Commonwealth Bank of Australia ACN 123 123 124

Retail Banking Services Update

Michael CameronGroup Executive, Retail Banking Services

28 September 2006

Mark JonesRegional General Manager, South & Western Australia

Fred PollockExecutive General Manager, Group Sales & Service

Michael CantExecutive General Manager, Trans. & Deposit Products

Vittoria ShorttGeneral Manager, Strategy Development

David GraftonExecutive General Manager, Credit Risk

Geoff AustinExecutive General Manager, Lending Products

2

The material that follows is a presentation of general background

information about the Bank‟s activities current at the date of the

presentation, 28 September 2006. 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

Today

Strategy

Michael Cameron

Sales and Service

Mark Jones and Fred Pollock

Products

Geoff Austin and Michael Cant

Panel Questions

Including Vittoria Shortt and David Grafton

4

Notes

5

45% of Australians have a relationship with us

6

Notes

7

Huge scale of interactions

Branches

1,007

sites

ATMs

3,173

terminals

EFTPOS

130,000

machines

NetBank

1.2m

active

customers

Australia

Post

3,730

agencies

Call

Centre

7.5m

passwords

Brokers

6,200

brokers

8

Notes

9

Today

Results

Strategy and Priorities

Structure

Progress

Collaboration

10

Notes

11

Well positioned to grow

1,0671,101

800

900

1,000

Dec 04 Dec 05 Jun 06

Costs vs. same period last year ($m)

1,100

1,200

2,000

2100

2,200

2,562

Jun 05

2,576

Jun 06

2,297

Dec 04

2,300

Income vs. same period last year ($m)*2,700

2,400

700

800

900

1,000

Profit After Tax vs. same period last year ($m)

2,500

2,396

Dec 05

2,600

1,1081,132

Jun 05

* All figures reflect Retail Product costs and income only

894

Jun 05

900

Jun 06

772

Dec 04

817

Dec 05

+11.5% +7.5% +6.1%+0.6%

+15.8% +10.2%

42.00%

43.00%

44.00%

45.00%

47.00%

Cost-to-Income – half yearly

Dec 04 Jun 06

46.00%

Jun 05 Dec 05

46.5%

46.0%

44.2%

43.0%

12

Notes

13

Invest in the capabilities of our

frontline people to improve

customer experience

Offer competitive and

value-for-money products

Leverage our natural advantage

of convenience

Build a culture of service and

operational excellence

To be Australia’s finest financial services

organisation through excelling in customer service

Retail Bank Strategy

14

Notes

15

GROUPFUNCTIONS

PEOPLERobyn Worthington

COMMUNICATIONSStephanie Barry

MARKETINGMark Buckman

TECHNOLOGYDave Curran

BRANCHNETWORKDavid Marshall

DIRECT CHANNELS

Vacant

GROUP SALES& SERVICEFred Pollock

LENDING PRODUCTS

Geoff Austin

TRANSACTION& DEPOSIT PRODUCTSMichael Cant

RETAILOPERATIONS

Peter Abbott

STRATEGICDEVELOPMENT

Vittoria Shortt

CREDIT RISKMANAGEMENT

David Grafton

CHIEF FINANCIAL OFFICER

Gary Thursby

SALES PRODUCTS

SUPPORT

Delivering Service

16

Notes

17

People engagement

Customer satisfaction

Product competitiveness

Service efficiency

Clear Priorities

18

Notes

19

Frontline people now more passionate

Lost Time Injury Frequency Rate

8

10

12

14

16

18

20

Jul 05 Oct 05 Jan 06 Apr 06 Jul 06

Absenteeism

Jul 05 Oct 05 Jan 06 Apr 06 Jul 06

3.85

3.90

3.95

4.00

4.05

4.10

4.15

4.20

2004 2005 2006

4.00

4.14

4.20

Gallup Workplace Survey

Internal Customer Service [strongly agree]

23%

31%

36% 37%

44%47%

0%

10%

20%

30%

40%

50%

Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06

2.0

2.5

3.0

3.5

4.0

4.5

5.0

(max) 5.00

20

Notes

21

Happier Customers

0

1000

2000

3000

4000

5000

Customer Complaints 52% reduction in number of

complaints since July 2005

Jul

05

Oct Jan

06

Apr JulAug Sep Nov Dec Feb Mar May Jun

22

Notes

23

Happier Customers

* Nielsen Media Research – Percentage of customers very or quite satisfied with their MFI

^ Roy Morgan Research – Percentage of customers very or fairly satisfied with their MFI

Trend matches major banks

since July 2005

4.3% increase in July 2006,

second highest improvement

among majors50%

60%

70%

80%

90%

100%

Roy Morgan^

AC Nielsen*

Satisfaction Surveys

Sep

05

Jan

06

Apr JulJunMayMarFebDecNovOct

24

Notes

25

We’re listening

Products

NetBank saver

„Yellow‟ card

Removal of NetBank fees

New streamline accounts

Travel Plus

NetBank saver fast start (youth)

