Commonwealth Bank of Australia : Items impacting CBA's financial reporting

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Items impacting CBA's financial reporting

Monday, 31 January 2022 SYDNEY: Commonwealth Bank of Australia (CBA) today provides an update on the completion of the Colonial First State (CFS) divestment; the impact from weather event related claims on the Group's Insurance Income for the half ended 31 December 2021; and changes to financial reporting including 1H22 financial comparatives (refer to Attachment A for detailed comparatives tables).

1. Update on the capital and financial reporting impact from divestments

The divestment of CBA's 55% equity interest in CFS to KKR completed on 1 December 2021. The Group has retained a 45% interest in CFS which is accounted for as an investment in associate. The associated sale proceeds were repatriated to the Group during December 2021, resulting in a 32 basis point uplift to the Group's Common Equity Tier 1 (CET1) ratio, based on the Group's risk weighted assets as at September 2021.

2. Insurance claims from customers affected by weather related events

CBA has recognised a loss of $85 million, net of reinsurance recoveries, for the half year ended 31 December 2021 for insurance claims and associated costs from customers affected by the hail and storm weather events in the East Coast, South Australia and Tasmania during October 2021.

3. Financial reporting changes in the 31 December 2021 half year profit announcement

Changes to financial reporting arising from revised accounting treatments of certain facilities and line fees impacting prior period financial statements

During the half year ended 31 December 2021, the Group performed a review of corporate and business lending credit limit and drawdown data, and identified a sustained increase in utilisation levels for certain products. As a result, facility and line fees on these products were reclassified from other banking income to net interest income, in line with the Australian Accounting Standards. There was no impact on the Group's Cash Net Profit After Tax (Cash NPAT). The impact on the individual operating income lines and the Group's Net Interest Margin for the comparative periods were:

• An increase in net interest income and a decrease in other banking income for the half years ended 30 June 2021 and 31 December 2020 of $234 million and $229 million respectively;

Commonwealth Bank of Australia | Media Release 008/2022 | ACN 123 123 124 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

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• An increase in net interest margin of 5 basis points for the half years ended 30 June 2021 and 31 December 2020. That is an increase in reported net interest margin from 204 basis points to 209 basis points for the half year ended 30 June 2021, and 201 basis points to 206 basis points for the half year ended 31 December 2020.

Changes to financial reporting arising from the simplification of CBA's operating model

Continued enhancement of our classification of portfolios have been made during the current half which results in changes to comparative financial information. These changes have not impacted CBA's cash net profit after tax (NPAT), but result in changes to the presentation of the Divisional Income Statements and Balance sheets of the affected divisions. The key changes are:

• The transfer of some customers between Retail Banking Services, Business Banking and Institutional Banking and Markets.
• Refinements of the allocation of capital and support units costs.

A summary of the impacts of financial reporting changes on financial comparatives, and restated financial comparatives is included in Attachment A.

4. Half year results announcement

Commonwealth Bank of Australia (CBA) is scheduled to announce its half year results on 9 February 2022. A virtual results briefing will be webcast with Chief Executive Officer, Matt Comyn, and Chief Financial Officer, Alan Docherty, at 11:00am (Australian Eastern Daylight Savings Time) on 9 February 2022. This briefing will be available via webcast on the Commonwealth Bank Investor Centre (www.commbank.com.au/about-us/investors/results).

Contact Details
Danny John	Melanie Kirk
Media Relations	Investor Relations
02 9118 6919	02 9118 7113
[e-mail]	[e-mail]

The release of this announcement was authorised by the Continuous Disclosure Committee.

