Banks. Commonwealth Bank of Australia. Australia Credit Analysis. Rating Rationale. Key Rating Drivers. Profile

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1 Australia Credit Analysis Ratings Foreign Currency Long Term IDR AA Short Term IDR F1+ Individual Rating A/B Support Rating 1 Support Rating Floor A Sovereign Risk Foreign Currency Long Term IDR Local Currency Long Term IDR Outlooks Foreign Currency Long Term IDR Sovereign Foreign Currency Long Term IDR Sovereign Local Currency Long Term IDR Financial Data AA+ AAA Stable Stable Stable 31 Dec Jun 09 Total assets (USDm) 560, ,369 Total assets (AUDm) 625, ,372 Total equity (AUDm) 32,644 30,503 Operating profit 4,425 5,466 (AUDm) Published net income 2,923 4,753 (AUDm) Comprehensive 2,459 3,984 income (AUDm) Operating ROAA (%) Operating ROAE (%) Internal capital generation (%) Eligible capital/ weighted risks (%) Tier 1 ratio (%) Analysts Tim Roche tim.roche@fitchratings.com John Miles john.miles@fitchratings.com Related Research Applicable Criteria Global Financial Institutions Rating Criteria (December 2009) Insurance Rating Methodology (December 2009) Other Research Fitch Says Australian Banks Largely Unaffected By Guarantee Removal (February 2010) Rating Rationale The ratings for (CBA) reflect the group s business diversity, robust risk management framework, adequate liquidity and capitalisation, and strong market position. CBA s underlying profitability has remained robust through the global financial crisis despite a significant deterioration in asset quality which affected performance in the financial year ended 30 June 2009 (FY09) and the half year ended 31 December 2009 (H110). Impairment charges remain elevated relative to historical levels, although the H110 charge of AUD1.4bn was down 14% relative to H109. This equates to 24% of H110 pre impairment operating profit (H109: 39%). Fitch Ratings expects the trend of declining impairment charges to continue through 2010, although they are likely to remain high by historic standards. While asset quality has deteriorated, it still compares favourably with domestic peers and internationally: at 31 December 2009, 0.99% of CBA s gross loans were classified as impaired (FYE08: 0.19%). This deterioration has largely stemmed from the commercial loan portfolio initially due to a small number of large corporate exposures followed by a more broad deterioration across the portfolio. Consumer loans continue to perform well, benefiting from only a modest uptick in unemployment in Australia through Fitch views the Australian banking system s reliance on wholesale funding as a key risk. CBA has the lowest reliance on wholesale funding among its major Australian banks peers, with 60% of its on balance sheet funding in the form of deposits. The wholesale funding portfolio is well diversified by currency, maturity, product and investor to reduce concentration risks. Fitch does not expect the removal of the Australian government guarantee from 31 to have a material impact on CBA. CBA s capital position appears adequate: at 31 December 2009, its Tier 1 capital ratio was 9.1%, while its total capital ratio was 11.6%. Support CBA is one of Australia s four major banks, which together accounted for about 76% of system assets at FYE09. Fitch believes it is a systemically important bank that the relevant authorities would be highly likely to support if needed. Key Rating Drivers Given its reliance on offshore wholesale funding markets, a protracted dislocation in these markets may place negative pressure on CBA s ratings. In addition, CBA s ratings may be negatively affected if the economic recovery stalled, leading to significant asset quality deterioration. Profile CBA is Australia s largest domestic bank by total assets. The group also includes a sizeable wealth management operation. It also has a moderate exposure to the New Zealand through banking and wealth subsidiaries as well as a number of small Asian operations. It is a publicly listed company and its shares are widely held. 9

