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Commonwealth BankCommonwealth Bank of AustraliaACN 1 1 14 Summary
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The Commonwealth Bank is an integral financial service business, providing a full range of banking and financial services to over 7.5 million Australians. The Bank's operations are conducted primarily in Australia. The Bank is represented internationally through ASB Bank Limited, a successful retail bank in New Zealand of which they are a 75% shareholder, and through branches in London New York, Singapore Tokyo, Hong Kong and Grand Cayman and representative offices in Beijing, Shanghai, Hanoi and Jakarta. Their services include retail, business and investment banking insurance, broking services and funds management. The Bank's success in building the business, in generating profits and in positioning for the future allows us to meet the lifetime financial needs of customers; provide fair, safe, challenging and rewarding employment for staff; and reward all shareholders through dividends and capital growth. Structure of the CompanyIn December 10 the Commonwealth Restructuring Act was passed. Its significant features were to amend the Commonwealth Banks Act 15 to enable conversion of the Bank from a statutory authority to a Public Company with a share capital (occurred 17 April 11), to amend the 15 Act to provide for the Commonwealth Development Bank to have a share capital wholly-owned by the Bank and to become a wholly owned subsidiary of the Bank (occurred 1 February11) and, to provide for the Commonwealth Bank of Australia to become successor in law to the State Bank of Victoria (officially merged 1 January 11).Listing of the Commonwealth Bank shares on the Australian Stock Exchange took placed on 1 September 11. In June/July 16 the Government made public offer of its remaining 50.4% shareholding, which was fully subscribed.Commonwealth Bank is fully Australian owned company. It is of Australia's leading providers of integral financial services including retail, business and institutional banking services, superannuating, life insurance, general insurance, funds management, broking services and finance company activities. The principal activities of the Commonwealth Bank Group during the financial year were banking funds management and life insurance.From its humble beginnings, with one office and twelve staff in the 160s, Commonwealth Bank, at present, had more than 116,000 EFTOS terminals throughout Australia, with over 1,80 branches, 4,081 agencies, 4,414 ATM's representation through Australia Post offices, and over 7,000 staff, as at December 000.The Bank's annual profit has risen from its first recorded profit of L, for the half year ended 0 June 115 to an operating profit after tax in 1/000 of AUD $1,71m before abnormal items, a 0% increase on the prior year 18/. Brief History of Commonwealth Bank100s Establishment The Commonwealth Bank Australia was established in 100s enacted by Andrew Fishers Labor Government in 111. The Commonwealth Bank Act of 111 empowered the bank to conduct both savings and general (trading) bank business, with the security of a Federal Government guarantee.The first bank headed by Sir Denison Miller together with other twelve staff opened for business on July 15, 11 in Melbourne. The first branch along with 48 agencies located in past office offered savings bank facilities throughout Victoria. During the following users branches were established in other capital cities as well as in Canberra, Townsville and London.10s Creation of Bank BoardDuring the year, the Bank's Note Issue Board was established. Upon the death of the first governor Sir Denison Miller in 1, a newly established Bank Board assumed responsibility for the note issue from the Note Issue Board. In 18 a designated Saving Bank Department was then structured as The Commonwealth Savings Bank (CSB).10s Surviving the Great DepressionDuring the great depression Commonwealth Bank considered merging with its state banks of Western Australia and New South Wales in 11. It had previously merged in 11 and 10 with its similar institutions in Tasmania and Queensland respectively.140s World War IIThe banks expansion program resumed after WW II. Majority of the branch were constructed in 146 and in 147. Only ten branches were opened during that year. Not too many buildings were constructed due to the shortage of building materials. 