Comments on Statement of Financial Performance

For the year ended 30 June 2005

Except where otherwise stated, all figures relate to the year ended 30 June 2005 and comparatives for the profit and loss are to the Commonwealth Bank Group year ended 30 June 2004.

For the year ended 30 June 2005, the Commonwealth Bank Group recorded a net operating profit after income tax of $3,991 million, an increase of 55% over the prior year.

The net operating profit (‘underlying basis’) for the year ended 30 June 2005 after tax, and before goodwill amortisation, appraisal value uplift, investment returns on Shareholders’ funds in the funds management and insurance business and initiatives including Which new Bank was $3,466 million. This was an increase of $388 million or 13% over the year ended 30 June 2004.

The Group result comprised:

	$M
Underlying segment profit after tax
— Banking	2,959	up 11%
— Funds Management	351	up 28%
— Insurance	156	up 21%
	3,466
Shareholder investment returns (after tax)	177
Which new Bank (after tax)	(105)
Net profit after tax (cash basis)	3,538
Appraisal value uplift	778
Goodwill amortisation	(325)
Net profit after tax	3,991

Banking

The contribution to profit after tax from the Group’s banking businesses increased to $2,959 million, 11% over the prior year, reflecting:

• Strong volume growth in home lending, up 15% to $140 billion and personal lending, up 19% to $16 billion;
• Stable net interest margin since June 2004 to bring the full year NIM to 2.45%, eight basis points below the average for the prior year;
• Continued market share growth in the key retail lending products;
• Good cost control, with relatively flat costs; and
• Bad debt expense as a proportion of Risk Weighted Assets remaining at 17 basis points.

Funds Management

The contribution to profit after tax from the Group’s funds management business increased to $351 million, 28% over the prior year.

The performance reflects strong Funds under Administration growth of 12% to $123 billion at 30 June 2005 and tight cost control which limited operating expenses growth including commissions to 1%.

Insurance

The contribution from insurance to profit after tax was up $27 million to $156 million, 21% over the prior year. The improvement in performance reflects growth in inforce premiums and good investment markets.

Group Expenses

Total operating expenses for the Group were 6% lower than in the prior year, decreasing by $402 million to $5,847 million reflecting the fall in expenses on the Which new Bank program. Underlying costs were $5,697 million, up 4% on the prior year, principally related to increased salary costs.

In September 2003, the Group launched its Which new Bank customer service vision. This is a three year transformation program with an estimated spend of $1,480 million over the period. The Bank has continued to meet all of its Which new Bank commitments and critical project milestones, with significant net benefits resulting.

Income Tax

Income tax expense includes amounts on behalf of life insurance policy holders and corporate tax. During the year, total income tax expense increased by $375 million to $1,637 million. The corporate income tax expense increased by $350 million or 33% to $1,409 million for 2005. This resulted in an effective corporate tax rate of 28.4% in 2005, which was consistent with the prior year rate of 28.1%.

Appraisal Value1

For the year ended 30 June 2005, appraisal values of the life insurance and funds management businesses increased by $778 million. This increase in appraisal value reflects the growth in Funds under Administration and improved fund flows, while persistency levels and claims ratios improved across each of the insurance businesses.

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