Transcript Raising capital in a changing global environment Michael Ullmer Group Executive, Institutional and Business Services Commonwealth Bank of Australia 20 March 2003

Raising capital in a changing
global environment
Michael Ullmer
Group Executive, Institutional and Business Services
Commonwealth Bank of Australia
20 March 2003
Disclaimer
The material that follows is a presentation of general
background information about the Bank’s activities current
at the date of the presentation, 20 March 2003. 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.
Institutional & Business Services
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Speaker’s Notes
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Institutional & Business Services
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Growth of the domestic corporate bond market
Total non government Australian debt issuance by year 1998 to 2003
45000
40000
35000
A$m
30000
25000
20000
15000
10000
5000
0
1998
1999
2000
2001
2002
2003 YTD
Source: Commonwealth Bank
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Australian corporate bond issuance by sector
Australian non government bond issuance in 2002 by sector
Total A$37.5bn
11%
15%
7%
49%
2%
7%
1%
5%
1%
2%
Bank
Corporate
Finance
GIC
Insurance
Property
Supranational
Transport & Infrastructure
Asset Backed
Credit Wrapped
Source: Commonwealth Bank
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Major developments in the Australian bond market

Special Purpose Vehicles

Public Private Partnerships

Growing retail demand for hybrid products

Commercial Mortgage Backed Securities ‘CMBS’

US Traditional Private Placements
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CMBS - an emerging asset class
CMBS Issuance by rating category
2002
CM BS Issuance Volumes
3,500
6,000
3,000
5,000
2,500
A
14%
Outstandings (RHS)
Volum e (A$'M)
4,000
A1%
BBB+
2% BBB
2%
Unrated
3%
2,000
3,000
1,500
2,000
1,000
1,000
500
-
AA
15%
AAA
63%
1999
2000
2001
2002
Source: Commonwealth Bank
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US Traditional Private Placements

Lower rated and unrated Australian and New Zealand borrowers can
now raise longer term capital via the US private placement market.

Capital not available domestically is now available in large volumes for
10 to 15 year maturities.

This further restricts supply from Australian investors.

Domestic banks are forming alliances with US investment banks to
achieve this - CBA and Merrill Lynch is an example.

More than US$2.5bn has been raised since the start of 2002 and there is
a substantial pipeline for new deals.

Issuers include: Amcor, Boral, PBL, Santos, CSL, Caltex Australia and
Origin Energy, Network Ten and Contact Energy (NZ).
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Australian borrowers benefit in global shift from
equities to bonds
US mutual fund flows shift from equities to government and corporate bonds
Ten week average US equity and government bond
mutual fund flows
Ten week average US equity and corporate bond
mutual fund flows
$b
$b
$b
$b
2.0
1.5
inflows
8
10
6
8
equities (RHS)
1.0
4
1.2
1
inflows
0.8
6
0.6
4
0.5
2
0.0
-0.5
bonds (LHS)
outflows
-1.0
0.4
2
0.2
0
0
-2
-2
0
-0.2
-4
-0.4
-4
-0.6
-6
-1.5
-6
-2.0
-8
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
-0.8
-8
-10
Mar-97
-1
-1.2
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Source: MFMF, Commonwealth Bank
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Increasing demand for Australian credit is
creating offshore borrowing opportunities
Australian borrowers issuing offshore and
domestic bonds since 2002 in A$ terms
Offshore A$61bn Domestic A$43.46bn
A$m
35,000
30,000
25,000
Non A$ Corporate
20,000
A$ Euros/Uridashi
Non A$ ABS
15,000
Dom estic ABS
Dom estic Corporate
10,000
5,000
-
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Source: Bloomberg
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Commonwealth Bank achieving volume and cost
benefits by accessing offshore demand
CBA Wholesale Funding as at 31 December 2002
Syndicated
4%
NonSyndicated
16%
A$ MTN
1%
USCP
18%
ECP
5%
Tier 2
10%
Tier 1
1%
Eurobonds TCD
2%
9%
Yen Loans
2%
Secn
15%
NCD
17%
Total A$48.9bn
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Commonwealth Bank accessing offshore
markets: issuing highlights

USD500m 5yr FRN issued June 2002: 25% placement into China

4 Japanese ‘Uridashi’ issues for almost A$2 billion

Structured EMTN issues: 420 completed

Global Securitisation ‘Medallion’ issues: A$11billion raised
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client
solutions