BN74 Hsbc Bk.26

RNS Number:0831J
Commonwealth Bank of Australia
03 December 2007


                             CEO'S ADDRESS FOR 2007                             
                           CBA ANNUAL GENERAL MEETING                           

 

Introduction

The 2007 financial year has been another record year for the Group.

We've achieved a very strong financial result and made another record dividend
payment to Shareholders.

Results

The Group reported a statutory net profit after income tax for the 12 months to
30 June 2007 of $4,470 million - that's an increase of 14% on the prior year.

Cash net profit after income tax grew 18% to $4,604 million with return on
equity increasing from 21.3% to 22.1%.

Cash earnings per share were up 16% to $3.53 and we declared total dividends for
the year of $2.56, up 14% on last year.

Some key highlights of the result included:

* Strong income growth of 11%, underpinned by good volume growth across
  our various lines of business

* 15% growth in average interest assets to $316 billion;

* 17% growth in Funds under Administration to $177 billion, supported by
  strong underlying inflows and positive investment market returns;

* 21% growth in Insurance premiums to $1,400 million, coupled with
  improved operating margins;

* Continued stability in credit quality levels across the portfolio;

* And further improvements in efficiency and productivity.

These are enabling higher levels of reinvestment in the future of our business,
including the recruitment of additional front line staff and increased
investment on strategic initiatives.

Strategic priorities

Last year we identified four strategic priorities to lift business performance
and growth:

Customer Service; Business Banking; Technology and Operational Excellence; and
Trust & Team Spirit.

We made significant progress again this year in progressing these four
strategies, and I am very pleased with what's been achieved and the positive
impact it's having for all our businesses.

During the course of the year we introduced one additional strategic priority -
Profitable Growth, which I'll talk more about later.

Customer Service

Customer service remains the Group's top strategic priority and while we still
have some way to go, we've made real progress in a number of areas over the past
12 months:

* We added over 1,100 customer facing positions across our business,
  including extra frontline staff in branches, Local Business Banking, Corporate
  Financial Services and Agribusiness;

* We trained over 4,000 leaders to apply a consistent sales and service
  leadership that will reach all of our people;

* We continued to develop a "one-team" culture to enhance the quality of
  referrals across our business

* We continued to train our front line people in key sales and service
  disciplines, including customer needs analysis, business referrals and taking
  ownership

* We are continuing to invest in our front line and becoming more
  accessible to our customers:

  o We are upgrading our branches and opening new state-of-the-art
    branches in key areas;

  o We have introduced more flexible opening hours, including Saturday
    trading in 65 branches and more recently, 7 day a week trading in selected
    locations;

  o We're opening new business banking centres and providing 24/7
    phone access for our local business;

  o We launched Agriline, a telephone banking service for our rural
    customers operated by specialist agribusiness bankers;

  o We have introduced a new operating model into the retail branch
    network, giving our branch managers greater autonomy. This will better meet 
    the needs of our customers and our people;

And we've continued to train wealth management and insurance advisers, placing
them in our retail bank branches to provide specialist advice for our customers.

* Separately, we have simplified our product range and improved the
  features we offer.

  This has resulted in 31 of our products being awarded the CANNEX 5 Star 
  ratings recently, more than any other Financial Services' organisation in 
  Australia.

* We are also simplifying our procedures and processing to improve our
  responsiveness, and introducing auto-decisioning in many parts of our business
  to speed up approval and processing times.

These initiatives are being noticed by our customers who are telling us that our
service is getting better.

I hope those of you who are customers would agree!

In the retail bank, we have seen significant improvements in our Roy Morgan
customer satisfaction scores...they're up 5.6% to our best rating in ten years.

In both the retail and business banks, I'm delighted to report that we're seeing
significant declines in customer complaints and a corresponding increase in
customer compliments.

And I'm equally happy to tell you that we are starting to see some improvement
in our market share numbers, particularly in the last six months.

Business Banking

Turning to our second strategic priority, Business Banking.

While we have strong relationships with a significant proportion of Australian
businesses and we're generating good quality profit growth, there remains
significant opportunities in a number of segments of business banking.

Over the past year, we have put in place a range of initiatives designed to
pursue these opportunities and to drive future growth.

* We restructured to be better aligned with the needs of our customers;

* We made good progress in increasing our business banking "footprint" by
  employing new business bankers, adding new business banking centres and 
  putting business bankers back into selected branches.

  We're on track to add 25 new Business Banking Centres by June 2009 and 140 out
  of the planned 180 business bankers have already been placed in branches;

* We have rolled out CommSee for Business across our branch and call
  centre networks.

  This is providing us with the information platform to support the selective
  growth of our business banking "footprint";

* Over 14,000 business customers are now using CommBiz, our new internet
  based business banking service;

* We've developed a new and improved range of business banking products
  and simplified our business banking processes and approval procedures;

* We've invested in people and new technology to make it easier for our
  customers to deal with us.