61 branches were established later on.150s Establishment of the Commonwealth Banking CorporationThe change in legislation had formally divided Commonwealth Bank act 15 and the Reserve Bank Act 15. The Reserve Bank of Australia was established on 14 January 160, assuming control of all central banking activities. The remaining functions such as trading/savings bank activities together with the newly constituted Commonwealth Development Bank was renamed Commonwealth Banking Corporation.Modernisation of the Bank160s Significant ChangesThe Bank celebrated its Golden Jubilee in 16. Saturday morning trading ceased. In 166, Christmas Club Accounts and variation on traditional savings accounts were introduced. Personal Loans made possible in 167. And the career opportunity fir women became available that year. The introduction of "Black Light" Signature System was introduced on December 16.170sComputerisation CommencesComputer in the savings bank section initially maintained office records. It also became the Banks expanding " on line" computer network and has been extended nationwide. In 170s, Commonwealth Bank expanded its operation, entering the home and travel insurance in 174, and forming its own finance company, Commonwealth Bank Finance Corporation Ltd (CBF Ltd), the following year.The Bank has become increasingly involved in foreign exchange dealings and overseas business generally.180s De-regulation of the Banking Industry Thee entry of foreign banks in Australia in the mid 80s became a major challenge to commonwealth Bank. The bank considered the restructuring of internal organization. Furthermore, new products were developed to meet the requirements of specific group within the community.10s Major Re-structureThe early 10s, the Commonwealth Bank undergo extensive organizational restructure. Changes included the division of Retail Banking into three units, Personal Banking, Business Banking and Banking Corporations, an enhanced Customer Service Program, which aimed to achieve and still does, a more disciplined approach to customer service.In Sept , 11, the bank introduced a new logo based on the stars of the "Southern Cross".The Maestro and Cirrus services were introduced on April 1, 1, an international equivalent of the Electronic Funds Transfer Point of Sale (EFTPOS) system, allows the purchase of goods and services by the use of a keycard at Maestro outlet around the world whereby payments are made by the automatic transfer of funds held in Australian bank account.Cirrus, an Automatic Teller Machine (ATM) network, enables depositors access to their primary savings, cheque and credit card accounts with their keycard, at overseas ATMs which display the Cirrus logo.During 14 Customer Service Centres were opened Australia wide in capital cities. These centers provide a telephone "hotline" service for customers banking enquiries.As part of the Commonwealth Banks enhanced Customer Service Program, Customer Relationship Model (CRM) branches were introduced in August 14. The new layout separated the areas of customer need ATM for electronic banking, customer studios (Interview office) for longer inquiries or for those interviews the require privacy, tellers counters, and a customer assistance counter, where the customer is greeted on arrival and directed to the area in the branch appropriate for their needs.The Bank's World Wide Web Internet site was launched on September 15.On 1 March 000, the commonwealth Bank and Colonial Limited announced their intention to merge, with seven Commonwealth Bank shares being offered for twenty Colonial shares. The merger received a final approval from the Supreme Court of Victoria on 1 May 000 and was completed on 1 June , 000.The Commonwealth Bank was awarded Internet Bank of the Decade by the Australian and Finance magazine in November 1 and again. Executive ManagementRemuneration of ExecutivesD V Murray Managing Director &CEOBase pay 1,450,000 Bonus Paid this year 450,000Bonus Vested in CBA shares 00,000Superannuation ,77Other Compensation 10,400Total Remuneration ,10,17Number of Option Grant -Number of Share Grant -P l PolsonHead of Colonial First State Investment Group Base pay 600,000 Bonus Paid this year 550,000Bonus Vested in CBA -Superannuation 144,480Other Compensation 456,000Total Remuneration 1,750,480Number of Option Grant 100,000 Number of Share Grant 16,800 M A KatzHead of Institutional BuildingBase pay 750,000 Bonus Paid this year 6,000Bonus Vested in CBA shares 4,000Superannuation 67,500Other Compensation 10,400Total Remuneration 1,87,00Number of Option Grant 15,000Number of Share Grant 0,00M J UllmerGroup General ManagerFinancial and Risk ManagementBase pay 75,000 Bonus Paid