2 Profile History Established by an Act of Parliament in 1911, CBA is headquartered in Sydney, Australia. CBA is the second largest of Australia s four major banking groups by total assets, although by domestic (Australian) assets it is the largest; the other three major banks are Australia & New Zealand Banking Group (ANZ; AA / Stable/ F1+ ), National Australia Bank (NAB; AA /Stable/ F1+ ) and Westpac Banking Corporation (WBC; AA /Stable/ F1+ ). In addition, CBA is Australia s largest fund manager. On 19 December 2008, CBA acquired Bank of Western Australia (BankWest; AA / Stable/ F1+ ) and St. Andrew s Australia (a small wealth management business) from HBOS plc ( AA /Stable/ F1+ ), which further enhanced CBA s domestic strength. CBA is now one of two dominant banking groups within the consumer segment in Australia (the other being WBC); according to data from the Australian Prudential Regulation Authority (APRA), at 31 January 2010 CBA (including BankWest) accounted for 30% of all Australian housing loans originated by deposittaking institutions, while its share of Australian household deposits was 31%. Table 1: Australian Market Share as at 31 January 2010 (% of banking system) Housing loans Household deposits CBA (incl. BankWest) WBC (incl. St.George Bank Limited) NAB ANZ Others Total Source: APRA In addition to its Australian operations, which accounted for 82% of total revenue in FY09, CBA owns ASB Bank Limited (ASB; AA /Stable/ F1+ ), one of the four major New Zealand banks with assets of NZD65.2bn at 30 June 2009, as well as stakes in a number of banks in the Asia Pacific region. Structure Structurally, CBA classifies its customer facing operations as follows. Retail banking services provide banking services to the group s core retail customer base, including small businesses. Premium business services provide banking and wealth management services to premium clients (personal, business, corporate and institutional) and performs investment banking activities. The group s online broking service, CommSec, is included in this division. Wealth management brings together CBA s fund management platform, master funds, superannuation, and insurance operations. Services are distributed through bank branches and a network of independent financial advisors. International financial services provide banking and insurance products to corporate, business and retail customers in New Zealand (including ASB) and Asia Pacific. The customer facing businesses are supported by four back office divisions: financial services and risk management, enterprise IT, human resources, and marketing and communications. 2

3 Table 2: Performance Summary CBA ( AA ) ANZ ( AA ) NAB ( AA ) WBC a ( AA ) 31 Dec 09 b 30 Jun Sep Sep Sep Sep Sep Sep 08 Financial profile (AUDm) Net interest income 6,160 10,258 9,775 7,804 11,802 10,780 11,565 7,160 Non interest income 3,545 5,358 3,322 3,591 4,415 3,054 4,844 3,908 Impairment charge 1,383 3,048 3,005 1,948 3,815 2,703 3, Operating profit 4,425 5,466 4,462 4,293 4,703 3,983 6,000 4,682 Net income after tax 2,923 4,696 2,912 3,281 2,316 4,210 3,415 3,855 Equity 32,644 30,503 31,558 25,681 32,921 28,135 36,571 19,471 Assets 625, , , , , , , ,676 Funds under management 149, ,204 40,719 41,890 85,000 83,600 44,500 45,000 Performance ratios (%) c Operating profit/average total assets Operating profit/average equity Net interest margin Non interest income/gross revenue Costs/income Costs/average assets a 30 September 2008 figures for WBC do not include St.George Bank Limited b Half year numbers ratios annualised where appropriate c Ratios according to the attached Fitch spreadsheet Source: Bank financial reports and Fitch Corporate Governance CBA is a publicly listed company and its shares are widely held. At FYE09, the group s board of directors consisted of 11 members, 10 of whom are classified as independent. Performance The figures in this report and the attached spreadsheet are based on Fitch s calculations and may differ from CBA s published figures. CBA s operating profit grew by 76% to AUD4.4bn in H110 relative to H109, largely due to an improved operating environment and the benefit of a full period of contribution from BankWest. As a result, CBA s operating ROE was a high (relative to peers) 27.8%. Underlying performance was also stronger pre impairment operating profit grew by 41% reflecting an improved net interest margin (NIM), solid volume growth and a rebound in investment returns from the group s wealth management operations. Chart 1: Net Interest Margins (%) FY07 FY08 FY09 H110 CBA ANZ NAB WBC Source: Banks' financial reports and Fitch Net Interest Income CBA s net interest income increased by 35% yoy during H110, in part benefiting from the acquisition of BankWest but also due to underlying interest earning asset growth excluding BankWest of 9% and a slight increase in the group s NIM to 2.11%. 3