Business online saver

Know Your Money

26

Notes

27

We’re listening

Service

550 additional frontline people

65 branches open on Saturdays

Extended operating hours

New branches

Shorter queue times

New Customer Service

Measurement program

Auto coin counting machines

28

Notes

29

Credit growth

Total credit growth steady at 1.2% (monthly) since 01/2006

Housing credit growth for June at a two year high of 1.4%

Credit quality

Arrears stable or decreasing

Quality improving for new personal loans

Cre

dit

Gro

wth

%

Total Credit Housing Credit

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Delin

qu

en

cy %

(30+

days)

40

50

60

70

80

90

100

110

CBA Arrears & Probability of Default

Credit Cards

Personal Loans Home Loans

PL probability of default (RHS)

Pro

bab

ilit

y o

f d

efa

ult

in

dex

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jan

06

Apr JulJunMayMarFebDec

05

Aug

Jan

06

Apr JulJunMayMarFebDec

Positive momentum

CBA Credit Growth

30

Other Key Information Notes

31

Collaboration – we’re all talking

Sales & Service Reinvigoration of Cohen Brown

Insurance specialists in branches

Business Bankers in branches

People Standardised approach to leadership,

talent management, safety and learning

Trust and Team Spirit

Operational Efficiency CommWay bank-wide approach

Co-ordinated purchasing

Systems stability

32

Notes

33

1. Business indicators support positive momentum going forward

2. Positive people measures will result in a continuing uplift in engagement

3. Greater understanding of customers will increase our ability tosatisfy their needs

4. Service metrics will translate into improved customer satisfaction

5. Aligning processes around the customer experience will driveoperational excellence

Key Messages

34

Notes

35

Mark Jones

Regional General Manager

South & Western Australia

36

Notes

37

Customer Service

Integration of Channels

Branch Actions

Empowerment

Sales and Service

38

Notes

39

We‟re asking the customer

Independently measuring queue times and customer experience

Results linked to performance

Being there when the customer needs us

Staff recruitment and induction programs re-built to focus on core sales and service competencies

Customer Service - taking it seriously

40

Notes

41

Integration of channels - convenience

Convenient access supports channel choice

CommSee – single view of customers

One Team Referral

Increased focus on in-branch general insurance

sales, with 25% increase from August 2005 to August 2006

Alignment of KPIs to encourage channel integration

42

Notes

43

388 branches refurbished over the last three years

Three branches in new markets opened in the last nine months

Rolling out open-plan branch designs in suitable locations

Rolling out auto coin counting technology

New corporate wardrobe introduced February 2006

Branch actions – look and feel

44

Notes

45

Empowerment trial – local ownership

Trial commenced on Sunshine Coast in March 2006 with

positive trends in sales and service outcomes

Connecting with local communities

Business ownership mindset and culture emerging

Greater flexibility around

Local area marketing

Staffing

Campaigns

Opening hours

Uncapped bonus scheme for branch managers

aligned to profit and customer experience targets

Business Bankers in branches

46

Notes

47

1. Customer ServiceMore relevant and regular measurement linked to rewards

2. Integration of channelsGiving the customer the choice – supported by technology

3. Branch actions Improving our look and feel

4. Empowerment Local ownership

Key messages

48

Notes

49

Fred Pollock

Executive General Manager

Group Sales and Service

50

Notes

51

Objective

How will we go about it?

What can we learn from Group?

What are our critical success factors?

Sales and Service

52

Notes

53

Our objective

To support the Bank‟s vision by creating a world

standard sales and service culture

54

Notes

55

How will we support execution?

Significant investment

State-based support model

Partnership with Cohen Brown

Consistent and group-wide focus

56

Notes

57

What drove the change at ASB?

Cohen Brown SUCCESS

Serv

ice A

dvanta

ge

Ti me

Creation of a

sales & service

engine…

…extended to

support units

for internal

customers…

…putting the

right specialist

in front of the

customer at

the right time…

Concur r ent1994

Breakt hrough Se

rvi ceOne Team

One Team

Breakt hrough Se

rvi ce

Cohen Brown SUCCESS

….harnessing

the power of an

integrated

network

58

Notes

59

ASB

20

40

60

80

Dec

97

Jun

99

Jun

00

Jun

01

Jun

02

Jun

03

Jun

04

Jun

05

Custo

me

r S

atisfa

ctio

n %

& A

sse

ts $

bn

ANZ takeover of

NBNZ

ANZ Assets NBNZ Assets ASB Assets BNZ Assets

Westpac Assets ASB Satisfaction* Other Major Banks Satisfaction*

Superior Customer Satisfaction and Significant Asset Growth

* Source: Auckland Business School

60

Notes

61

Sovereign Insurance

15%

19%

23%

27%

31%

35%

Mar-04 Sep-04 Mar-05 Sep-05 Mar-06

Sovereign

Next two largest

Breakthrough Service Performance

launched In Support Areas

Ave

rage

in

forc

e +

ne

w m

ark

et sh

are

The positive impact of service culture

62

Notes

63

What are the critical success factors?

