Commonwealth Bank of Australia to acquire Bank West and St Andrew's

170 Pages·2015·8.98 MB·English

The impairment of customer loans
Submission 109 - Attachment 1
Commonwealth Bank Group 1 14/08/2015 81:56 am
Commonwealth Bank of
Australia to acquire Bank
West and St Andrew's
Sydney, 8 October 2008
The Commonwealth Bank of Australia (the Group) has acquired the
Bank of Western Australia Limited (BankWest) and St Andrew’s
Australia Pty Ltd (St Andrew’s) through the execution of a sale and
purchase agreement with UK based HBOS plc.
The purchase does not extend to HBOS’s other Australian
businesses - Capital Finance Australia Ltd, BOS International
(Australia) Ltd and HBOS’s Australian Treasury operations.
The purchase price will be $2.1 billion. The purchase is conditional
on the receipt of all necessary competition, regulatory and
government approvals - and will be completed following receipt of
those approvals.
The Group is determined to continue to carry substantial surplus
capital due to the current volatile market conditions. It intends to
fully fund the purchase price by undertaking a
$2 billion accelerated institutional placement which will maintain
APRA Tier 1 capital at 7.6% and Tier 1 capital under UK FSA rules
at 10.1%.
Standard & Poor’s, Moodys and Fitch have all confirmed the
Group’s credit ratings with stable outlook post the acquisition.
Credit Suisse has served as exclusive financial adviser to the Group
on this transaction.
Ralph Norris, Commonwealth Bank Chief Executive Officer said,
“The Commonwealth Bank regularly reviews acquisition
opportunities but rarely have we seen a quality asset such as
BankWest become available on such attractive terms to us. The
strength of our current capital and funding position combined with
the strategic value of this transaction makes this an attractive
opportunity for the Group and its shareholders.”
https://www.commbank.com.au/about-us/news/media-releases/2008/081008-news-bankwest-acquisition.html Page 1 of 3
The impairment of customer loans
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“BankWest provides a significant opportunity to further develop the
Group’s business in the fast growing Western Australian market. It
complements our existing operations and will deliver additional
growth opportunities in key market segments, as well as enhanced
product and service delivery opportunities for customers,” Mr Norris
said.
BankWest is a strong business and a market leader in Western
Australia. It is the Commonwealth Bank’s intention to maintain and
grow the BankWest brand.
Commonwealth Bank and BankWest branches and business
centres in Western Australia will not be closing as a consequence
of this acquisition, and both BankWest and Commonwealth Bank
customers will be able to use each other’s ATMs without paying any
additional fees once our systems allow.
St Andrew’s is HBOS Australia’s wealth management business,
providing life insurance and wealth management products to the
Australian marketplace. Its range of products is complementary to
the Group’s existing wealth management business.
The Group is strongly committed to its Australian businesses and on
achieving its vision to be Australia’s finest financial services
organisation through excelling in customer service. This acquisition
demonstrates this commitment, by expanding in a rapidly growing
region of the Australian economy.
“I am confident that this acquisition will deliver significant benefits
for the people and customers of both organisations. HBOS’
Australian businesses are good quality, strong businesses
underpinned by dedicated and talented staff,” Mr Norris said.

TThhee SSttrraatteeggiicc RRaattiioonnaallee
Builds on the Commonwealth Bank’s commitment to being
Australia’s leading financial services organisation with strong
positions in home loans, retail deposits and business banking,
and an enhanced position in credit cards, personal lending and
wealth management;
Strengthens the competitive position in the fast growing and
attractive Western Australian market. The BankWest brand will be
retained;
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The impairment of customer loans
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Commonwealth Bank Group 3 14/08/2015 83:56 am
Provides opportunities to enhance the Group’s reputation as a
leader in product innovation and customer service by further
developing existing relationships with nearly 11 million Australians;
and
Provides a wider pool of talented and experienced people to
complement the focus on achieving the Group’s vision of
becoming Australia’s finest financial service organisation through
excelling in customer service.

NNoottee rreeggaarrddiinngg 66 OOccttoobbeerr SSuunnccoorrpp AAnnnnoouunncceemmeenntt
High level, exploratory discussions have been conducted with
Suncorp.

ENDS

For further information please contact:

Media Analyst
Steve Batten Warwick Bryan
Media Relations Investor Relations
Commonwealth Bank Commonwealth Bank
[phone] 02 93785979