4 Growth in NIM was not isolated to CBA (please see Chart 1) and reflects loan book repricing undertaken by Australian banks to reflect greater risk premiums and allow for increased funding costs. Wholesale funding costs remain high relative to precrisis levels and competition for deposits remains fierce, placing downward pressure on NIMs. Movement in Australian bank NIMs will be largely reliant on the banks ability to further reprice their loan portfolios to reflect higher weighted average funding costs. Non Interest Income CBA s non interest income consists largely of net fees and commissions from lending activities, wealth management income and trading revenue. As with the other Australian major banks, CBA s trading activities are conducted to facilitate client activities proprietary trading is only a small part of the overall portfolio. Non interest income grew by 30% yoy in H110, driven by a 2.5x increase in funds management income reflecting generally stronger investment markets. Fitch views the earnings diversification provided by the wealth management operations of the major Australian banks as a positive, particularly in light of Australia s compulsory pension regime. A 10% increase in net fees and commissions also contributed, the result of solid loan growth of 8%. Non Interest Expenses CBA s non interest expenses increased 23% in H110, with the BankWest acquisition in H209, as well as higher staff costs and occupancy expenses being significant contributors. Nevertheless, strong revenue growth meant CBA s cost/income ratio declined to 40.2% from 43.4% during the year. Expenses are likely to grow over the rest of FY10, when CBA will have the full year impact of the BankWest acquisition for the first time. The cost/income ratio should not alter materially though, as revenue will also rise. Impairment Charge CBA s impairment charge fell to AUD1.4bn in H110 from AUD1.6bn in H109, reflecting a stabilising economic environment. As a percentage of pre impairment operating profit, the charge fell to 24% (see Chart 2), and consisted of: AUD881m related to provisioning for the deterioration in asset quality in CBA s portfolio; AUD313m related to BankWest s exposures; and a charge of AUD189m to the collective provision to reflect management s view of the likely impact of economic conditions on asset quality. Chart 2: Impairment Charges As a % of pre impairment operating profit (%) 50 FY06 FY07 FY08 FY09 H CBA ANZ NAB WBC Source: Banks' financial reports and Fitch The collective provision totalled AUD3.5bn at end H110, which equated to 1.34% of credit risk weighted assets; this is about average relative to the other Australian major banks. 4

5 Outlook In some ways, FY09 was a year of contrasts for CBA: pre impairment operating profit benefited from improved market of lending in the Australian banking system but the weaker economic environment contributed to much increased impairment charges. This reversed somewhat in H110: underlying profit growth was still strong but impairment charges showed signs of stabilising. Economic conditions appear likely to improve further during H210 in CBA s core markets of Australia and New Zealand, though the recovery still appears fragile. Nonetheless, CBA (along with the other major Australian banks) is well positioned to withstand any second round effects should they occur it has solid preimpairment profit, provision and capital levels which have been bolstered and could absorb a sizeable increase in losses. Risk Management Risk is managed through a broad framework: a board risk committee oversees credit, market and operational risk policy, while one of the functions of the board audit committee is to independently review the risk management framework. At the executive level, two committees are responsible for policy implementation: the executive risk committee and the asset and liability committee. Responsibility for policy implementation resides with the risk functions within the individual businesses. Where required, CBA has initiated processes to align BankWest s risk management framework with that of the group. Credit risk is the largest risk within the group, although insurance and fund management businesses also carry material market and operational risk. Credit Risk CBA manages its credit portfolio in two divisions. The retail division comprises housing loan, credit card and personal loan facilities, some leasing products and most secured commercial lending up to AUD1m. These facilities are statistically managed, with unsecured facilities written off once they are 180 days in arrears. Secured facilities are classified as impaired when an assessment is made that the security does not cover the facility and all outstanding interest and fees. All remaining commercial exposures make up the credit risk rated segment. An internal risk