2 Commonwealth Bank of Australia | Media Release 008/2022 | ACN 123 123 124 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

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Attachment A

Impact of Current Half Financial Reporting changes on the Prior Periods

Divisional cash NPAT from continuing operations

The impact of the following change is presented below:

• Re-segmentationsand allocations

			Half Year Ended 30 June 2021
	Retail		Institutional		Corporate
	Banking	Business Banking and	New	Centre
	Services	Banking	Markets	Zealand	and Other	Group
	$M	$M	$M	$M	$M	$M
Cash NPAT (continuing operations) - as published	2,610	1,423	499	624	(371)	4,785
Restatements in the current half:
Re-segmentations and allocations	(69)	48	1	1	19	-
Total restatements	(69)	48	1	1	19	-
Cash NPAT (continuing operations) - as restated	2,541	1,471	500	625	(352)	4,785

		Half Year Ended 31 December 2020
	Retail		Institutional		Corporate
	Banking	Business Banking and	New	Centre
	Services	Banking	Markets	Zealand	and Other	Group
	$M	$M	$M	$M	$M	$M
Cash NPAT (continuing operations) - as published	2,196	1,335	423	535	(621)	3,868
Restatements in the current half:
Re-segmentations and allocations	(41)	34	3	1	3	-
Total restatements	(41)	34	3	1	3	-
Cash NPAT (continuing operations) - as restated	2,155	1,369	426	536	(618)	3,868

3 Commonwealth Bank of Australia | Media Release 008/2022 | ACN 123 123 124 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

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Attachment A

Divisional cash NPAT from continuing operations by Income Statement line items

The impact of the following change is presented below:

• Re-segmentationsand allocations

		Half Year Ended 30 June 2021
	Retail		Institutional		Corporate
	Banking	Business Banking and	New	Centre
	Services	Banking	Markets	Zealand	and Other	Group
	$M	$M	$M	$M	$M	$M
Cash NPAT (continuing operations) - as published	2,610	1,423	499	624	(371)	4,785
Restatements:
Increase/(decrease) in Operating income	(69)	69	(1)	2	(1)	-
(Increase)/decrease in Operating expenses	(10)	(10)	3	-	17	-
(Increase)/decrease in Loan impairment expense	(9)	9	-	-	-	-
(Increase)/decrease in Corporate tax expense	19	(20)	(1)	(1)	3	-
Total restatements	(69)	48	1	1	19	-
Cash NPAT (continuing operations) - as restated	2,541	1,471	500	625	(352)	4,785
		Half Year Ended 31 December 2020
	Retail		Institutional		Corporate
	Banking	Business Banking and	New	Centre
	Services	Banking	Markets	Zealand	and Other	Group
	$M	$M	$M	$M	$M	$M
Cash NPAT (continuing operations) - as published	2,196	1,335	423	535	(621)	3,868
Restatements:
Increase/(decrease) in Operating income	(65)	64	1	1	(1)	-
(Increase)/decrease in Operating expenses	3	(10)	4	-	3	-
(Increase)/decrease in Loan impairment expense	4	(4)	-	-	-	-
(Increase)/decrease in Corporate tax expense	17	(16)	(2)	-	1	-
Total restatements	(41)	34	3	1	3	-
Cash NPAT (continuing operations) - as restated	2,155	1,369	426	536	(618)	3,868

4 Commonwealth Bank of Australia | Media Release 008/2022 | ACN 123 123 124 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000

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Attachment A

Divisional Cost to Income Ratios from continuing operations

The impact of the following change is presented below:

• Re-segmentationsand allocations

		Half Year Ended 30 June 2021
	Retail		Institutional	New
	Banking	Business	Banking and	Zealand
	Services 1	Banking	Markets	(in NZD)	Group
	%	%	%	%	%
Operating expenses to total operating income	37. 6	41. 3	46. 7	41. 2	47. 3
(continuing operations) (%) - as published
Operating expenses to total operating income	38. 4	40. 8	46. 4	41. 2	47. 3
(continuing operations) (%) - as restated

			Half Year Ended 31 December 2020
		Retail		Institutional	New
		Banking	Business	Banking and	Zealand
		Services 1	Banking	Markets	(in NZD)	Group
		%	%	%	%	%
Operating expenses to total operating income	39. 2	36. 2	39. 2	38. 7	46. 7
(continuing operations) (%) - as published
Operating expenses to total operating income	39. 7	35. 8	38. 9	38. 7	46. 7
(continuing operations) (%) - as restated
1	Excludes Mortgage Broking and General Insurance.

5 Commonwealth Bank of Australia | Media Release 008/2022 | ACN 123 123 124 Ground Floor Tower 1, 201 Sussex Street, Sydney NSW 2000