total of all financial intermediaries retrospectively when required. This may be due to a change in definition, the inclusion of a new participant or correction of errors in prior returns. CBA restates its market share where the RBA total has changed based on current balances less implied percentage growth rates now reported by the RBA for previous months. |
Profit Announcement 69