grading system is used to highlight the probability of default (PD), exposure at the time of default and loss given default of each exposure. Where the transaction is complex and/or the issuer is not suited to CBA s statistical models, judgement is used to assign the internal risk grades. The grading system includes PD ratings, which are divided into five broad categories: exceptional (which roughly equate to AAA to AA on Fitch s rating scale), strong ( A+ to BBB ), pass ( BB+ to B ), weak/doubtful ( CCC to C ) and default ( RD or D ). A system of geographic, industry and single name (including related counterparties) limits is in place to reduce the group s concentration risk. Exceptions to the policy limits require board risk committee approval. The bank s large exposure framework is granular, with limits determined by loan grade and tenor. Asset Quality As with the other Australian major banks, CBA s asset quality deteriorated during FY09 (shown in Chart 3), although the pace of deterioration declined during H110. Nevertheless, on international comparisons, CBA s impaired assets remain low; at end H110, 0.99% of gross loans were impaired. Further deterioration could occur during H210, although as long as the economic recovery continues the impaired asset level should begin to stabilise. 5

6 Chart 3: Asset Quality Gross impaired loans/gross loans (%) ANZ CBA NAB WBC H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 Source: Australian banks' financial reports and Fitch Loan Portfolio CBA s primary source of credit risk is its on balance sheet loan portfolio, 87% of which was domiciled in Australia at FYE09 (much of the rest relates to CBA s New Zealand subsidiary, ASB). CBA has a reasonable presence in every Australian state, although the portfolio is weighted towards the eastern states of New South Wales, Victoria and Queensland, which contain the vast majority of Australia s total population. Residential mortgages, which Fitch views as relatively low risk, dominate the loan portfolio, accounting for 64% of on balance sheet gross loans at end H110. While lending criteria in this segment deteriorated somewhat in the run up to the global financial crisis, it remained conservative relative to international peers; over the past months, the criteria have been tightened to reflect the higher risk environment. About 96% of the portfolio is in the form of full documentation prime mortgages, with the remaining 4% in the form of low documentation loans (lowdocs; prime mortgages for which the borrowers self certify their income); CBA (along with the other major Australian banks) did not undertake subprime lending. CBA caps loan/valuation (LTV) ratios at origination at 90% for traditional prime mortgages (the only exception being existing CBA customers deemed to be low risk, in which case the cap is 95%) and 80% for low docs. Lenders mortgage insurance (LMI; covers the bank in the event of losses from a forced sale) is required for mortgages with an LTV ratio greater than 80% at origination (60% for low docs); this is paid for by the customer. CBA s loan portfolio is well seasoned, with an average LTV ratio at original values of 52%; based on current valuations this drops to 42%. In addition, many of CBA s home loan customers have maintained payment levels despite the sharp decline in interest rates through late 2008 and early As a result, 70% of home loan customers are ahead of their scheduled repayment level by an average of seven months. Stress tests undertaken by CBA indicate that even in an extreme scenario (unemployment of 10%, interest rates of 14% and house price declines of 30%), single year losses from the mortgage portfolio should be manageable: 7% of annualised H110 pre impairment operating profit after factoring in LMI, or 19% pre LMI. Of course, such a scenario is indicative of substantial economic stress and the rest of CBA s loan book would likely be under severe distress. Commercial loans accounted for a further 33% of gross loans at end H110. The portfolio is well diversified, with property the largest non bank sector at 7.4% of CBA s total credit exposure (includes off balance sheet commitments). Commercial property was particularly hard hit as a result of the economic downturn; it accounted for 23% of CBA s impaired assets at FYE09. However, actual losses from the portfolio were modest, reflecting generally high security levels and low average LTV ratios (74% and 53% respectively for the portfolio at end H110). 6

