Commonwealth Bank of Australia

Hello and welcome to the Commonwealth Bank of Australia's results briefing for the full year ended 30 June 2025. I'm Melanie Kirk and I'm Head of Investor Relations. Thank you for joining us. For this briefing we will have presentations from our CEO Matt Common with a business update and an overview of the results. Our CFO Alan Docherty will provide details of the financial results. and Matt will then provide an outlook and summary. The presentations will be followed by the opportunity for analysts and investors to ask questions. I'll now hand over to Matt. Thank you, Matt.

Thanks very much, Mel, and good morning to everyone. It's good to be with you today to present the bank's full year results. We recognise cost of living remains a challenge for many, and global issues are creating uncertainty. We've been focused on consistent operational execution and investing for the long term. This year, we've chosen to increase lending across all of our key segments with record risk-weighted asset growth of $29 billion and disciplined margin management. Accelerated investment by $300 million in line with our strategic priorities. strengthen our balance sheet and pay a $4.85 sustainable dividend with a fully neutralised reinvestment plan. We've been able to provide our customers with a range of support options, including tailoring more than 139,000 payment arrangements for those most in need. We've helped more than 140,000 households buy a home and have provided support for first home buyers. We've extended our commitment to regional Australia, operating the largest branch and ATM network in the country. Safe and secure banking remains a top priority. Over the past year, we've invested more than $900 million to combat fraud, scams, cyber threats and financial crime to better protect our customers. These efforts have led to a 76% reduction in customer losses from scams since the peak in late 2022. Our Name Check technology has been used 110 million times, preventing over $880 million in mistaken and scammed payments. Strong, safe and resilient banks benefit all Australians. This year we lent $42 billion to businesses to help them grow and paid $22 billion in interest to Australian savers. We further strengthened our balance sheet and remain well positioned to support our customers and the broader economy. And this year we paid $8 billion in dividends benefiting more than 13 million Australians. We know many Australians have found the past four years challenging, particularly dealing with cost of living pressures. This past year has brought some relief through easing inflation, lower interest rates and tax cuts. Many households are now experiencing a rise in disposable income. The financial gap between younger and older Australians has narrowed. Savings have increased across all age groups, with younger Australians now rebuilding their financial buffers. And discretionary spending has also picked up, reflecting growing consumer confidence. While we recognise many are still finding the context challenging, there is some positive momentum. The economy is at an important juncture. And as a country, we need to make the most of our structural advantages, government stability and available opportunities to improve prosperity for generations to come. We welcome the government's focus on economic growth and productivity. We believe it is important to make a constructive contribution on behalf of the more than 10 million personal customers and 1 million business customers who choose to bank with us. Economic growth will require both small and large businesses to thrive and invest for the future. Small businesses play a very important role in economic dynamism and job creation and will be most responsive to changes and incentives. When I meet with our small business customers, I'm often struck by their energy, optimism and new ideas for the future. Australia's large companies also have a substantial role to play. These are our most productive institutions and provide critical infrastructure the economy relies on. They are investing to build a better Australia, whether that be laying intercity optic fibre, mining resources for export to underpin our prosperity, building and financing new infrastructure, or investing in cyber security or AI capability. These investments benefit all Australians and help small businesses help the economy. 36% of Australia's corporate tax base comes from 20 of our largest companies. Our miners and banks are the largest taxpayers in the country, while our retailers are some of the largest employers. We need to make sure that the economic dividend from technology is captured by Australia for Australians and not shifted offshore. We observe many overseas markets actively supporting their domestic institutions in the interests of economic growth and resilience. It will be strong domestic institutions that support Australia in times of crisis. We support the Productivity Commission's focus on reforms to encourage greater private sector investment. We do, however, think a simpler and faster way to achieve this outcome would be through an accelerated investment incentive which should be time-bound, apply to all businesses and allow immediate investment write-offs. We understand well the high expectations on the Commonwealth Bank. We are proud of our role as the bank for all Australians and how we contribute to our country. We are one of Australia's largest corporate taxpayers with an implied tax rate of approximately 36%. As a domestically significant institution, we hold an additional capital buffer to protect depositors and provide stability to the broader economy. And we are required to invest significantly in national infrastructure without a return on capital like the new payments platform and open banking, which