* For our rural customers we've introduced an improved service model with
  specialist bankers in 63 new locations and launched Agriline which provides 
  our customers with 24/7 access to advice and assistance from our rural banking
  specialists.

* For our small business customers, we launched Local Business Banking
  Online combined with a 24/7, 365 days per year call centre service.

Technology and Operational Excellence

Turning to Technology and Operational Excellence.

Our objectives here are to deliver greater efficiency across the Group, while
providing us with the technology to increase our competitive leverage through
innovative process and systems.

From an efficiency perspective, we've bedded down a new Enterprise Information
Technology team and reorganised into a more co-ordinated and effective
structure;

* We've continued to reshape our relationships with our IT providers.

  This year we established a new desk top agreement with EDS which will deliver
  cost savings and improved service levels to the Group; and

* We have continued to refine our more focussed approach to Group wide
  procurement - building on the progress we have made over the last three years.

* These and other initiatives have enabled us to exceed our target of
  delivering efficiency savings across EIT of $100 million.

  We have in fact eliminated $114 million in recurrent expenses and have seen
  further improvements in our IT efficiency ratio;

* These efficiency improvements are enabling us to reinvest in areas of
  the business which will help drive future growth.


During the year, we've invested across a number of areas.

  o Dual factor identification for internet banking;

  o The rollout of CommBiz;

  o Ongoing CommSee enhancements for our frontline staff;

  o Global Markets systems improvements;

  o MediClear;

  o Wealth management cross sell initiative and

  o New margin lending facility systems for FirstChoice.

* We have also seen significant improvements in systems stability and
  resilience

* and we've improved our security, controls and disaster recovery
  capabilities;

Trust and Team Spirit

The commitment, engagement and enthusiasm of our people go to the heart of our
success as an organisation and our ability to deliver on our strategies.

* We have seen a greater level of collaboration across the Group, which is
  helping to support a "one-team" culture;

* We have introduced a number of initiatives designed to enhance the wellbeing
  of our people;

* And we have continued to support our community - making significant
  commitments to a range of initiatives including financial literacy,
  environmental partnerships and one-off assistance for communities in need of
  help.

We are already beginning to see positive results, with improved engagement
scores in internal surveys, positive feedback from our people and the community
and a substantial decrease in employee injury rates, staff turnover and
absenteeism.

Profitable Growth

During the year, we identified profitable growth as an additional strategic
priority.

This additional priority was introduced to ensure we remained focused on
identifying opportunities to deliver growth and so create real value for our
shareholders.

* We have a number of investments in Asia, with the most significant
  being our existing businesses in Indonesia and China.

  While these investments are still relatively small, they are all performing 
  well and we continue to look for further opportunities to invest in these and 
  other attractive Asian markets;

* Our Funds Management business has grown rapidly since we acquired
  Colonial in 2000 and we believe that we have the expertise and the scale to
  continue to expand this business both locally and internationally.

  CFSGAM is looking at a wide range of opportunities

  During the year, we launched over 20 new funds including infrastructure funds 
  to hold and manage (on behalf of investors) our interest in recently acquired 
  UK infrastructure company, AWG plc;

* Premium Business Services has a high level of expertise in its Global
  Markets Group, and it has used this to leverage product capabilities across a
  broad range of the Group's existing customer base.

  It is also introducing innovative products and looking at how we might utilise
  existing expertise to take advantage of opportunities to grow in selective
  global markets;

* We also recognise that there are significant opportunities to better
  leverage our existing customer base, and we're focusing on these to drive
  profitable growth.

Looking Ahead

I am very pleased with the progress we made in 2007.

Financially, we had a very good year and we have momentum going into the current
financial year.

In our September quarter trading update we were able to confirm our earnings
momentum and earnings guidance for the year ahead.

The Bank has been able to weather the recent volatility in global credit markets
very well. We have no direct exposure to the sub-prime and C.D.O. defaults in
the United States. While it may take some time for this external situation to
fully play out and for conditions to return to normal, we remain very well
positioned given our strong and well diversified funding base. Obviously, the
financial services sector will remain competitive but we believe we are well
able to meet the challenge.

Our target for the 2008 year is to generate earnings per share growth which is
equal to or exceeds the average of our peers.

I'm also pleased with the progress that we have made on executing our strategic
agenda and I'm confident that, over the year, we'll increasingly see the
benefits of the significant investments that we are making.

We will continue to focus on profitable growth. This means avoiding business
which we perceive to have too high a risk profile or which does not meet our
return criteria. This approach will ensure that our credit quality remains
strong.

Our ability to deliver this year's strong performance would not have been
possible without the goodwill and commitment of all our people.

I am very grateful for the tremendous support I've received from the Board and
across the organization, and I am enormously impressed with the quality and
skills of our people.

Ladies & gentlemen, it's a great privilege to lead this organization and I am
confident that we can continue to deliver for our people, for our customers and,
for you, our shareholders.

 

Thank you.

 



                      This information is provided by RNS
            The company news service from the London Stock Exchange

END

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