7 Although commercial lending is largely responsible for the increase in impaired assets during FY09 and H110, credit quality appears to have held up relatively well; 59% of the group s credit risk rated portfolio was classified as investment grade at end H110. In addition, CBA undertook a number of extensive portfolio reviews during FY09, with very few incorrect classifications identified. The remaining 3% of the portfolio consists of consumer credit such as credit cards and personal loans, most of which is unsecured. Arrears levels and loss rates are typically higher than in the mortgage portfolio; however, given the relatively small size of the portfolio, there would need to be a severe deterioration in asset quality for this to have a significant impact on CBA. Other Credit Risk Other credit risk in CBA s banking operations is relatively low and is derived primarily from the provision of guarantees, securities investments, derivatives and financial market transactions. Credit risk also arises in the group s insurance operations through its investments in securities, loans and from its reliance on reinsurance. Operational Risk Each business manager is responsible for the day to day monitoring and identification of operational risks as well as maintaining appropriate internal controls. A suite of risk mitigating policies is used to support these efforts, as is insurance. CBA s operational risk capital model is granular, combining both expert assessment of individual risk exposures with internal loss data to calculate economic capital and determine potential loss. The model is accredited for use under the advanced measurement approach of Basel II. At end H110, CBA s operational risk charge was AUD18.3bn, or 6.2% of riskweighted assets. Economic capital is allocated to the output of the model based on a 99.95% confidence interval. Market Risk CBA s market risk is governed by two policies: a group market risk policy and a funds management and insurance market risk policy. As noted previously, CBA s trading activity is largely the result of client requirements; proprietary trading is not a significant component. As a result, the group s traded market risk is relatively modest. CBA manages traded market risk through value at risk (VaR), stress testing limits and risk sensitivities measures. VaR is measured using a 97.5% confidence interval and a one day holding period; on this basis the group reported an average VaR of AUD12.1m in H110 (H209: AUD10.3m). Stress testing of trading positions is undertaken on a daily basis to determine the effect of extreme market conditions, with the worst stress test result in H209 equating to trading losses of about 2% of net income for the half. Non traded interest rate risk in the banking book is measured and managed in two ways: by simulating net interest earnings at risk (EaR) over the next 12 months and by employing an economic VaR to capture longer term sensitivity. The average monthly EaR for a 1% parallel shift in the yield curve during H110 was AUD150.3 for Australia and NZD4.7m for New Zealand, while the economic VaR (using a 97.5% confidence interval and 20 day holding period) was AUD58.0m for Australia and NZD0.9m for New Zealand. Non traded foreign exchange risk is hedged, with the exception of CBA s long term investments in its offshore subsidiaries; the group s only significant non traded foreign exchange exposure arises as a result of its capitalisation of ASB. Non traded equity risk which arises as a result of strategic investments and business development activities in CBA s institutional, wealth management and international financial services divisions is also measured using 7

8 VaR (97.5% confidence interval and 20 day holding period); for H110, it totalled AUD139m. CBA s life insurance and fund management businesses also give rise to market risk. In life insurance, it is primarily through the investment of shareholder and policyholder funds. Each class of funds is invested in a different manner to reflect the varying needs of each group. At FYE09, 20% of shareholder funds were invested in growth assets (property and shares) with the rest invested in fixed interest instruments and cash. Changes in market prices for invested shareholder funds flows through the group s income statement. Policyholder funds are invested according to specific mandates and market risk arises from asset/liability mismatch. The mismatch is managed by holding a suitable level of highly liquid assets. In fund management, fee income is based primarily on the level of funds under management which can fluctuate with market movements. Funding, Liquidity and Capital Funding Among the major Australian