Commonwealth Bank - Report to Shareholders 2003 - Review of Operations
 

Review of Operations

Profits

Net profit after tax chart

The statutory net profit after tax for the year ended 30 June 2003 was $2,012 million, a decrease of 24% on the prior financial year. Net profit after tax from ordinary activities ('cash basis') was $2,579 million, an increase of 3% on the prior financial year. The difference between statutory and cash profit comprises two non-cash items; the amortisation of goodwill and an adjustment to the appraisal value of the life and funds management businesses. The cash result reflects:

Earnings per Share

Cash earnings per share chart

Consistent with the decrease in statutory profit explained above, statutory earnings per share were 157 cents, down 53 cents on the prior year of 210 cents. Cash earnings per share were 203 cents, up 6 cents compared with 197 cents for 2001/2002.

Dividend

Dividends per share chart

A final dividend of 85 cents per share fully franked will be paid on 8 October 2003 to shareholders on the register at 5:00 pm on 29 August 2003. The ex dividend date is 25 August 2003. This brings the full year dividend to 154 cents per share fully franked.

The dividend is determined having regard to a number of factors including rate of business growth, capital adequacy, investment requirements, cyclical nature of returns in the insurance business and a range of other factors.

Return on Equity

Return on equity chart

Return on equity ('cash basis') was 13.3%, which represents a slight increase on the prior financial year.

Assets

Lending Assets Growth

Lending assets chart

Lending assets have increased by $14 billion or 9% over the prior financial year to $175 billion. This reflects improved market conditions for home lending, which has also increased by $14 billion or 17%.

Funds Under Management

Funds under management chart

Total funds under management (FUM) at 30 June 2003 were $94 billion, an 8% decrease for the year. This decrease is reflective of the difficult industry conditions faced during the year. Total FUM consists of $50 billion in retail FUM, $36 billion in wholesale FUM, $5 billion in cash management FUM and $3 billion in mastertrust FUM.

Capital Management

At 30 June 2003, the total Capital Adequacy ratio was 9.73% (well above the regulatory guideline of 8%) compared with 9.80% at 30 June 2002. This ratio does not include the USD 550 million hybrid capital issue undertaken on 6 August 2003. The Bank's credit ratings have remained unchanged for the year. At 30 June 2003, the Bank's credit ratings were:

Summary of the Commonwealth Bank's Credit Ratings
Credit Ratings Short terms Long term

Standard & Poor's Corporation A-1+ AA-
Moody's Investors Service, Inc. P-1   Aa3 
Fitch IBCA F1+ AA 

Shareholders

The five year total shareholder return to 30 June 2003 was 14.9%(1), calculated by combining dividends and the movement in the value of the Group's shares. The dividend yield was 5.1% based on the 30 June 2003 share price of $29.55 and calculated on the dividend payments of 82 cents (June 2002) and 69 cents (December 2002). The dividend to ordinary shareholders for the year ended 30 June 2003 represents 75.9% of the cash earnings available to ordinary shareholders of $2,543 million(2).

For information on the performance of our main businesses, please refer to the Business Overview section of this report.

(1) Source: Bloomberg.
(2) Cash profit of $2,579 million less $36 million paid to holders of PERLS.