Passionate leadership from the top down.

Line driven training and mastery of the process.

Rewards and recognition linked directly to

sales and service outcomes.

Smart use of technology.

Clear expectations and effective follow up.

64

Notes

65

Geoff Austin

Executive General Manager

Lending Products

66

Notes

67

Home Loan book in good shape.

Significant improvement in personal loans new business

quality.

Some credit card market share appears value destroying.

Lending Products

68

Notes

69

Revenue and profit growth

more important than balance

growth

Avoid chasing unprofitable

balance & share growth

e.g. 0% card balance transfers

Effective margin

management

Consumer Finance*

+11.2%

+3.5%

* Personal Loans and Credit Cards. DEET (student loan) balances

added back for comparative purposes

+11.4% +16.4%

Home Lending

+11.4% +16.4%

Revenue and Profit Focus

70

Notes

71

Home Loan Book: well positioned to withstand stress

LVR Profile

Strong LVR profile

Majority of loans <60% LVR

Mortgage insurance in place for most loans >80% LVR

* Australian Owner Occupied and Investment Housing only, excludes Lines of Credit.

Number of loans as at 30 June 06 and market value as at 31 Mar 06. Market value marked

against the APM or Residex database

20%

40%

60%

80%

0 - 60 60.1 - 75 75.1 - 80 80.1 - 90 90.1+

LVR on original security value*

LVR at current market value*

Property ValueExpected Default Rate (PD)

PD x2 x4 x6

No decrease 10.3 14.1 20.1 24.8

10% decrease 27.3 38.4 56.7 70.6

20% decrease 58.6 84.8 128.6 161.8

30% decrease 103.6 153.1 236.4 299.4

Potential Loss $m

Mortgage Portfolio Stress Testing

Testing on conditions similar to 80‟s/90‟s UK recession shows losses < 3 months‟ Home Loan revenue

Additional insured losses of $175m covered by LMI in most extreme scenario shown

72

Other Key Information Notes

Underwriting – Low Doc criteria

All Low-Doc loans must have manual decisioning

(through specialist credit cell)

Credit cell does reasonableness test on declared

income vs. stated occupation and on asset holdings

relative to income declared

All Low Docs require external valuations

Applicant must have been self employed for at least

two years

Must be able to service loan according to Income

Serviceability test

Refinancing customers must provide satisfactory

evidence of repayment over last 6 months (aimed at

avoiding problem debts being recycled through

industry)

Credit Bureau checks are conducted on all Low Doc

facilities regardless of LVR

No Credit Underwriting Standard exceptions apply to

Low Doc loans

73

Low Doc Loans Prudently Managed

Low Doc pricing changes

have seen new business

mix settle at 3% - 4% of

new approvals

Low Doc specific credit

criteria in place to ensure

risks are minimised

Extra LMI protection

ensures risk profile

remains low

LVR for Low-Doc Loans

0% 60% 80% 100%

CBA Low Doc Loans by month as a

percentage of total mortgage approvals

0.7%

4.0%

3.8%

1.0%

2.0%

3.0%

4.0%

Jul

05

Jun

06

Jan

06

Pooled LMI coverage arranged by CBA LMI at customer cost Low Doc not available

74

Notes

75

Home Loan Initiatives: focus on risk

Valuation fraud risk is an increasing industry issue.

Systems and decision rules introduced to manage a significant expense.

Decision rules upgraded for new fraud environment.

Recent review of LMI arrangements confirmed continuation of external insurer rather than partial / full captive.

New APRA capital requirements inhibit acceptable risk-adjusted return on capital-intensive business.

LMI investment underway to deliver B2B solution.

Delivers efficiencies and improved operational controls.

76

Notes

77

Personal Loans: New Business Quality Improved

A number of

initiatives taken

Significant

improvements in the

expected Probability

of Default (PD)

This translates into

lower arrears levels

for more recently

approved loans

Month on Book = 2Month on Book = 3

Ind

exe

d A

rre

ars

Ra

teIn

de

xe

d A

cq

uis

itio

n Q

ua

lity

(PD

ris

k %

)

40%

60%

80%

100%

120% Higher

Risk

Lower

RiskAug

05

Jan

06

Aug

06

May

06

0.50%

1.00%

1.50%

2.00%

2.50%

Jun

04

Oct

04

Feb

05

Jun

05

Oct

05

Feb

06

Jun

06

78

Notes

79

Why we don’t offer zero percent balance

transfers

0% offers appear value

destroying with roll-over

to low-rate card margins

On marginal cost basis,

customer break-even for

“genuine” customers

between 12-24 months

(est.)