banks CBA has the largest proportion of retail funding in its funding mix: 60% of total funding at end H110 (includes securitisation but excludes equity). The group has a leading market share in retail deposits in Australia, with almost one third of the market. The remainder of CBA s total funding is sourced from wholesale markets. About 65% of CBA s wholesale funding portfolio is set to mature in FY10 (includes long term funding). Fitch views the Australian banks reliance on wholesale funding, in particular short term wholesale funding sourced from offshore markets, as one of the key risks they face (at end H110, 59% of CBA s wholesale funding was sourced from outside Australia). The banks, including CBA, seek to manage this risk through diversification by currency, geography, maturity and structure to limit concentrations within the portfolio. Fitch does not expect the removal of the government guarantee on wholesale funding on 31 to have a material impact on Australian banks, including CBA; CBA s issuance since FYE09 has largely been unguaranteed (see Fitch Says Australian Banks Largely Unaffected By Guarantee Removal under Related Research on the front page). Liquidity CBA s liquidity and funding policies are approved by the board and agreed with the APRA. Group treasury manages funding and liquidity in accordance with these policies. Larger subsidiaries (such as ASB) are responsible for managing their own liquidity and funding; they may employ their own policies but must also meet group requirements. A number of tools are used to measure and manage liquidity within the group. A liquidity management model, similar to maturity gap analysis, is used to forecast liquidity requirements on a daily basis. Another model implements agreed prudential policies, incorporating both systemic and individual name crisis assumptions. In the wake of the global financial crisis, global regulators have placed greater focus on bank liquidity and capital. APRA has proposed changes to its current liquidity regulation regime that include, among other things: lengthening the time period for the name crisis stress to 20 days from the current five and introducing a new market disruption stress test; clearly defining what constitutes a liquid asset at the moment it is proposed to include only assets that are readily liquefiable in the market regardless of market conditions (APRA suggests sovereign bonds meet this criteria); and 8

9 the introduction of standardised liquidity reporting (previously banks had submitted data in their own internal formats). Depending on APRA s timing, these changes could be fully implemented by end H111. While this should result in a more conservative and consistent approach to liquidity, it does represent a significant change to the current regime, one which would most likely place negative pressure on Australian bank revenue through greater holdings of relatively low margin liquid assets and a lengthened funding maturity profile. Capital The group s regulatory capital ratios improved substantially during H110, reflecting a AUD2bn non innovative hybrid capital raising. At end H110, CBA reported a Tier 1 capital ratio of 9.10% and a total capital ratio of 11.63%, up from 8.07% and 10.42% respectively at FYE09 these ratios are similar to those reported by its Australian major bank peers. 9

10 Income Statement 31 Dec Jun Jun Jun Months Interim 6 Months Interim As % of Year End As % of Year End As % of Year End As % of USDm AUDm Earning AUDm Earning AUDm Earning AUDm Earning Original Original Assets Original Assets Original Assets Original Assets 1. Interest Income on Loans 12, , , , , Other Interest Income , , , , Dividend Income Gross Interest and Dividend Income 13, , , , , Interest Expense on Customer Deposits 5, , , , , Preferred Dividends Paid & Declared n.a. n.a Other Interest Expense 2, , , , , Total Interest Expense 8, , , , , Net Interest Income 5, , , , , Net Gains (Losses) on Trading and Derivatives Net Gains (Losses) on Other Securities Net Gains (Losses) on Assets at FV through Income Statement Net Insurance Income , Net Fees and Commissions 1, , , , , Other Operating Income , , , , Total Non Interest Operating Income 3, , , , , Personnel Expenses 2, , , , , Other Operating Expenses 1, , , , , Total Non Interest Expenses 3, , , , , Equity accounted Profit/ Loss Operating n.a. n.a. n.a. n.a. n.a. 21. Pre Impairment Operating Profit 5, , , , , Loan Impairment Charge 1, , , Securities and Other Credit Impairment Charges n.a. n.a n.a. n.a. 24. Operating Profit 3, , , , , Equity accounted Profit/ Loss Non operating