This announcement is not an offer for subscription, invitation,
recommendation or sale with respect to the purchase or sale of any
shares in any jurisdiction. This announcement does not constitute
an offer to sell, or a solicitation of an offer to buy, securities in the
United States or to any U.S. person (as defined in Regulation S
under the U.S. Securities Act of 1933, as amended (the “U.S.
Securities Act”)). Securities may not be offered or sold in the United
States unless the securities have been registered under the U.S.
Securities Act or an exemption from registration is available.
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NOTFORRELEASEINTHEUNITEDSTATES:ThispresentationisnotfordistributionorreleaseintheUnitedStatesortoanyU.S.personandmaynotbeforwarded,reproduced,
disclosedordistributedinwholeorinparttoanyotherperson.
Commonwealth Bank of Australia
Determined to offer strength in uncertain times
Acquisition of BankWest and
SStt. AAnnddrreeww’’ss AAuussttrraalliiaa –
A Compelling Strategic Growth
OOppppoorrttuunniittyy
IInnvveessttoorr PPaacckk
8 October 2008
Commonwealth Bank of Australia ACN 123 123 124
ThispresentationdoesnotconstituteanofferofsecuritiesforsaleinAustralia,theUnitedStatesorelsewhereandanysecuritiesdescribedinthispresentationmaynotbeoffered
orsoldinAustralia,theUnitedStatesorelsewhereabsentregistrationundertherelevantlegislationoranexemptionfromregistration.
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Summary
BankWest and St. Andrew’s Australia only
(cid:132)
Consistent with CBA strategy
(cid:132)
Attractive price and terms:
(cid:132)
Purchase price $2.1bn
(cid:190)
(cid:190) 0.80 x 2007A book value 1
(cid:190) 11.2 x 2007A net profit 2
(cid:132) Expected to be EPS accretive immediately
SSubbsttanttiiall costt synergiies
(cid:132)
1. Ordinary shareholders’ equity.
2. Profit attributable to equity holders, after dividends on Redeemable Preference Shares.
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Key terms and conditions
• Final purchase price to not exceed $2.1 bn
• Sale and purchase agreement signed
• Subject to regulatory, ACCC and Govt approvals (discussions commenced)
• HBOS pie shareholder approval not required
• Does not require CBA shareholder approval
• Completion expected end January 2009
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Reinforces strong Australian market position
Market Shares - Australia
HHoommee LLeennddiinngg HHoouusseehhoolldd DDeeppoossiittss CCrreeddiitt CCaarrddss
25% 22.7% 40%
21.3% 19.7% 35% 33.7% 29.7% 30% 24.9% 26.2%
20% 30% 25% 21.7% 20.5%
22.3%
15% 12.2% 13.2% 2205%% 20% 14.1%
10% 15% 12.9% 13.0% 1155%%
10%
10%
5% 3.0% 4.0% 5% 3.2%
5%
0% 0% 0%
Personal Lending Business Lending Business Deposits
30% 2255.11%% 25% 25% 21.6% 21.5% 2211.99%%
25% 21.9% 22.8% 20% 18.8% 15.8% 16.4% 18.9% 20% 15.9% 17.6%
20% 14.1%
16.1% 15% 15%
15%
11.0%
10% 10%
10% 5.8% 4.7% 5.7%
55%% 5% 55%%
0% 0% 0%
SSoouurrccee:: AAPPRRAA // RRBBAA ((JJuullyy 22000088))..
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Proposed operating model
Business Description Proposed Model
(cid:131) BBrraanndd rreettaaiinneedd iinn WWAA
(cid:131) 860,000 customers
(cid:131) East coast retail expansion strategy to be
(cid:131) Lending assets of $28bn
reviewed
Retail
(cid:131) Deposits of $15bn
Banking (cid:131) Streamlining of administrative functions,
ssyysstteemmss, aanndd pprroocceesssseess ooff CCBBAA aanndd
(cid:131) 22000088 RRegiionall BBankk off tthhe
Year 1 BankWest, where synergies exist and it
enhances the customer experience to do so
(cid:131) Brand retained in WA
(cid:131)(cid:131) 7777 BBuussiinneessss BBaannkkiinngg
(cid:131) Integration of two businesses with a view to
Business & Centres 2
incorporating best practice and enhancing
Corporate
(cid:131) Lending assets of $27bn customer experience across the Group
Banking
(cid:131) Deposits of $22bn (cid:131) Streamlining / sharing of back-office and
systems whhere synergiies exiist
(cid:131) Wealth management and
Insurance and insurance (cid:131) Integrated into broader Group
Investments (cid:131) Funds under Management of
more than $2.4bn
Note: All Lending Assets and Deposits figures as at 30 June 2008. (Source: HBOS plc interim report). Funds under management figure as at 31 December 2007.
(Source: HBOS Australia 31 December 2007 annual report). Exchange rate of 2.08 AUD to 1 GBP.
1. Australian Banking and Finance Magazine.
22. SSoouurrccee:: BBaannkkWWeessttwweebbssiittee.
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Submission 109 - Attachment 1
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BankWest Balance Sheet
2005 2006 2007 Unaudited
$m $m $m June 2008
Loans and advances to customers 31,582 40,276 50,838 55,500
Other assets 5,058 5,398 7,974 7,700
TToottaall aasssseettss 3366,,666677 4455,,667744 5588,,881122 6633,,220000
Customer deposits & Intergroup funding 28,482 35,197 45,899 50,800
Other interest bearing liabilities 5,993 7,723 9,385 8,700
Non interest bearing liabilities 413 505 478 300
Total liabilities 34,888 43,425 55,762 59,800
Issued share capital (incl preference shares) 992 1,282 1,907 2,100
Retained earnings 787 967 1,143 1,300
Total equity1 1,779 2,249 3,050 3,400
Total liabilities and equity 36,667 45,674 58,812 63,200
Source: BankWestfinancial reports for the years ended 31 December 2005, 2006 and 2007.
1 IInncclluuddeess rreeddeeeemmaabbllee pprreeffeerreennccee sshhaarreess 22000077:: $$553300mm,, 22000066:: $$330055mm,, 22000055:: $$111155mm..
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The impairment of customer loans
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CBA funding position very strong
CBA’s Existing Source of Funding1
BankWest intra-group funding of
(cid:132)
21%
~$18bn easily accommodated within
2%
existing CBA internal resources
5%
58%
1111%%
Overview of CBA funding position:
(cid:132)
3%
Retail Funding Long Term Wholesale maturing in FY09
(cid:190) AA credit ratingg Short Term Wholesale Long Term Wholesale maturing after FY09
Structured Funding with first call <12mth Securitisation
CBA’s Liquid Assets ($bn)2
58% retail funded
(cid:190)
50
13
(cid:190) Well advanced in 2009 funding Medallion RMBS
programme – 30% completed 28 10
Surplus liquids
3
MMiiniimum
(cid:190) Significant surplus liquids 25 27 prudential
requirement
1. Surplus liquids are excluded from short term wholesale funding. Jun 07 Jun 08
22. 66 mmoonntthh aavveerraaggee lliiqquuiidd aasssseettss hheelldd.
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