David Murray Securities Institute of Australia 9 May 2001 commbank.au

1. David MurraySecurities Institute of Australia  9 May 2001www.commbank.com.au

2. 1 The material that follows is a presentation of general background information about the Bank�s activities current at the date of the presentation, 9 May 2001. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate. Disclaimer

3. 2 Speaker�s Notes Speaker�s notes for this presentation are attached below each slide. To access them, you may need to save the slides in PowerPoint and view/print in �notes view.�

4. 3 Changing Environment Strategy Agenda

5. 4 CURRENCY The currency weakness has longer term implications for productivity and offshore growth. To remain attractive to offshore investors you have to increase the rate of productivity gain ( to offset the currency effect). Additionally, we can seek to generate greater overseas growth, however, if this is via offshore acquisitions, the currency has made it harder. The current tax regime also makes it difficult, in particular, for the treatment of franking credits in relation to overseas income and the dividend withholding tax paid by Australian companies on offshore earnings.CURRENCY The currency weakness has longer term implications for productivity and offshore growth. To remain attractive to offshore investors you have to increase the rate of productivity gain ( to offset the currency effect). Additionally, we can seek to generate greater overseas growth, however, if this is via offshore acquisitions, the currency has made it harder. The current tax regime also makes it difficult, in particular, for the treatment of franking credits in relation to overseas income and the dividend withholding tax paid by Australian companies on offshore earnings.

6. 5 Wealth Distribution and Ageing WEALTH DISTRIBUTION AND AGEING The lack of national savings is a serious issue. Around 2010, the �baby boomers� start to move out of the workforce and that is the first time we will have more people out of the workforce than in it. The implication in Australia is that more people will be dissavers than savers. This makes it imperative for people to save now for their retirement and for superannuation contributions to be adequate. As you can see in the graphs, Australia is among a number of countries in the same position. Our going in position is reasonable ( superannuation, retirement funds etc.) but we are a small market and our level of savings is low, investment confidence weak, and the productivity outlook weakening.WEALTH DISTRIBUTION AND AGEING The lack of national savings is a serious issue. Around 2010, the �baby boomers� start to move out of the workforce and that is the first time we will have more people out of the workforce than in it. The implication in Australia is that more people will be dissavers than savers. This makes it imperative for people to save now for their retirement and for superannuation contributions to be adequate. As you can see in the graphs, Australia is among a number of countries in the same position. Our going in position is reasonable ( superannuation, retirement funds etc.) but we are a small market and our level of savings is low, investment confidence weak, and the productivity outlook weakening.

7. 6 Regulation Growing influence of populism More than 25 inquiries currently underway Declining understanding of industry�s role and operation Increasing trend to micro regulation REGULATION The paradox of globalisation is that a deregulatory trend is spawning micro regulation. Public policy needs to take account of unintended consequences of this paradox. Commonly it hurts investment, limits the availability of goods and services and focuses the delivery of services on the well off to the detriment of the poor.REGULATION The paradox of globalisation is that a deregulatory trend is spawning micro regulation. Public policy needs to take account of unintended consequences of this paradox. Commonly it hurts investment, limits the availability of goods and services and focuses the delivery of services on the well off to the detriment of the poor.

8. 7 Technology TECHNOLOGY Previously, many productivity improvements were achieved by getting greater scale within existing systems, for example, by centralising back office processing. However, with web technology both productivity and service can improve simultaneously. There are countless possibilities. For example, the introduction of cheque imaging with front office enablement, allows our staff to answer a host of enquiries instantly - whether it be about stop cheques, legal evidence, etc. The consequence is that there are enormous productivity and service enhancements in prospect. At the same time, the combination of third party processing and direct access systems and securitisation has radically altered the competitive dynamics of distribution. How financial institutions adapt to this is significantly dependent on their people systems. TECHNOLOGY Previously, many productivity improvements were achieved by getting greater scale within existing systems, for example, by centralising back office processing. However, with web technology both productivity and service can improve simultaneously. There are countless possibilities. For example, the introduction of cheque imaging with front office enablement, allows our staff to answer a host of enquiries instantly - whether it be about stop cheques, legal evidence, etc. The consequence is that there are enormous productivity and service enhancements in prospect. At the same time, the combination of third party processing and direct access systems and securitisation has radically altered the competitive dynamics of distribution. How financial institutions adapt to this is significantly dependent on their people systems.