benefits all Australians. We estimate these obligations amount to almost $6 billion per year. We also make a range of voluntary contributions to support the financial system, our customers and the broader community, some of which are illustrated on the slide. We provide fee waivers and goodwill payments to support customers in vulnerable circumstances. We subsidise the provision of cash and regional services to support low cost access. And this year we stepped in financially to support Armaguard, Australia Post, as well as helping to protect Australia's interests in the Pacific. To provide further stability to the financial system, we also choose to hold an additional capital buffer. Australia's banking market is stronger and more efficient than international markets. We already have among the lowest consumer banking fees and lowest credit and debit interchange rates globally. We seek to strike the right balance between strength, security, efficiency, customer outcomes and investment for the long term. We believe Australia compares very favourably with global markets and that our financial system is working well for the country. Our purpose to build a brighter future for all reflects our enduring commitment to Australia. This year, we refreshed our strategy to reflect changes in the context and also emphasis. At this time, It is critical to support national growth and prosperity, unlock the potential of AI for our customers and increase economic resilience for the country. Our strategy is built on four key pillars. The first, building Australia's future economy. This is about helping the nation prosper and improving living standards for all Australians. We played an active role during COVID and are now actively involved in supporting growth and resilience of the Australian economy. Second, reimagining customer experiences that are more seamless, personalised and rewarding. We're focused on building deep, trusted relationships, offering a distinctive proposition and digital experiences that our customers love. Third, leading in technology and AI reflects our commitment to technology leadership and particularly AI, which is likely to play a more prominent role across the economy into the future. We've accelerated the modernisation of our technology estate and the use of AI to drive better experiences for customers, as well as quality and speed of execution. And finally, delivering simpler, safer and better reflects our commitment to delivering customers experiences which are underpinned by security and reliability. We've increased our focus on operational resilience in particular. Our strategy aims to build on our sources of competitive advantage. The strength of our core franchise starts with a deep commitment to customer focus and deep trusted relationships. These relationships drive more frequent and meaningful engagement, a deeper understanding of customer needs and superior customer experiences. This creates long-term value for our shareholders. This model has always underpinned our performance in retail banking, and we are using that same model to drive growth in business banking. Technology is accelerating this momentum. It's reshaping what customers expect from a trusted relationship, including how we protect them from increasingly sophisticated threats like scams and cyber attacks. Net promoter score is an important way that we track the strength of our customer relationships. In consumer banking, we've maintained the number one position for 32 consecutive months and achieved the highest score of any major bank since tracking began. In business banking, we've regained the number one position with our highest score since June 2023, the second highest ever recorded by a major bank. Our digital NPS leads peers across key platforms, including the CommBank mobile app, which continues to be the most widely used financial services app in Australia. When customers know us and trust us, they choose to bank with us. Today, one in three Australians and more than one in four businesses call the Commonwealth Bank their main financial institution. This has led to continued growth. Retail transaction accounts increased 4% since June 2024 and by 35% over the past six years. Business transaction accounts grew 7% since June 2024 and 65% over the last six years. These increases have translated into home and business lending growth, 6% and 11% respectively, over the past 12 months. And importantly, more than 97% of home loans and 90% of business loans are linked to a CBA transaction account. Turning now to our performance, we've sought to be disciplined on volume and margin management in home loans. We increased net interest income share and gained seven basis points of market share. We're enhancing the customer experience through Gen AI powered messaging, reduced contact centre wait times and faster business loan decisioning. Our focus on disciplined capital management is supporting franchise growth and dividends. Strategically, we're deepening direct primary relationships. Our proprietary home lending flows remain strong at 66%, now accounting for 52% of proprietary loans in Australia. We continue to leverage technology data and AI to provide superior differentiated customer experiences. We've delivered for all stakeholders through our customer focus and disciplined execution. The 4% growth in cash net profit after tax was driven by strong operating performance and lower loan impairment expense. Throughout the year, we've maintained strong liquidity, funding and capital positions. Our operating performance and strong capital position has allowed the board to declare a fully frank dividend of $4.85, an increase of 20 cents on the prior corresponding period. Our operating income increased 5% supported by a disciplined approach to volume growth and