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JP Morgan Investment Conference
Peter Polson
Group Executive, Investment & Insurance Services
Commonwealth Bank of Australia
1 October 2002
The material that follows is a presentation of general
background information about the Bank’s activities
current at the date of the presentations, 1 October
2002. It is information given in summary form and
does not purport to be complete. It is not intended to
be relied upon as advice to investors or potential
investors and does not take into account the
investment objectives, financial situation or needs of
any particular investor. These should be considered,
with or without professional advice when deciding if
an investment is appropriate.
Disclaimer
Agenda
Overview of Commonwealth Bank
Commonwealth Bank’s Wealth Management Model
Wealth Management Industry Trends
Commonwealth Bank’s Strategic Response
Overview of Commonwealth Bank
Commonwealth Bank: An Overview
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December 2001 - the Bank’s
restructure programme
“Organising for the Future”
announced.
December 1990 - the Bank
was converted into a public
company with share capital.
70% shareholding retained
by the Commonwealth
Government.
1991 - The Bank acquired
State Bank Victoria $1.6
billion. October 1993 - the
Commonwealth Government
shareholding was reduced to
50.4% and in 1996 the Bank
was fully privatised.
June 2000 - the Bank
acquired Colonial Group
Limited $9.1 billion.
Share price performance last 10 years
February/March 1997 - Introduction of
- “NetBank” internet banking and
- “CommSec” discount broking
May 2002 - “FirstChoice”
masterfund launched
Recent Result Highlights
Solid Earnings Growth
Reported Profit up 10.7% to $2,655m
Cash Profit up 10.6% to $2,501m
Cash EPS up 10.1% to $1.97
Costs steady year on year
Improved productivity and cost to income ratio
High dividend payout ratio relative to peers
Capital position remains strong
Credit Quality and Provisioning remains strong
Net Profit by Segment*
875 918 9751092
156164
121
97
7871 96
120
0
200
400
600
800
1,000
1,200
1,400
Dec 2000 Jun 2001 Dec 2001 Jun-02
Banking Life & Super Funds M anagement
* Net Profit after tax and outside equity interest - cash basis.
Excludes appraisal value uplift and goodwill amortisation.
1,109 1,153
$m
illi
on
1,1921,309
Full Year = 2,262 Full Year = 2,501
17%
Segmentation: Aligned Domestic
Structure with Customer Needs
Retail BankingServices
PremiumFinancialServices
Investment &InsuranceServices
Institutional &BusinessServices
CustomerGroup
Personalbankingcustomers,Small businessbankingcustomers
Premium clientsincludingprofessionalsand business
Agents, Brokers,Financial Advisers
Institutional,Corporate,Commercialbusinesscustomers
Channels Branch, Ezy-Banking, ATM,EFTPOS,Phone, On-line,Mortgagebrokers
Relationshipmanagers,Premiuminvestmentcentres, phone,on-line.
Agents, Branches,Brokers, FinancialAdvisers, Premiuminvestment centres,DirectDealerships,Institutional Clients
Relationshipmanagers,Business centres
Support Finance, Risk Management, Human Resources, Strategy, Technology, Legal, Secretariat
Commonwealth Bank’s Wealth
Management Model
Investments and Insurance within
Commonwealth Bank
Business
Investment Products
• Colonial First State Australia
• Colonial First State Property
• First State Asia
• First State UK
Insurance
• CommInsure
Financial Planning & Advice
• Financial Wisdom
• Commonwealth Financial
Solutions
• Bank Branch Network
Country
Australia/NZ
Australia/NZ
Asia
UK, Europe, USA
Australia
Australia
Australia
Australia
Activity
• Asset management & Masterfunds
• Direct property asset management
• Asset management
• Asset management
• General & life insurance
• Third party distribution
• Third party distribution
• Distribution of investment/insurance
products
Scale: Funds Under Management
$103bn
29 28
2731 33 33
1723
24 26 25
2722
181921
0
20
40
60
80
100
120
Dec 2000 Jun 2001 Dec 2001 Jun 2002
$b
illio
ns
Australian Retail Funds Australian Wholesale Funds
International Funds Internal Life Assets
Average FUM
Retail Australian Market Share -
Investment Products
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Market Share and Rank
by Product Category
Market Share and Rank
by Asset Class
2 22
2 1 2
2
4
1 1
2
1
Superannuation Allocated Pension
CMT* Unit Trusts (ex Cash)
Total Retail Total Wholesale
Cash Australian Shares
Overseas Shares Diversified
Income Property
*CMT = Cash Management Trust
Source: Plan for Life June 2002
Brand - Colonial First State
0%
5%
10%
15%
20%
25%
7.60
7.70
7.80
7.90
8.00
8.10
8.20
8.30
0%
20%
40%
60%
80%
100%
32%
34%
36%
38%
40%
42%
44%
AMP
AMP
AMP
BTColonial
or
ColonialFirstState
ColonialFirst
State
AXA
Colonial
FirstState ING
Consumer Brand Awareness - Unaided
3
Consumer Brand Awareness - Total
Consumer Purchase Intention
