Policy for managing conflicts of interest

Frequency of reporting

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.

Supervision of analysts

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.

Sign-off procedures

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.

Conflict of interest procedures

Potential conflicts of interest are controlled in a number of ways:

• No research staff report to client, trading or transactional areas as regards the determination of salary or bonuses, or in the content of their research;
• Where research staff assist product or transaction teams, this is controlled by Chinese-wall  procedures;
• Staff may not receive gifts or inducements;
• While staff can hold stock in the sector they cover, their trading is strictly controlled, and subject to specific restrictions whenever they are preparing research, or before company results presentations;
• The trading of all staff is subjected to a restricted list maintained by Compliance;
• Research is not circulated prior to release;
• We do not provide recommendations on our own company or its products;
• There are strict barriers to prevent analysts having access to non-public information.
• We declare when members of the CBA group own more than 5% of any company which is the subject of research.
• We declare when members of the CBA group have provided material non-research services to subject companies in the past two years.  

Methodology of equities valuation

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.

Definitions used in making recommendations

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. 

Interests in the Bank above 5%

As at 8 July 2010, there are no shareholders who owned more than 5% of the stock in the Commonwealth Bank of Australia. 
 

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