Research is published either regularly (daily, weekly etc) or as driven by events.
The regular publications cover economics, credit, debt, currencies, commodities and quantitative research. Most of these areas also have weekly overviews and monthly summaries.
The event driven style dominates in equities although when important events happen, when rates change, or when data is released, the other research areas will often respond by producing a one-off piece of research.
Analysts report to their respective Heads of Research.
These Heads of Research have responsibility for the work of analysts and are the final arbiters of editorial content.
The respective Head of Research reports into The General Manager Institutional Equity and Debt Capital Markets who has only limited responsibility i.e. high level strategic direction and resource allocation.
The Executive General Manager in charge of Global Markets makes final judgement on salaries, bonuses etc.
Most research is signed-off by the respective Head of Research producing the research and the senior researcher producing it.
Changes to stock recommendations must be signed-off by an appropriate review panel or senior analysts.
No member of the Bank outside the research teams is involved in reviewing draft research reports.
Only members of the Research Team can determine the comments and information that is to be included in research reports.
Potential conflicts of interest are controlled in a number of ways:
The valuation of equities involves significant data input combined with the judgement of the research team. Most teams produce a discounted cash flow model of the company concerned, consider price earnings ratios for comparable companies, and review a wide range of other standard metrics, which they combine with informed judgement to produce a final valuation.
CBA institutional Equities Investment recommendations are determined by the covering analyst and reflect the analyst’s assessment of a stock’s expected total shareholder return (TSR). TSR is calculated as the difference between the analyst’s 12-month price target and the current share price plus the forecast dividend yield.
|BUY||Stocks with a Buy recommendation represents the most attractive stocks under the analyst’s coverage. They are forecast to generate significantly positive expected total shareholder returns.|
|HOLD||Stocks with a Hold recommendation are less attractive than stocks with a Buy recommendation. They are forecast to generate flat to slightly positive expected total shareholder returns.|
|SELL||Stocks with a Sell recommendation are the least attractive stocks. They are forecasts to generate flat or negative expected total shareholder returns.|
As at 8 July 2010, there are no shareholders who owned more than 5% of the stock in the Commonwealth Bank of Australia.
Structure of calls
As at 8 July 2010, the proportions of equity recommendations in each category are given below. We cover about 80 large cap stocks.
The following table details the calls we have on entities in which the CBA Group had a lead or co-lead mandate during the 12 months to 8 July 2010.
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Analyst Certification and Disclaimer: Each research analyst, primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the report. The analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing, and interpreting market information. Directors or employees of the Group may serve or may have served as officers or directors of the subject company of this report. The compensation of analysts who prepared this report is determined exclusively by research management and senior management (not including investment banking). No inducement has been or will be received by the Group from the subject of this report or its associates to undertake the research or make the recommendations. The research staff responsible for this report receive a salary and a bonus that is dependent on a number of factors including their performance and the overall financial performance of the Group, including its profits derived from investment banking, sales and trading revenue.
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