Thank you for the opportunity to be here – the provision of banking services in regional areas is a very important topic.
The Commonwealth Bank has the largest branch network in the country with 728 branches across the CBA Group.
As the Committee has heard, the way customers engage with banks continues to change and this has meant a reduction in our branch footprint over time.
As the Committee will also be aware, we recently made a decision to pause all CBA regional branch closures until the end of 2026.
Bankwest has appeared in front of this Committee and has outlined our different strategy and approach to the way we engage with our Bankwest customers.
I would like to spend a few moments on some of the important considerations that have influenced our thinking.
Firstly, we recognise the unique and important contribution that regional Australia makes to our country.
As our branch footprint has reduced, we have chosen to skew closures towards metropolitan areas.
Today, around 40 per cent of our branches are in regional areas yet regional Australia only accounted for only 25 per cent of closures over the past four years.
To maintain a larger footprint in regional Australia we have also experimented with ways to manage reduced customer demand in branches.
For example, in a number of regional locations we have branches that open in the morning when demand is higher and then in the afternoon those same teams switch to taking calls from customers right across the country.
This provides the dual benefit of protecting face to face services and preserving regional jobs.
Secondly, substantial cross subsidies exist in the provision of banking services.
Building and maintaining the infrastructure to serve all our retail customers requires significant investment.
However, the continued investment required is very different depending on how customers engage with us: building and maintaining the Commbank app is different to keeping a branch open.
We spend $1 billion each year on our branch network and we pay tens of millions of dollars to Australia Post in order to maintain Bank@Post services.
Every year, we invest more to enable the digital economy including over $750 million a year protecting our customers from financial crime, cyber threats, scams and fraud.
As more and more customers use the digital economy, increasing investment is required to deliver the best digital experience in a way that is safe, secure and resilient.
On the other hand, continuing to offer non-digital services also involves continued expense.
For instance, transporting and making cash available around our vast country involves the considerable expense of logistics and security.
We estimate that continuing to support distribution and availability of cash costs CBA $400 million each year – which works out to roughly $40 for every one of our 10 million customers.
Many of our customers don’t use cash though – and these customers cross subsidise those that do.
Some level of cross subsidisation is of course inevitable in any large business – but it is problematic if the level of cross subsidisation gets too large.
As time goes on, it becomes unsustainable to invest substantial resources keeping expensive services that fewer and fewer customers use.
Which leads me to my third point, a sustainable commercial model does matter.
ATMs are an interesting example.
An ATM costs around $30,000 per year to operate.
In the six years since fees were removed, the number of major bank ATMs in Australia has more than halved.
While we have seen the demand for ATMs reduce, we have also seen growth of over 2,400 ATMs held by third party operators who need to charge fees in order to cover the operating costs.
While the number of ATMs we offer has reduced, we have chosen to maintain the largest and most convenient network - which is twice as large as our nearest major bank competitor.
However, the more we have services that either we don’t charge for, or that are used by a small number of customers, the more we are challenged to sustain these services.
This is especially true given we expect to see continued intensity in competition, with some participants in the market only prepared to serve more profitable customers.
We need to match both the service proposition and pricing of these competitors to enable us to keep serving as many Australians as possible.
And, like every organisation, we review our costs and revenue each year to ensure we're best allocating resources to deliver the best possible outcomes over the long term.
This is important given the speed with which customers are changing how they bank with us.
Five years ago, 43 per cent of all point of sale transactions were cash. Today, the figure is around 15 per cent.
And yet, every week, customers transact more than $18 billion through the CommBank app, an increase of 64 per cent in just two years.
The trends we see in Australia are even more pronounced around the world.
The final point I would like to make is that our decision to pause regional branch closures is also predicated on customers and communities valuing our decision to stay.
The reality today is that more than 90 per cent of customers stay with their existing bank after a branch is closed.
I remember meeting a community leader in a regional town who was challenging our decision to close a branch.
He told me of the negative effect that closing the branch would have on the community, particularly given it was the last in town.
But, consistent with our experience, he hadn’t moved his own banking and was a customer of one of our competitors which had long since left the town.
We hope to change this. I would like to see the Commonwealth Bank have a substantially higher market share in regional communities where we are the only bank in town.
Recently Warren Shire Council moved their banking to the Commonwealth Bank because one of our competitors closed three branches in their area.
We need to see more decisions like these to ensure the sustainability of our network.
So for other local councils, or small businesses, or farmers, home owners in regional areas: if you value CBA supporting your communities, we would be delighted to serve you.
We remain extremely optimistic about the future of regional Australia and I look forward to taking your questions this morning.