this year 76,000Bonus Vested in CBA shares 184,000Superannuation 1,00Other Compensation 10,400Total Remuneration 1,7,700Number of Option Grant 15,000Number of Share Grant 0,00 J F MulcahyHead of Australian Financial ServicesBase pay 700,000 Bonus Paid this year 46,000Bonus Vested in CBA shares 164,000Superannuation 6,000Other Compensation 10,400Total Remuneration 1,18,400Number of Option Grant 15,000 Number of Share Grant 0,000 R J NorrisHead of International Financial Services & Managing Director & CEO, ASB GroupBase pay 680,000 Bonus Paid this year 50,000Bonus Vested in CBA shares -Superannuation n/aOther Compensation n/aTotal Remuneration 1,00,000Number of Option Grant 15,000 Number of Share Grant 0,00 Board of DirectorsNonExecutive DirectorsJohn Ralph - Chairman (Victoria)He has been a member of the Board since 185 and Chairman since 1. He is also Chairman of the Risk, Remuneration and Nominations Committees. He is a Fellow of the Australian Society of Certified Practicing Accountants and has over forty-seven years experience in the mining and finance industries.John Schubert Deputy Chairman (NSW)He has been a member of the Board since 11, he was appointed as Deputy Chairman on the 1 December 000 and is Chairman of the Audit Committee and a member of the Nominations Committee. He holds a Bachelor Degree and PhD in Chemical Engineering and has experience in the petroleum, mining, building materials industries. He is the former Managing Director and Chief Executive Office of Pioneer International Limited.David Murray Managing Director and Chief Executive Officer (NSW)He has been a member of the Board and Managing Director since 1. He holds a Bachelor of Business and Master of Business Administration and has thirty-five years experience in banking. He is a member of the Remuneration, Risk and Nominations Committees. Ross Alder (SA)He is a member of the Board since 10 and is a member of the Remuneration Committee. He holds a Bachelor of Commerce and a Master of Business Administration. He was the Managing Director of Santos Limited for 16 years and retires on 0 September 000. He has experience in various commercial enterprises, more recently in the oil and gas industry.Reg Clairs (Q)He has been a member of the Board since 1 March 1 and is a member pf the Audit Committee. As the former Chief Executive Officer of Woolworths Limited, he has thirty-three years experience in retailing, branding and customer service. Tony Daniels (NSW)He has been a member of the Board since March 000 and is a member of Remuneration Committee. He has extensive experience in manufacturing and distribution, being the Managing Director of Tubemakers of Australia for eight years to December 15m during a long year with that company.Colin Galbraith (VIC)He has been a member of the board since June 000 and is a member of Risk Committee. He was previously a Director of Colonial Limited, having been appointed in 16. He is a partner of Allens Arthur Robinson, Lawyers.Warwick Kent (WA)He has been in the board since June 000 and is a member of the Risk Committee. He was previously a Director of Colonial Limited. Having been appointed in 18. He was the Managing Director and Chief Executive Officer of Bankwest until his retirement in 17. Prior to joining Bankwest, Mr. Kent had a long and distinguished career with Westpac Banking Corporation.Fergus Ryan (VIC)He has been a member of Board since March 000 and is a member of the Audit Committee. He has extensive experience in accounting, audit, finance and risk management. He was a senior partner of Arthur Andersen until his retirement in August 1 after thirty-three years with that firm including five years as Managing Partner Australasia.Frank Swan (VIC)He has been a member of the Board since July 17 and is a member of the Risk Committee. He holds a Bachelor of Science degree and has twenty three-years senior management experiences in the food and beverage industries.Barbara Ward (NSW)She has been a member of the Board since 14 and is a member of the Audit Committee. She holds a Bachelor of Economics and Master of Political Economy and has six years experience in policy development and public administration as a senior ministerial adviser and twelve years experience in the transport and aviation industries, most recently as Chief executive of Ansett Worldwide Aviation Services. Since 18, she has pursued a career as a company director.Anna Booth (NSW)She was a member of the Board from 10 until she retired on 1 December 000, and was a member pf the Risk Committee. She holds a Bachelor of Economics