1. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Institutional Banking Performance and Strategy Michael Katz Commonwealth Bank of Australia 27 September 2001

2. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 27 September 2001. 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

3. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Business Performance 2000/01 Strategy People Environment i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Outline

4. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s An integrated, client focussed capital and risk management business i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Business

5. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Corporate Finance Financial Markets Transaction Services Equities CIM Fund Services i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Six Business Lines Business Development

6. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Risk Management Human Resources Financial Control Financial Markets Operations Technology i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Five Support Streams

7. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Financial Institutions Government Entities including State and Local Government Large Corporates - Turnover greater than $75m pa Middle Market since 1 July 2001 - Turnover between $40m and $75m pa i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The Client Base

8. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Financial Markets Operations Financial Control Human Resources Information Technology PRODUCT GROUPS Investment Management Corporate Finance Financial Markets Equities Transaction Services Deliver Products Diagnose Needs Risk Management Analyse Credit Risk Business Development Calculate the Equity Risk per Client Clients Integrated Approach Fund Services

9. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Business Performance 2000/01 Strategy People Environment i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Outline

10. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Colonial integration completed in Jan 01 Growth in Corporate Finance and internationalisation Trading income up 30% Equities –Implementation of VoiceBroker –Entry to IPOs i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Highlights of 2000/01

11. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Development of Funds Management /Fund Services products focussed on IB’s origination skills Integration of Middle Market business i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Highlights of 2000/01 - contd

12. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s CommSec - 38% (1) Margin Lending - 24% (2) Domestic Bonds - 10% (3) FX - 10% (4) Transaction Banking - 22% (5) Sources: (1) ASX; (2) RBA; (3) IFR; (4) RBA; (5) Greenwich Survey i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Market Share at June 2001

13. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Capital Raised IB raised $17 bn of Capital for its Clients, an increase of 49% over 1999/00

14. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Business Performance 2000/01 Strategy People Environment i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Outline

15. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s An integrated, client focussed capital and risk management business operating domestically and in niche markets offshore i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Strategy

16. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Commercial banks are a stock business - rely on balances for revenue Flow business - transition through the balance sheet IB’s dependency on the lending business is reducing i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Migration to a Flow Business

17. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Broad range of products Preferred access to both wholesale and retail clients Developing skills in product integration i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Competitive Advantage

18. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Risk Management Client Service Products International People i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s What Makes us Different?

19. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Superior risk management compared to Investment Banks Credit Risk Market Risk Operational Risk i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Risk Management

20. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s KMV Large Credit Exposure Policy Highly skilled analysis Diversification is key i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Credit Risk Management

21. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Impact of LCEP

22. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s CBA maintains the lowest VaR across the big 4* –CBA2.9 –ANZ4.0 –WBC4.8 –NAB13.0 * Data to 31 March 01 based on CBA Analysis i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Market Risk Management

23. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Unique presence in Australian market place Have a relatively lower cost base Will succeed by providing better broader service to the chosen segment Lack international client and product coverage of global competitors i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Client Service is Paramount

24. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Model is better Business Development, better Risk Management and bundled product delivery i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Better Service is our Business Continuity of Coverage Quality and Transparency Responsiveness Innovation

25. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Financial Technology “Technology” Technology i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Innovation

26. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Financial Technology Cross Border Leases Royal Bank of Scotland ComputerFleet i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Innovation

27. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Develop technology for client self service Examples: eCommCorporate CommSec - VoiceBroker Ensures cost effective service levels i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Technology Innovation

28. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s eCommCorporate Client and trade volumes are growing

29. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s VoiceBroker VoiceBroker is handling 45% of calls

30. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Broad product range servicing providers and users of capital - retail & wholesale Equities business Corporate Finance focus on risk adjusted return Exportable products i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Product Set

31. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Product focus rather than client focus Growth from product initiatives –distribute institutional equity offshore –export ComputerFleet technology –residual value risk - ships, planes, trains Develop position as Asian Dollar Bloc specialist - AUD, NZD, HKD i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s International Strategy

32. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Business Performance 2000/01 Strategy People Environment i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Outline

33. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Staff growth Staff numbers have increased by 35% over the last two years

34. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Executive team of 12 with average age of 45 and 23 years post-graduate experience each Intranet based 360 degree performance review for all staff International staff rotation program - 25 Australian staff posted overseas i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The Best Team

35. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Remuneration system is closely aligned with business performance with incentive payments based on a factor of: Year on year growth in net profit after tax Return on Target Equity i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Remuneration Model

36. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Fixed vs Variable Remuneration 98/9999/0000/01 Total Remuneration Costs Variable remuneration Fixed remuneration

37. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Risk and Relationship - Provide client continuity and service levels required - Domestic skill base Product - Provide the focus for international expansion - Have international skill sets - Accept a degree of turnover i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s People Segmentation Strategy

38. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s IB’s Business Performance 2000/01 Strategy People Environment i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Outline

39. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The Environment Spreads to Rating (AA+) on Kangaroo Bond Issues 0 5 10 15 20 25 30 35 40 45 03- Sep 04- Sep 05- Sep 06- Sep 07- Sep 10- Sep 11- Sep 12- Sep 13- Sep 14- Sep 17- Sep 18- Sep 19- Sep 20- Sep 21- Sep 2005 Issue 2003 Issue Source: Commonwealth Research CBASpectrum 24 September 2001

40. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s We are caught between a rock and a hard place i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The Environment

41. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The most dangerous words in Financial Services: “This time it’s different” i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The Rock

42. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s “Generals (Management) always prepare to fight the last war not the next” i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s The Hard Place

43. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Mean reversion suggests that after 20 years of exceptional growth we should expect a long hard drought i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Summary

44. i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Focus on Costs Focus on Large Exposures Focus on Continuity i n s t i t u t i o n a l b a n k i n g c l i e n t s o l u t i o n s Conclusion