stable underlying margins. Operating expenses were 6% higher driven by inflation and investment in technology and our frontline. Loan impairment expense decreased 9.5% in the period, and as a result, cash net profit after tax increased 4% on the prior year. The credit environment is stable. Our portfolio quality remains sound, supported by a strong labour market and savings buffers. Troublesome and non-performing exposures as a percentage of total committed exposures were stable over the past 12 months. And as we've made HELP easier to access, we've seen the number of home loan customers in hardship come down by 19%. We remain well provisioned for a range of economic scenarios. We hold total provisions of $6.4 billion, which is $2.6 billion above our central economic scenario. Our balance sheet remains strong with 78% deposit funding, Our weighted average maturity of long-term funding is 5.1 years and liquid assets are $184 billion. Our capital ratio of 12.3% is $10 billion above the minimum regulatory requirement. We've delivered consistent and disciplined execution across all of our business units this year. In our retail bank, we've grown home lending and deposit volumes broadly in line with the market. We're continuing to grow our business banking franchise above system. We hold 1.3 million business transaction accounts, a 7% increase from June 2024. We remain the market leader in business deposit market share and hold $15 billion more deposits than the nearest peer. Our institutional bank continues to play an important role in net deposit funding, contributing more than $65 billion. Over the past nine years, we've reduced total risk-weighted assets by more than $38 billion while maintaining strong risk-adjusted returns. ASB has also seen strong growth in both business and rural lending and deposits. Notwithstanding clear leadership in retail MFI share, we've seen increased competitive intensity and building stronger and deeper relationships with customers will be a focus in 2026. Our consistent investment in our digital ecosystem enables us to offer distinct and differentiated customer experiences. Our CommBank app now has more than 9 million active users and sees more than 12.7 million daily logins. The app incorporates leading AI capabilities including AI powered messaging and new features like everyday investing to offer highly personalised and rewarding digital experiences. This year, we relaunched CommBank Yellow, Australia's largest loyalty program to offer customers even more value through their relationship with us. So far, CommBank Yellow has delivered more than $135 million in benefits, rewards and discounts to CommBank customers. This year, Bankwest successfully transformed into a digital bank and has acquired more than 90,000 new to bank customers. Central to the business bank's continued growth has been an increased focus on deepening customer relationships and differentiated digital experiences. For example, CommBank Yellow for Business is now available to more than 360,000 business customers, helping them unlock discounts and reduce costs. We've also provided easier lending access with more than 10,000 loans to small businesses written through BizExpress and auto decisioning resulting in as little as 10 minutes between instant approval and funding. The time it takes to conduct a customer's annual review has been reduced by 85%, further enhancing efficiency. The deepening of primary customer relationships and prudent lending growth is driving strong earnings performance. The business bank contributes approximately 40% of group net profit after tax. To deliver better outcomes for our customers and people, over the past year we've continued to invest in strengthening our AI capabilities and enhancing our technology delivery. To accelerate innovation through artificial intelligence, we've partnered with global leaders and established our own tech hub in Seattle. We're using AI to increase the speed and quality of code reviews, alert customers to suspicious activity, help process disputed transactions and create more personalised experiences for our customers. This year we've delivered 35% more technology changes, reduced critical incidents by 30% and improved recovery time by 25%. To leverage the full benefits of AI, we've chosen to accelerate the modernisation of our technology estate. We completed one of the largest and fastest data migrations of its kind in the Southern Hemisphere, moving 10 petabytes of data to AWS Cloud. Building world-class AI and engineering talent and capability is central to our technology ambitions, and we've hired 2,000 engineers in the past year. We're also providing all of our people with AI skills and tools so we can deliver the best customer experiences and outcomes. We're also investing in AI partnerships, including with Anthropic and OpenAI, to try to bring the best of AI to our customers and our teams. Digital scammers continue to prey on our communities. We've scaled up our alert system, sending 10 times more alerts to customers this year via the CommBank app to warn them of suspicious transactions. We're intercepting frauds and scams earlier and have seen the number of disputed transactions fall by more than 30% as a result. We've also introduced a QR code based feature for cardless withdrawals and deposits, offering a safer and more secure way to access funds. And at an Australian Banking First, we've deployed thousands of AI-powered bots to actively engage scammers on voice calls and WhatsApp chats. But we must be vigilant. We know there is still more for us to do to protect Australians from financial harm. We remain committed to keep delivering our own innovations as well as working on a broader ecosystem approach. I'll now hand to Alan to take you through the result in some more detail.