and has had seventeen years experience in the trade union movement.Ken Cowley (NSW)He was a member of the Board from September 17 until he retired on March 001, and he was a member of the Remuneration Committee. He has thirty-three years experience in the media industry, having been a Director of News Limited since 176 and until July 17, was Executive Chairman of the company. Remuneration of DirectorsNon-Executive Directors Name Base Fee/ Committee Salary Superannuation Total Pay Fee Sacrifice RemunerationJ T Ralph 04,0 4,016 41,885 1,04 ,04 J M Schubert 8,01 4,04 1,510 ,504 14,81 N R Adler 68,0 1,756 14,11 6,46 101,46 R J Clairs 68,0 17,008 14,5 7,401 107,401 A B Daniels 68,0 1,756 14,11 7,01 10,01F D Ryan 68,0 17,008 14,5 7,401 107,401 F J Swan 68,0 1,60 15,707 7,771 11,771 B K Ward 68,0 17,008 14,5 6,80 106,80 W G Kent 68,0 ,18 14,447 7,6 ,767 C R Galbraith 68,0 ,18 14,447 7,18 ,56A C Booth ,671 1,60 - 4,4 56,508K E Cowley 5,077 ,764 ,474 5,6 76,641These were the total amount received or due and receivable by non-executive Directors of the Company for the year ended 0 June 001. Directors' ShareholdingsName Shares OptionsJ T Ralph 1,674J M Schubert 7,478D V Murray 44,7 1,500,000N R Adler 6,7R J Clairs 10,48A B Daniels 1,741C R Galbraith 4,54W G Kent 6,70F D Ryan 4,48F J Swan ,5B K Ward ,405 Top 0 Holder of Fully Paid Ordinary SharesRank Name of Holder Number of Shares1. Chase Manhattan Nominees Limited 1,777,81. National Nominees Limited 80,5,78. Westpac Custodian Nominees 7,4,454. Citicorp Nominees Pty Limited 50,715,675. AMP Life Limited 0,6,7816. Commonwealth Custodial Service Limited 1,18,0057. Queensland Investment Corporation Limited 18,46,818. ANZ Nominees Limited 16,07,140. Perpetual Trustees Victoria Limited 14,756,41410. Cogent Nominees Pty Limited 10,88,011. BT Custodial Service Pty Limited ,6,851. RBC Global Services Australia ,57,7041. Colonial Foundation Limited 8,58,41814. HKBA Nominees Limited 8,0,85415. MLC Limited 4,0,60616. The National Mutual Life Association of Australia Ltd 4,871,68017. Perpetual Nominees Limited 4,8,7518. NRMA Nominees Pty Limited 4,780,811. Perpetual Trustees Nominees Limited 4,616,110. CSS & PSS Board 4,485,88The twenty largest shareholders hold 48, shares which is equal to 40.18% of the total shares on issue. Top 0 Holders of Preferred Exchangeable Resettable Listed Shares (PERLS)Rank Name of Holder Number of Shares1. Commonwealth Life Limited 00,000. The National Mutual Association Of Australia 11,650. Commonwealth Custodial Services Limited ,514. Dervat Nominees Pty Limited 84,005. AMP Life Limited 80,0006. INVIA Custodian Pty Limited 67,0007. National Mutual Funds Management 60,0008. UBS Warburg Private Clients Nominees Pty Limited 5,74. Citicorp Nominees Pty Limited 4,00010. National Nominees Limited 41,511. Perpetual Nominees Limited 6,761. ANZ Executors & Trustee Company Limited 6,071. Austrust Limited 4,8114. Perpetual Nominees Limited 1,44015. Boxall Marine Pty Limited 5,00016. Questor Financial Services Limited 1,817. Flight Center Limited 15,00018. Livingstone Investment (NSW) Pty Limited 15,0001. Brencorp No. Pty Limited 14,140. Ms Thelma Joan Martin Weber 1,500The twenty largest shareholders hold 1,01,680 shares which is equal to 0.7% of the total shares on issue. Range of Shares (000-001)(Fully Paid Ordinary Shares and Employee Shares) Number of % Number of % Issued Range Shareholders Shareholders Shares Capital 1 1,000 566, 78.84 186,516, 15.001,001 5,000 14,6 18.7 6,04,01 1.6 5,001 10,000 11,668 1.6 80,47,001 6.4710,001 100,000 4,7 0.70 100,47,76 8.07100,001 and over 00 0.05 607,458,67 48.8Total 718,16 100.00 1,44,015,455 100.00 Range of Shares (PERLS) Number of % Number of % Issued Range Shareholders Shareholders Shares Capital 1 1,000 1,440 8.7 1,764,548 50.411,001 5 1 1.01 4,55 1.5 5,001 10,000 6 0.1 07,06 5.10,001 100,000 4 0.1 764,485 1.84100,001 and over 0.01 1,650 .48 Total 1,61 100.00 ,500,000 100.00 RATIOS M$ M$ 001 000Liquidity RatiosCurrent Ratio Current Assets = 156,465 151,0Current liabilities 145,178 157,701 = 11.07 10.6 The firm had 1.07 current assets for every $1 current liabilities, which means that the ratio had increased by .11 compared to last years ratio due to the increase of assets and a decline in liabilities.Fixed assets turnover Sales = 8,84 61Non current liab. 65,85 6,106 = 1 times 10 times Sales are 1 times the non current assets employed, an increased of times compared to last years ratio, which was due to the huge increased in sales and very slight increased in liabilities. Total assets turnoverSales = 8,84 61Total assets 0,411 18,5 = .8 times =.81 times Sales were .8 times the assets employed. The turnover had increased by 1.0 times this year due to the increased in sales and total assets.Profitability RatiosGross Profit MarginGross Profit = ,405 ,58Sales 8,84 6,1 = 8.5% =57.6% Gross profit was 8.5 expenses. Gross profit margin had decline by1.04 even though the sales have increased, which means that there was an increased in expenses incurred for this year.Net Profit Margin Net Profit after tax = ,41 ,78Sales 8,84 6,1 = 7.