n.a. n.a. n.a. n.a. n.a. 26. Non recurring Income n.a. n.a n.a. n.a. 27. Non recurring Expense n.a. n.a n.a. n.a. 28. Change in Fair Value of Own Debt n.a. n.a. n.a. n.a. n.a. 29. Other Non operating Income and Expenses Pre tax Profit 3, , , , , Tax expense 1, , , , , Profit/Loss from Discontinued Operations n.a. n.a. n.a. n.a. n.a. 33. Net Income 2, , , , , Change in Value of AFS Investments n.a. n.a Revaluation of Fixed Assets n.a. 36. Currency Translation Differences Remaining OCI Gains/(losses) n.a. n.a Fitch Comprehensive Income 2, , , , , Memo: Profit Allocation to Non controlling Interests Memo: Net Income after Allocation to Non controlling Interests 2, , , , , Memo: Dividends Relating to the Period 1, , , , , Exchange rate USD1 = AUD USD1 = AUD USD1 = AUD USD1 = AUD

11 Balance Sheet 31 Dec Jun Jun Jun Months Interim 6 Months Interim As % of Year End As % of Year End As % of Year End As % of USDm AUDm Assets AUDm Assets AUDm Assets AUDm Assets Original Original Original Original Original Original Original Original Original Assets A. Loans 1. Residential Mortgage Loans 278, , , , , Other Mortgage Loans n.a. n.a. n.a. n.a. n.a. 3. Other Consumer/ Retail Loans n.a. n.a. 15, , , Corporate & Commercial Loans 158, , , , , Other Loans n.a. n.a Less: Reserves for Impaired Loans/ NPLs 4, , , , , Net Loans 432, , , , , Gross Loans 437, , , , , Memo: Impaired Loans included above 4, , , Memo: Loans at Fair Value included above n.a. n.a. n.a. n.a. n.a. B. Other Earning Assets 1. Loans and Advances to Banks 10, , , , , Trading Securities and at FV through Income 20, , , , , Derivatives 18, , , , , Available for Sale Securities 26, , , , , Held to Maturity Securities n.a. n.a. n.a. n.a. n.a. 6. At equity Investments in Associates 1, , , Other Securities n.a. n.a. n.a. n.a. n.a. 8. Total Securities 65, , , , , Memo: Government Securities included Above n.a. n.a. 14, , , Investments in Property n.a. n.a Insurance Assets 15, , , , , Other Earning Assets , , , Total Earning Assets 524, , , , , C. Non Earning Assets 1. Cash and Due From Banks 10, , , , , Memo: Mandatory Reserves included above n.a. n.a. n.a. n.a. n.a. 3. Foreclosed Real Estate n.a. n.a. n.a. n.a. n.a. 4. Fixed Assets 2, , , , , Goodwill 6, , , , , Other Intangibles 1, , , Current Tax Assets n.a. n.a Deferred Tax Assets , Discontinued Operations n.a. n.a. n.a. n.a. n.a. 10. Other Assets 14, , , , , Total Assets 560, , , , , Liabilities and Equity D. Interest Bearing Liabilities 1. Customer Deposits Current 154, , , , , Customer Deposits Savings n.a. n.a. 167, , , Customer Deposits Term 115, , , , , Total Customer Deposits 270, , , , , Deposits from Banks 12, , , , , Other Deposits and Short term Borrowings 61, , , , , Total Deposits, Money Market and Short term Funding 344, , , , , Senior Debt Maturing after 1 Year 106, , , , , Subordinated Borrowing 12, , , , , Other Funding n.a. n.a. n.a. n.a. n.a. 11. Total Long Term Funding 119, , , , , Derivatives 19, , , , , Trading Liabilities 14, , , , , Total Funding 497, , , , , E. Non Interest Bearing Liabilities 1. Fair Value Portion of Debt n.a. n.a. 9, , , Credit impairment reserves n.a. n.a. n.a. n.a. n.a. 3. Reserves for Pensions and Other , , , Current Tax Liabilities Deferred Tax Liabilities n.a. n.a Other Deferred Liabilities n.a. n.a. n.a. n.a. n.a. 7. Discontinued Operations n.a. n.a. n.a. n.a. n.a. 8. Insurance Liabilities 14, , , , , Other Liabilities 17, , , , , Total Liabilities 530, , , , , F. Hybrid Capital 1. Pref. Shares and Hybrid Capital accounted for as Debt n.a. n.a. 3, , , Pref. Shares and Hybrid Capital accounted for as Equity G. Equity 1. Common Equity 29, , , , , Non controlling Interest Securities Revaluation Reserves Foreign Exchange Revaluation Reserves n.a. n.a. n.a. 5. Fixed Asset Revaluations and Other Accumulated OCI , , Total Equity 29, , , , , Total Liabilities and Equity 560, , , , , Memo: Fitch Core Capital 19, , , , n.a. 9. Memo: Fitch Eligible Capital 23, , , , n.a. Exchange rate USD1 = AUD USD1 = AUD USD1 = AUD USD1 = AUD

