Commonwealth Bank - Report to Shareholders 2003 - Message from the Chief Executive Officer

Message from the Chief Executive Officer

The Bank's result for 2003 was achieved after charging against the year's profit before tax $259 million of first time expenses relating to strategic initiatives and two years of costs associated with the employee share acquisition plan. Excluding these expenses and shareholder investment returns, there was a 9% improvement on 2002 (based on cash profit), slightly ahead of the industry average earnings growth rate.

The strategic initiatives implemented during the year were aimed at improving customer service and simplifying processes. The gross cost of these initiatives for the year was $214 million. Annualised future benefits of $165 million were ahead of target and in line with the Bank's commitment to annual improvements in productivity.

The Bank's Strategy

A leading market share position across our core products and our diversified business mix places the Bank in a good position to respond to two fundamental trends in the financial services sector.

Firstly, demographic changes are continuing to drive customers' needs to enhance their long-term financial wellbeing, leading to a greater demand for more sophisticated investment services, with trustworthy advice and helpful information.

Secondly, the extended period of easier monetary conditions and low interest rates that has boosted financial system growth and customer indebtedness is likely, at some point, to change - with most forecasters expecting continued lower inflation rates.

The major implications of these trends for the Bank are the need to provide superior service in a lower growth market, with pressure on margins; and the opportunity to benefit customers from our strong position in wealth management.

Consistent with this, we have modified our vision statement, simply "to excel in customer service". Our strategies to deliver this vision have been developed around three basic service-led requirements, namely the scope and quality of service, engagement of our people and effectiveness of our processes.

Customer Service - The Bank recognises that it has a significant opportunity to retain and increase the amount of business we do with customers by better identifying and meeting their financial needs. This can be achieved by bundling services according to the emerging needs of each customer and providing greater value to customers based on their relationship with the Bank.

People Engagement - Excelling in customer service is critically dependent on ensuring that our people are skilled, authorised, equipped, and engaged to deliver consistently good service to our customers. Key activities include aligning human resource systems to more closely support frontline staff in achieving better service standards, removing unnecessary layers of supervision thereby empowering people and streamlining decision making.

Processes and Systems - Over the past year, we set out to improve service and better engage our people by simplifying processes and systems. We removed some administrative functions from branches, streamlined business banking processes and commenced rationalisation of Insurance and Investment systems. This work will continue as we continue to review all major processes and seek to rationalise supporting procedures and computer systems.

Leading the Way Forward

Our strategic focus, in essence, represents a transformation that will enable us to increasingly take our lead from our customers and our people who support them. This transformation is about our culture and the way we do our day-to-day work - it is about the processes we use, the technology that supports us and the products that we offer.

While we have made some initial progress around credit approval times, queue lengths and complaint resolution, there is much still to be done. We have spent considerable time over the past year identifying key opportunities to reduce turnaround times, make it easier to get things done and remove key sources of customer frustration. Efficiency gains through this approach will deliver enduring benefits to both customer and shareholder and will enable us to redirect resources into activities that directly improve our ability to serve customers. At the same time, we have reaffirmed our commitment to being the most accessible financial organisation in Australia - the Bank for All Australians.

Consistent with the Chairman's Message, within the next six weeks we will announce details of the initiatives required to achieve our strategic objectives going forward. This will be a major test of the skill and dedication of our people. However, if past programs such as the Colonial integration and the progress made over the past twelve months are any guide, the strength of our people will prove to be our greatest asset.

I would like to place on record my thanks to all our people for their contribution to this year's result for our customers and shareholders.

Signature of David Murray

David Murray
Chief Executive Officer


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