% =44.60% Net profit after tax is 7.% of sales after deducting expenses. Net profit margin had declined due to high expenditure.Return on total assetsNet profit after tax = ,41 ,78Total assets 0,411 18,5 = 1.05% =1.5% The firm has 1.05% return on total assets. It has declined this year by .0% which was a result of the declined in net profit after tax.Return on net worth Net profit after tax = ,41 ,78Shareholders funds 1,848 18,45 = 1.15% = 14.85% Shareholder has reinvested 1.15% to the company. The reinvestment has declined .7% which was a result of the declined in net profit after tax.Leverage RatiosDebts to equityLong-term debts = 65,85 6,106Shareholders funds 1,848 18,45 = .% =.7% The firm is making more debts than equity. There was a very slim difference of.08% compared to last years' ratio.Total debts to total assetsTotal debts = 10,56 1,84Total assets 0,411 18,5 = 1.% =1.55% 1.% of total assets are financed by creditors, 8.61 of firms assets are financed by shareholders funds. There has been very slight difference of .11 with the last year's ratio.Equity Valuation and Performance RatiosPayout ratioProv. for ordinary shares = 1,407 = 1,11Net profit after tax = ,41 = ,78Preference dividends = = 0 = 1407 = 1,11 ,41- ,78-0 = 58.55% =40.56% It is the percentage showing the firms ability to pay its shareholders. An increased by 18 percent more makes the firm in better position in their ability to pay their shareholders. Earnings per shareNPAT =,41 = ,78Preference div. = = 0No. of Ord. Sh. issued =1,44,015,455 = 1,60,01,78 = ,41- = ,78-0 1,44,015,455 1,60,01,78 =1. cent per share =17.7 cent per share The percentage per share has decline by 4.07 this year due to the increased in preference shareholders.Dividend per shareOrdinary div. =1,407 = 1,11No. of ord.sh. issued 1,44,015,455 1,60,01,78 =11.1 cent per share =88. cent per share The dividend per share has increased by 4.78 cent per share due to the decreased in the number of ordinary shareholders.Earning yieldEarning per share = 1. Market price per share .8 = 571%Dividend yieldDividend per share =11.1Market price per share .8 = 4.6%Price earning ratio Market price per share = .8Earning per share 1. = .17Recommendation Current AssetsIt will be good for the firm if they keep on increasing their assets every year.Current liabilitiesIt is a good sign that the firm has able to pay all their current obligations.Non- current liabilitiesThe companies long term debts had increased, to prevent this from happening, the company must increase their revenue.Ordinary shareholdersTo have a better and higher return on shares, the company must reduce the number of shareholders.Preference shareholders The firm use to have 0 preference shares, the increased in preference shareholders is an increased on equity. It is the companies obligation to pay dividends to them every year.SalesThere was a good increased in sales this year, which is not proportionate with the expenditure. Expenses The company must find a way to reduced their expenditure so that they will have a high return on profits.ConclusionThe Bank continues to generate high levels of capital, reflecting its strong earnings streams in a low inflationary period. The high dividend payout ratio, retained capital continues to grow due to the extensive participation in the dividend reinvestment plan. Future capital management will take account of the long-term growth in the business and the need to optimize returns to shareholdersThe progress achieved by the Bank is a reflection of the continued actions of all the people who make up the results and work together to provide service to customers. AttachmentGraph of Share PriceArticles about Commonwealth Bank Graph of Share Price Reference Clive Wilson and Bruce Keer, Third Edition Financial Management Principles and Applications, Prentice HallCommonwealth Bank, 001 Annual Reportwww.vu.edu.auwww.commonwealthbank.com.auwww.asx.com.auAcknowledgementAiman Abousher, teacher, Victoria University of Technology
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