Thank you, Matt, and good morning, everyone. I will take you through the results in some more detail, focusing on three key themes. Firstly, how we are responding to changes in our current operating context, including choices around the level of investment deployed towards our strategic priorities and the financial outcomes that's delivering. Secondly, how the changing global and domestic environment shapes our approach to balance sheet settings around credit risk, funding, interest rate risk and capital management. And thirdly, how today's combination of management actions and balance sheet settings seeks to position us to continue to deliver shareholder value over the years ahead. Starting with our headline numbers, statutory profits after tax were $10.1 billion. That included some non-cash losses on divestments, principally relating to the sale of our interest in the Bank of Hangzhou, and a modest amount of hedge accounting volatility. Excluding those items, cash profits after tax were $10.25 billion. Breaking down the components of that cash profit, operating income increased by 4.8% over the year or approximately $1.3 billion. That growth in the top line gave us the opportunity to increase the level of investment in the business, resulting in growth in operating expenses of 6% over the year. After absorbing some further restructuring costs and other notable items in the fourth quarter, we delivered 3.4% growth in pre-provision profits over the year. Loan impairment expenses reduced by nearly 10% to $726 million, and this resulted in growth in cash profits of 4.2%. Looking firstly at operating income. Overall, income grew by almost 5% to approximately $28.5 billion. Net interest income was the key driver of that growth, increasing $1.2 billion due to strong lending growth across all of our banking businesses in Australia and New Zealand. Importantly, that growth did not come at the cost of margin contraction. margins were broadly stable to improving on an underlying basis, reflecting our ability to compete effectively while maintaining our pricing discipline. Other operating income increased modestly over the year, due mainly to the soft first half trading income that we reported in February. The second half growth was stronger, reflecting continued volume-driven growth in lending fees and a rebound in trading income. This slide illustrates the results of our decision making around the all-important trade-off between volume and rate. In this context, it was pleasing to see continued growth in our share of industry net interest income. This was achieved by growing volumes at or above system in most of our key segments, while maintaining our focus on higher return proprietary distribution across all of our businesses. One example of this can be seen in the performance of our network of retail lenders. The middle chart shows our share of proprietary home lending in Australia growing from 34% two years ago to more than 50% today. By continuing to invest in our digital capabilities, customer experience, and our frontline and operational teams, we're meeting more needs of more customers. Turning to net interest margin and looking at the movements over the most recent six-month period. Despite two cash rate cuts in February and May, and ongoing competitive intensity, margins remained broadly stable over the half. On the asset side, we continued to see elevated levels of discounting across the industry for both home and business lending. As you can see, that did not translate into any material margin compression for CBA over the half. Our business bankers continued to show good discipline, walking away from over $4 billion of new lending to large corporate customers due to competitor pricing being below cost of capital. Deposit margins were under pressure due to competition and lower rates, driving most of the four basis point headwind in funding costs. This was offset by our hedges of interest rate risk, which delivered five basis points of margin accretion. If three year swap rates remain around their current levels, our equity hedge earnings will likely be relatively stable from here, and so we wouldn't expect to see that particular tailwind repeat in the next financial year. Turning now to operating expenses, they increased by 6% over the year. This reflected a combination of inflation as well as strategic choices about where and how much to invest in the franchise for long-term outcomes. As we flagged in our results announcement in February, we have accelerated our investments in our technology infrastructure and software assets, as well as the frontline teams supporting our proprietary distribution channels. These choices were made possible due to our strong top-line momentum and our continuing delivery of productivity benefits. Looking ahead, we'll continue to adopt a flexible and responsive approach to our cost growth. This will take into account factors such as our top-line growth, realised productivity improvements, and our targeted level of pre-provision profit and dividend growth. Turning now to our balance sheet settings, starting with credit risk. Our lending portfolio continues to perform well from a credit quality perspective. Loan impairment expenses fell for the third successive year to $726 million as loan loss rates reduced to seven basis points over the year. Consumer arrears rates have stabilised in recent months and we're seeing reduced levels of hardship amongst our customer base as real household disposable incomes continue to improve as inflation and interest rates eased. Corporate troublesome and non-performing exposures were also stable