9. 8 People PEOPLE Application of new technology always has the effect of fracturing work and social systems. Some employees are de-skilled and those with technical know-how can bargain and become increasingly mobile. In this environment the challenge is to use technology to upskill staff dealing directly with customers, and to build and retain the skills of the specialists. In such an environment flexibility is paramount. Yet most large established banks have outdated industrial structures, built on a �one size fits all� basis, created many years ago. The challenge is to build people systems which reflect the work system (and related customer service standards) at each point in the value chain. If anything, the industrial relations arrangements in the banking industry are challenging competitiveness and harming the career prospects of our own staff. None of the required people outcomes can be achieved without effective leadership from the supervisory level up. PEOPLE Application of new technology always has the effect of fracturing work and social systems. Some employees are de-skilled and those with technical know-how can bargain and become increasingly mobile. In this environment the challenge is to use technology to upskill staff dealing directly with customers, and to build and retain the skills of the specialists. In such an environment flexibility is paramount. Yet most large established banks have outdated industrial structures, built on a �one size fits all� basis, created many years ago. The challenge is to build people systems which reflect the work system (and related customer service standards) at each point in the value chain. If anything, the industrial relations arrangements in the banking industry are challenging competitiveness and harming the career prospects of our own staff. None of the required people outcomes can be achieved without effective leadership from the supervisory level up.

11. 10 Group Strategy GROUP STRATEGY Our strategy deals with an environment of : low inflation; technology shift; competition and margin squeeze; ageing population and rate of change; and online services and wealth creation. The Colonial merger was an implementation of this strategy. GROUP STRATEGY Our strategy deals with an environment of : low inflation; technology shift; competition and margin squeeze; ageing population and rate of change; and online services and wealth creation. The Colonial merger was an implementation of this strategy.

12. 11 Accelerated Change ACCELERATED CHANGE If we contrast that environment with the environment I have just described, clearly the new issues are: currency; regulation; further shift in technology; and people. So, how do we adapt our strategy to those new issues? ACCELERATED CHANGE If we contrast that environment with the environment I have just described, clearly the new issues are: currency; regulation; further shift in technology; and people. So, how do we adapt our strategy to those new issues?

13. 12 Accelerated Change ACCELERATED CHANGE Currency The object of our response to currency weakness is to ensure that our domestic and foreign shareholders hold a financial institution stock of relevance in the globalising industry. Regulation We now have to do a lot more to encourage understanding among the community and regulators of the ultimate higher costs of regulation. Meanwhile productivity improvement is the only offset. Technology The Group will implement enterprise wide web-enabled technology which deals with productivity change, HR systems and service all at once. Significant process re-engineering is intended to improve cycle times and improve interaction times with customers. Continuing development of on-line services, for example NetBank, ComSec and Quickline for business customers. The big change lies in very significant investment in the next few years to improve the quality of service and materially lift productivity to bring better quality service to the market. Web enablement, customer relationship management and end to end processes are important. That is, quality service is key at the front end, and streamlined systems and processes are vital at the back end. People Up-skilling and development processes will cover graduate and high potential development programmes and career mapping for all staff, accessed through a web-enabled HR system. More flexible reward structures linked to customer service scores. Continuing development of leadership programmes, commenced three years ago.ACCELERATED CHANGE Currency The object of our response to currency weakness is to ensure that our domestic and foreign shareholders hold a financial institution stock of relevance in the globalising industry. Regulation We now have to do a lot more to encourage understanding among the community and regulators of the ultimate higher costs of regulation. Meanwhile productivity improvement is the only offset. Technology The Group will implement enterprise wide web-enabled technology which deals with productivity change, HR systems and service all at once. Significant process re-engineering is intended to improve cycle times and improve interaction times with customers. Continuing development of on-line services, for example NetBank, ComSec and Quickline for business customers. The big change lies in very significant investment in the next few years to improve the quality of service and materially lift productivity to bring better quality service to the market. Web enablement, customer relationship management and end to end processes are important. That is, quality service is key at the front end, and streamlined systems and processes are vital at the back end. People Up-skilling and development processes will cover graduate and high potential development programmes and career mapping for all staff, accessed through a web-enabled HR system. More flexible reward structures linked to customer service scores. Continuing development of leadership programmes, commenced three years ago.

14. David MurraySecurities Institute of Australia  9 May 2001www.commbank.com.au