12 Summary Analytics 31 Dec Jun Jun Jun Months Interim Year End Year End Year End % % % % Original Original Original Original A. Interest Ratios 1. Interest Income on Loans/ Average Gross Loans Interest Expense on Customer Deposits/ Average Customer Deposits Interest Income/ Average Earning Assets Interest Expense/ Average Interest bearing Liabilities Net Interest Income/ Average Earning Assets Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets B. Other Operating Profitability Ratios 1. Non Interest Income/ Gross Revenues Non Interest Expense/ Gross Revenues Non Interest Expense/ Average Assets Pre impairment Op. Profit/ Average Equity Pre impairment Op. Profit/ Average Total Assets Loans and securities impairment charges/ Pre impairment Op. Profit Operating Profit/ Average Equity Operating Profit/ Average Total Assets Taxes/ Pre tax Profit C. Other Profitability Ratios 1. Net Income/ Average Total Equity Net Income/ Average Total Assets Fitch Comprehensive Income/ Average Total Equity Fitch Comprehensive Income/ Average Total Assets Net Income/ Av. Total Assets plus Av. Managed Assets n.a. n.a. n.a. n.a. D. Capitalization 1. Fitch Eligible Capital/ Regulatory Weighted Risks n.a. 2. Tangible Common Equity/ Tangible Assets Tangible Common Equity/ Total Business Volume Tier 1 Regulatory Capital Ratio Total Regulatory Capital Ratio Fitch Eligible Capital/ Tier 1 Regulatory Capital n.a. 7. Equity/ Total Assets Cash Dividends Paid & Declared/ Net Income Cash Dividend Paid & Declared/ Fitch Comprehensive Income Net Income Cash Dividends/ Total Equity E. Loan Quality 1. Growth of Total Assets Growth of Gross Loans Impaired Loans(NPLs)/ Gross Loans Reserves for Impaired Loans/ Gross loans Reserves for Impaired Loans/ Impaired Loans Impaired Loans less Reserves for Imp Loans/ Equity Loan Impairment Charges/ Average Gross Loans Net Charge offs/ Average Gross Loans Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets n.a. n.a. n.a. n.a. F. Funding 1. Loans/ Customer Deposits Interbank Assets/ Interbank Liabilities

13 Reference Data 31 Dec Jun Jun Jun Months Interim 6 Months Interim As % of Year End As % of Year End As % of Year End As % of USDm AUDm Assets AUDm Assets AUDm Assets AUDm Assets Original Original Original Original Original Original Original Original Original A. Off Balance Sheet Items 1. Managed Securitized Assets Reported Off Balance Sheet n.a. n.a. n.a. n.a. n.a. 2. Other off balance sheet exposure to securitizations n.a. n.a. n.a. n.a. n.a. 3. Guarantees n.a. n.a. 3, , , Acceptances and documentary credits reported off balance sheet n.a. n.a. n.a. n.a. n.a. 5. Committed Credit Lines n.a. n.a. 117, , , Other Contingent Liabilities n.a. n.a. 3, , , Total Business Volume 560, , , , , Memo: Total Weighted Risks 266, , , , , B. Average Balance Sheet Average Loans 429, , , , , Average Earning Assets 520, , , , , Average Assets 558, , , , , Average Managed Assets (OBS) n.a. n.a. n.a. n.a. n.a. Average Interest Bearing Liabilities 488, , , , , Average Common equity 27, , , , , Average Equity 28, , , , , Average Customer Deposits 266, , , , , C. Maturities Asset Maturities: n.a. n.a. n.a. n.a. n.a. Loans & Advances < 3 months n.a. n.a. n.a. n.a. n.a. Loans & Advances 3 12 Months n.a. n.a. n.a. n.a. n.a. Loans and Advances 1 5 Years n.a. n.a. n.a. n.a. n.a. Loans & Advances > 5 years n.a. n.a. n.a. n.a. n.a. Debt Securities < 3 Months n.a. n.a. 2, , , Debt Securities 3 12 Months n.a. n.a. 3, , , Debt Securities 1 5 Years n.a. n.a. 10, , , Debt Securities > 5 Years n.a. n.a. 5, , n.a. Interbank < 3 Months n.a. n.a. n.a. n.a. n.a. Interbank 3 12 Months n.a. n.a. n.a. n.a. n.a. Interbank 1 5 Years n.a. n.a. n.a. n.a. n.a. Interbank > 5 Years n.a. n.a. n.a. n.a. n.a. Liabiliity Maturities: Retail Deposits < 3 months n.a. n.a. n.a. n.a. n.a. Retail Deposits 3 12 Months n.a. n.a. n.a. n.a. n.a. Retail Deposits 1 5 Years n.a. n.a. n.a. n.a. n.a. Retail Deposits > 5 Years n.a. n.a. n.a. n.a. n.a. Other Deposits < 3 Months n.a. n.a. n.a. n.a. n.a. Other Deposits 3 12 Months n.a. n.a. n.a. n.a. n.a. Other Deposits 1 5 Years n.a. n.a. n.a. n.a. n.a. Other Deposits > 5 Years n.a. n.a. n.a. n.a. n.a. Interbank < 3 Months n.a. n.a. n.a. n.a. n.a. Interbank 3 12 Months n.a. n.a. n.a. n.a. n.a. Interbank 1 5 Years n.a. n.a. n.a. n.a. n.a. Interbank > 5 Years n.a. n.a. n.a. n.a. n.a. Senior debt Maturing < 1 year n.a. n.a. n.a. n.a. n.a. Senior debt Maturing > 1 year n.a. n.a. n.a. n.a. n.a. Total Senior Debt on Balance Sheet 106, , , , , Fair Value Portion of Senior Debt n.a. n.a. n.a. n.a. n.a. Subordinated Debt maturing < 1 year n.a. n.a. n.a. n.a. n.a. Subordinated Debt maturing > 1 year n.a. n.a. n.a. n.a. n.a. Total Subordinated Debt on Balance Sheet 12, , , , , Fair Value Portion of Subordinated Debt n.a. n.a. n.a. n.a. n.a. D. Net Income Reconciliation 1. Net Income 2, , , , , Add: Preferred Stock Dividend n.a. n.a Published Net Income 2, , , , , E. Equity Reconciliation 1. Equity 29, , , , , Add: Pref. Shares and Hybrid Capital accounted for as Equity Published Equity 30, , , , , Exchange Rate USD1 = AUD USD1 = AUD USD1 = AUD USD1 = AUD

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