with relatively small movements in a few single name exposures. Overall, loan loss provisions increased slightly to $6.4 billion, which was principally a function of lending growth, and that led to a slight decline in provisioning coverage to 160 basis points of credit risk-weighted assets. We now hold a buffer of approximately $2.6 billion to our central economic scenario, And our balance sheet provisions cover 75% of the expected credit loss of our downside economic scenario of a global recession. As usual, we have set out here how our provisioning considerations have evolved at the sectoral level over the last six months. In response to heightened global trade and geopolitical tensions, we increased the weighting to our downside scenario by 2.5%, with a commensurate reduction in our central scenario. As a result, consumer provisions were overall largely unchanged, as the increase in MES provisioning was offset by reduced forward-looking adjustments for those customers most exposed to higher interest rates. within corporate, provisioning overall increased marginally due to portfolio growth and the increased MES overlay. Our funding profile remains conservatively positioned for the long term. Customer deposits now cover 78% of our funding needs, providing structural cost advantages and funding stability. Short-term wholesale funding currently represents just 7% of total funding, well below historical levels, and provides substantial franchise protection against volatility in funding markets. We have long said that the first and best use of surplus capital is to support our customers and the economy and grow our franchise. the capital deployed to grow risk-weighted assets totaled 31 basis points over the last six months. Notwithstanding that high level of franchise growth and a strong first half dividend, our level two common equity tier one ratio was 12.3%, up 10 basis points. This was a function of strong profitability as well as the capital benefit of recent divestments. The final dividend increased 10 cents to $2.60. That brings our full-year dividend to $4.85, an increase of 4% year-on-year, and represents a full-year payout ratio of 79%. The dividend reinvestment plan will again be fully neutralised through an on-market purchase of shares, ensuring no dilution to our existing shareholders. We have also extended our on-market share buyback programme by a further 12 months. As you know, we are currently seeing historical lows in the cost of CBA equity relative to the after-tax cost of our debt, and we responded by pausing activity on our buyback. That said, the flexibility provided by this form of capital return mechanism means we still see value in maintaining an open-ended buy-back program with execution remaining subject to changes in market conditions. I wanted to share some additional considerations around our current and future balance sheet settings. The guiding principle across our approach to balance sheet management is to underpin and protect our long-term franchise value, and in doing that, support our customers and the economy through good times and bad. On the left-hand chart, we've sought to show a broader perspective on the capital buffers held to fund organic growth and absorb losses. Firstly, we have the current level of common equity tier one in excess of the APRA regulatory minimum. Secondly, our forward-looking approach to loan loss provisioning means we can set aside provisions on our balance sheet to absorb losses if economic conditions worsen relative to our central scenario. Thirdly, we're holding an unrealized loss reserve on our liquid asset portfolio of high quality domestic government bonds Holding these bonds to maturity will see their mark-to-market revert to par value in the years ahead. And lastly, we have an embedded gain which reduces our overall capital requirement for interest rate risk in the banking book. These gains will reverse over time and therefore they are deducted. It is important to understand that the composition of our aggregate capital buffers, currently totalling $13 billion, will move in response to changing market conditions. Turning to the second chart, under Australian Prudential Requirements for IRRBB, we have long had to make trade-offs between earnings volatility and capital volatility. Changes to the Prudential Standard scheduled for implementation on 1 October will introduce new capital considerations related to the size and composition of our replicating portfolio hedge. This will introduce an additional aspect to the Board's calibration of our capital target, depending on our appetite for earnings volatility through an interest rate cycle. And the third chart highlights the unique nature of CBA's funding stack that embeds resilience through a combination of deposits and low-risk long-term wholesale funding. In summary, our balance sheet settings are deliberately conservative and calibrated to optimise for long-term outcomes as opposed to short-term earnings. As the global operating context becomes increasingly uncertain, We believe that this approach is even more important today and remains a key focus of both board and management. This long-term approach has again assisted in delivering consistent superior shareholder returns. A combination of a high return on equity and a strong payout ratio continues to compare favourably with domestic and global banking peers. Our strategic investments help generate the franchise growth, which underpins our continued outperformance in net tangible assets and dividends per share. I'll now hand back to Matt for the economic outlook and closing remarks. Thank you.