COMMONWEALTH BANK OF AUSTRALIA. (CBA)



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General Information
Company Name: Commonwealth Bank of Australia
Stock Code: CBA
Website: www.commbank.com.au
GICS Sub-Industry: Diversified Banks
Market Cap ($M): 125,766
Equiv. Shares (M): 1,621

Current Price Data+
Current Price Open High Low Last Close Volume Price Movement
$ 77.570 $ 77.460 $ 77.800 $ 77.100 $ 77.570 1,937,061 0%

Current Broker Consensus Recommendation more
Recommendation: Sell
Recommendation Date: 2nd Apr 2014
12 Month Target Price (average): $76.073
Brokers Surveyed: 8

Company Overview

Business Description:
Commonwealth Bank of Australia (CBA) is an Australian retail bank. Its core business is the provision of a broad range of banking and financial products and services to retail, small business, corporate and institutional clients. CBA conducts its operations primarily in Australia, New Zealand and Asia Pacific region. It also operates in several countries including United Kingdom and USA.

Strategy Analysis:
CBA generates superior shareholder returns by optimising revenue growth, productivity, capital efficiency and staff culture. The strategy is to invest in the competitive advantages that are difficult to replicate. The bank specifies its three primary sources of advantage as industry-leading application of technology to financial services, a customer-focused staff culture and a strong balance sheet. Each of these respectively supports returns on equity by making CBA more attractive to customers in a multi-channel banking world (an intangible asset), enhancing customer loyalty and satisfaction (another intangible asset), and reducing bad debts expense below peers¬ī (a cost advantage). Lower losses on bad debts give CBA more room to price keenly to win and retain business while remaining sufficiently profitable. The group will continue to invest in all three sources of advantage. CBA¬īs industry-leading technology initiative is the $1.1bn Core Banking Modernisation project, which rolled out real-time banking and same-day settlement across the depositor and borrower customer base. The project is effectively complete and CBA will be the only major bank offering these features across its customer base, an advantage which will take competitors years to replicate given the project was launched in 2008. CBA¬īs policy on acquisitions is to acquire only when it can create more value for shareholders than they can create for themselves. Commonwealth Bank of Australia reported NPAT up 1% to $3.66bn for the half-year ended 31 December 2012. Cash NPAT for the current half was $3.78bn, an increase of 6%. Revenues from ordinary activities were $22.92bn, down 4% from the same period last year. Diluted EPS was 221.7 cents compared to 222.1 cents last year. Net operating cash flow was $3.62bn compared to $8.34bn last year. The interim dividend declared was 164.0 cents compared with 137.0 cents last year. While many of the group's customers are facing challenges, this is not translating into a deterioration of credit quality. However, given the uncertain outlook for both the global and domestic economies, the group remains cautious maintaining a strong balance sheet with high levels of capital, provisioning and liquidity - $128.0bn as at 31 December 2012.


Financial Summary
Year to Jun NPAT EPS EPS chg (%) PER DPS Yield (%) Franking (%)
2015  F 9,266.0 555.2 5.8 14.0 416.0 5.4 100.0
2014  F 8,500.0 524.6 8.0 14.8 393.0 5.1 100.0
2013  A 7,779.0 485.9 8.1 12.8 364.0 5.9 100.0
Source: Morningstar analyst estimates.

Peer Comparison
EPS Growth (%) P/E (%) Dividend Yield (%)
Company Mkt Cap 2013 A 2014 F 2015 F 2013 A 2014 F 2015 F 2013 A 2014 F 2015 F
ANZ Bank (ANZ) $92,340 M -0.0092 0.1637 0.0567 15.5564 13.3686 12.6509 0.0487 0.0522 0.0553
Bendigo Adelaide Bnk (BEN) $4,556 M -0.0390 0.2243 0.0594 14.8009 12.0894 11.4120 0.0553 0.0571 0.0601
Commonwealth Bank (CBA) $125,085 M 0.0893 0.1112 0.0534 16.3077 14.6759 13.9323 0.0472 0.0509 0.0533
National Aust. Bank (NAB) $82,806 M 0.0508 0.0831 0.0564 14.1969 13.1073 12.4079 0.0540 0.0575 0.0619
Westpac (WBC) $107,542 M 0.0657 0.0677 0.0432 15.4158 14.4390 13.8404 0.0561 0.0526 0.0551

Market Comparison
Earnings P/E Ratio P/B Ratio P/E Growth
CBA 1.02 15.1 2.77 1.84
Market 1.09 15.9 1.26 2.00
Sector 1.02 15.1 1.44 1.44

Directors
Name Position Start Date
Mr Ian Narev Chief Executive Officer 01 December 2011
Mr Brian Long Director 01 September 2010
Mr David Turner Non-Executive Chairman 01 August 2006
Mr Andrew Mohl Non-Executive Director 01 July 2008
Ms Sarah (Carolyn) Carolyn Hailes Kay Non-Executive Director 05 March 2003
Ms Jane Sharman Hemstritch Non-Executive Director 09 October 2006
Mr Harrison Hurst Young Non-Executive Director 13 February 2007
Sir John Anthony Anderson Non-Executive Director 12 March 2007
Ms Lorna Karen Inman Non-Executive Director 16 March 2011

Management
Name Position
Carla F Collingwood Assistant Company Secretary
Margaret Taylor Company Secretary
Alden Toevs Group Chief Risk Officer
Grahame Petersen Group Executive, Business and Private Banking
Michael Harte Group Executive, Enterprise Services and Chief Information Officer
David Craig Group Executive, Financial Services and Chief Financial Officer
Robert Jesudason Group Executive, Group Strategic Development
Melanie Laing Group Executive, Human Resources
Ian Saines Group Executive, Institutional Banking and Markets
Simon Blair Group Executive, International Financial Services
Matthew Comyn Group Executive, Retail Banking Services
Annabel Spring Group Executive, Wealth Management
David Cohen Group General Counsel and Group Executive, Group Corporate Affairs

Substantial Shareholders
Holding Name
-- (--%) Not Disclosed in Annual Report

Calendar of Events
Date Event
11 February 2015 Report (Interim)
02 October 2014 Report (Annual)
18 August 2014 Report (Annual)
13 August 2014 Report (Prelim)
© 2011 Morningstar, Inc. All rights reserved. The data and content contained herein are not guaranteed to be accurate, complete or timely. Neither Morningstar, nor its affiliates nor their content providers will have any liability for use or distribution of any of this information. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Some material is copyright and published under licence from ASX Operations Pty Limited ACN 004 523 782 ("ASXO"). DISCLOSURE: Employees may have an interest in the securities discussed in this report. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp.

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