Significant risks of

obtaining transient,

expensive balances

^ Balance Transfer 0% for 6 Months then 50% retained at 10.99%

Spend $750 per month with 95% repaid each following month

* Cumulative costs at month 16 - ignores operating costs of card establishment/maintenance

$

-30

-20

-10

0

10

20

30

40

2 4 6 8 10 12 14 16

-90

-50

-10

10

50

90

110

Month

$

Funding Cost Fraud

Bad Debt Interest Income

Fee Income Cumulative^ (RHS)

Monthly Cash Flow per Card*

80

Notes

81

1. Home Loan book in good shape

Well positioned to withstand stressed conditions

2. Significant improvement in personal loans new business quality

Bad and doubtful debt profile expected to improve over time

3. Some credit card market share appears value destroying

Focus on profit and risk-adjusted returns is also good risk management

Key messages

82

Notes

83

Michael Cant

Executive General Manager

Transaction and Deposit Products

84

Notes

85

Competitive position and

strategy

Managing the back book

Update on recent product

initiatives

Transaction and Deposit Products

86

Key Information

Notes

87

Well placed in a competitive market

Convenience

1007

3173

817

2282

500

1500

2500

3500

Branches Branded ATMs

CBA Nearest major

Market Share: Balance vs. Balance Growth

No. 1 Branch Footprint

No. 1 ATM Network

Large retail customer base

Award winning product set

Most to gain in a rising

interest rate environment

Solid recent financial

performance

Number one share of

industry growth

Market Share - Balance v Balance Growth

NAB

ANZ

WBC

STG

CBA

0%

5%

10%

15%

20%

25%

30%

35%

0% 5% 10% 15% 20% 25% 30% 35%

Share of Balance %

Sh

are

of

Bala

nce

Gro

wth

%

88

Notes

89

Key elements of deposits strategy

Customer segmentation Understand customer

preferences and propensity

Targeted offerings by segment

Distribution Leveraging convenience

Outbound retention contact

Product and pricing Competitive products

Differentiated pricing strategies

Sales & Service roll-out will

underpin success

90

Notes

91

Effectively managing back book

substitution

Modest substitution to date

1.8% NetBank Saver

3.5% Streamline

Significant number of passive

customers

Product eligibility criteria

Use of targeted offerings by

segment

Overall deposits margin is

holding up

Deposit Revenue $M

2400

2450

2500

2550

2600

2650

2700

2004/05 2005/06

Product Mix %

NetBank Saver

Term Deposits

Transactions

All other20%

40%

60%

80%

100%

+6%

2004/05 2005/06

92

Notes

93

Understanding of customer is key

Smart analytics

Predictive models

Event based triggers

Targeted retention

and upsell activityLow

At Risk of Internal Migration

High

At R

isk o

f

Exte

rnal A

ttri

tion

High

Passive

Create

awareness

Proactive

upsell

Facilitate

transfers

Retention

focus

94

Notes

95

NetBank Saver:

growth with modest substitution

Significant improvement in

deposit balances growth

63% funds from external

sources

Only 1.8% of existing customer

balances have switched into

NetBank Saver (at June 06)

“Cost” of internal churn for 2006

approximately $15m (2bp)

Accompanied by an increase in

Streamline balances

62

66

70

74

78

Jul

04

Oct Jan

05

Apr Jul Oct Jan

06

Apr

All other

NetBank Saver

RBS Deposit Balances ($B)

7.6% growth

96

Notes

97

New Streamline: another success

7% increase in new accounts

per month vs. last year

55% of accounts are from

external sources

Fee revenue for many

customers not impacted by

“all you can eat” fee structure05 06

20,000

40,000

60,000

May June July August

Average 7% increase

Number New Transaction Accounts

98

Notes

99

1. We have improved our competitive position

Leading to good growth in balances and revenue

2. Management of the back book remains a key

Smart customer analytics and segmentation will help in managing the volume / margins trade off

3. Substitution has been modest

Margins are holding up

Key messages

100

Notes

101

Commonwealth Bank of Australia ACN 123 123 124

Retail Banking Services Update

Michael CameronGroup Executive, Retail Banking Services

28 September 2006

Mark JonesRegional General Manager, South & Western Australia

Fred PollockExecutive General Manager, Group Sales & Service

Michael CantExecutive General Manager, Trans. & Deposit Products

Vittoria ShorttGeneral Manager, Strategy Development

David GraftonExecutive General Manager, Credit Risk

Geoff AustinExecutive General Manager, Lending Products