COMMERCIAL LAW

Commercial Law

Commercial Law

Commonwealth Bank of Australia (CBA), one of Australia's Big Four banks, offers retail and commercial banking, insurance, and investment services, including credit cards, home loans, deposit accounts, mutual funds, and investment services. CBA's brands include wealth manager Colonial First State, master trust services provider First Choice, online brokerage Commence, and ASB Bank, which provides banking, investment, and financial services in New Zealand. CBA has approximately 1,000 branch offices in Australia (plus more than 3,800 Australia Post locations), as well as operations that reach Asia, Europe, and the US.

Profits

The statutory net profit after tax for the year ended 30 June 2003 was $2,012 million, a decrease of 24% on the prior financial year. Net profit after tax from ordinary activities ('cash basis') was $2,579 million, an increase of 3% on the prior financial year. The difference between statutory and cash profit comprises two non-cash items; the amortization of goodwill and an adjustment to the appraisal value of the life and funds management businesses. The cash result reflects:

- Strong retail banking performance in Australia and New Zealand, subdued corporate and institutional banking and funds management performance as a result of difficult industry conditions and improved performance from the life insurance business;

- Expenses of $259 million in first time costs associated with strategic initiatives and expensing the allocation of shares under both the 2002 and 2003 employee share plans; and

- An increase in underlying operating expenses of 2%, primarily driven by the set up of the new premium division in banking and increased regulatory costs within the funds management business.

Earnings per Share

Consistent with the decrease in statutory profit explained above, statutory earnings per share were 157 cents, down 53 cents on the prior year of 210 cents. Cash earnings per share were 203 cents, up 6 cents compared with 197 cents for 2001/2002.

Dividend

A final dividend of 85 cents per share fully franked will be paid on 8 October 2003 to shareholders on the register at 5:00 pm on 29 August 2003. The ex dividend date is 25 August 2003. This brings the full year dividend to 154 cents per share fully franked.

The dividend is determined having regard to a number of factors including rate of business growth, capital adequacy, investment requirements, and cyclical nature of returns in the insurance business and a range of other factors.

Return on Equity

Return on equity ('cash basis') was 13.3%, which represents a slight increase on the prior financial year.

Asset Pricing: Overall increase in margin of 13 basis points, reflecting the impact of reprising on home loans (four basis points), personal lending (six basis points) and business lending (three basis points). This has been in response to higher funding costs and increased credit risk.

Deposit pricing: Deposit margins decreased 24 basis points due to strong price competition for retail deposits and the decline in the official cash rate.

Mix and Liquids: Average liquid asset holdings increased $14 billion since June 2008, resulting in six basis points of margin decline. This was driven by higher levels of liquid ...