2
2
Adviser Brand Awareness - OverallOpinion of Organisation
ColonialFirst
StatePerpetual
1
Navigator
Source: Consumer Charts - Newspoll June 2002; Adviser Chart - ASSIRT Service Level Survey 2001
CommInsure - Overview
Life Insurance:
•Market Inforce $3.4bn
•CommInsure rank: 2
Annuities:
•Market FUM $10.7bn
•CommInsure Rank: 3
House & Contents Insurance:
•Market GWP* $2.5bn
•CommInsure Rank: 6
*GWP: gross written premium
Source: Plan for Life, APRA adjusted
14.40%
5.13
%
12.97%
Financial
Planning &
Advice Services
Investment
Products
Insurance
Products
Branch
Network
Owned Practice
Based Planning
Financial Planning & Advice Services -
Overview
Key Metrics
• Practice Based Planners- Financial Wisdom (263)- C’wlth Financial Solutions (142)
• Bank Branch Planners (625)
Wealth Management
Industry Trends
Australian Market Prospects -
Product Segment Growth
0
50
100
150
200
250
300
350
Self M
anage
d Fun
ds
Per
sona
l Sup
er
Unit
Trusts
Pub
lic S
ector F
unds
Whol
esale
Sav
ings
Mar
ket
Corp
orat
e Sup
er M
aste
r Tru
sts
Indu
stry F
unds
Corp
orat
e Sta
ndalon
e Fun
ds
Allo
cate
d Pen
sion
s
Ann
uitie
s
Insu
ranc
e Bon
ds
$ B
illi
on
Value at 30 June 2001
Projected Value at 30 June 2011
Projected Size of Various Product Segments
Source: Rice Kachor projections March 2002, include 5% post fee returns, except for DIY (7%)
Growth in Master Trusts
Master Trust Market as a Percentage of Total Retail
(ex cash)
0%
10%
20%
30%
40%
50%
60%
70%
80%
Se
p-9
4
Ma
r-9
5
Se
p-9
5
Ma
r-9
6
Se
p-9
6
Ma
r-9
7
Se
p-9
7
Ma
r-9
8
Se
p-9
8
Ma
r-9
9
Se
p-9
9
Ma
r-0
0
Se
p-0
0
Ma
r-0
1
Se
p-0
1
Ma
r-0
2
FUM gross salesSource: Plan for Life June 2002
Australian Market Prospects:
Other Trends
Top 5: Trends in Share of Retail FUM
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Jun-9
1
Jun-9
2
Jun-9
3
Jun-9
4
Jun-9
5
Jun-9
6
Jun-9
7
Jun-9
8
Jun-9
9
Jun-0
0
Jun-0
1
Jun-0
2
CBA
NABWBCAMPANZ
Source: Plan for Life June 2002
Commonwealth Bank Wealth Management:
Our Competitive Advantage
Distribution - internal and external
Brand
Innovation
Flexibility to vary margins across value chain
Efficient administrator with strong service culture
Broad manufacturer across broad product base
Scale
Commonwealth Bank’s
Strategic Response
Investment Products - Key Strategies
Realise benefits of integration
Establish Colonial First State as key player in:
mastertrusts
corporate superannuation
Leverage internal distribution opportunities
Increase reputation as manager of international shares
Strengthen retail brand
Grow alternate asset classes
Investment Products - Key Strategies
Global Business
Expand global investment manufacturing capabilities
Gather assets in the UK and Europe
UK retail: IFAs, fund supermarkets, life companies
Europe: sell product via European financial services companies
Wholesale/Institutional
Explore distribution opportunities in Asia
Growth through Retail Masterfunds
FirstChoice Corporate Superannuation
0
50
100
150
200
250
300
350
400
450
500
550
600
31-May 30-Jun 31-Jul 31-Aug
Cummulative totals for week ending
Millio
ns
CBA Branch + CommSec CBA Third Party Other
FirstChoice: Retail Net Contribution
by Channel
Period covered: 13 May 2002 - 31 August 2002
Insurance - Key Strategies
Insurance environment has been restructured to increase
focus. Key actions going forward are:
- product rationalisation
- migrate to modern systems architecture
- actively promote the CommInsure brand
- customer service and pricing improvements
- improve sales through both internal distribution channels
and IFAs
- strong focus on capital management
Financial Planning & Advice Services -
Key Strategies
Review positioning of non-proprietary dealerships
Confirm business model for proprietary dealerships
- extent of Group manufactured product sold
- role of technology (Avanteos)
- appropriate performance metrics
Assess operating model interfacing with bank distribution
Summary
Revenue Generation Strategies
• Develop innovative new products
• Grow the FirstChoice Masterfund
offering
• Expand international asset
management capability
• Build strong links between
manufacturing and distribution
businesses
• Improve service and pricing for
insurance business
Efficiency-Based Strategies
• Remove investment product overlap to
offer an integrated product suite
• Migrate to a single back office platform
• Eliminate duplicated functions
The structure of the IIS Group reflects a strategy
of growing value by being the manufacturer and distributor
of high quality wealth management products
Conclusion
Commonwealth Bank’s wealth management strategies
are an integral part of the Group’s vision:
To be chosen and respected
as an excellent provider
of financial services
Questions
JP Morgan Investment Conference
Peter Polson
Group Executive, Investment & Insurance Services
Commonwealth Bank of Australia
1 October 2002