Harrystaff What do you think?, page-8

EARNINGS PREVIEW
*CBA shall report their FY2002 result on 21 August (next Wednesday). Expect Cash NPAT of $2,480m (reflecting EPSg of 10.2%) and a final dividend of 82c f.f.
*Positive earnings drivers are expected to be net interest margins, transaction fees and some cost cutting. Negative drivers include investment returns from life insurance operations and wealth management profits.
*Investors shall focus on the outlook for wealth management and double digit forecasts (including investment market caveats).
*CBA, is a good counter cyclical bank play given its large retail register and retail earnings characteristics. It offers large productivity upside.
But it is still early days.
*Key long term success drivers are cross sell (CRM, First State and CommSec), customisation (to the premium retail segment) and cost constraint.
*CBA enjoys a productivity lag versus its peers. The $300m targeted savings from BCG review accompanied by the shift from 15 to 7 reporting lines should assist in
reducing this lag.
*Management restructure should re-ignite organic focus, with the recent hiring of Mr Stuart Grimshaw as CFO a positive.
*CBA is well capitalised, with strong excess cashflow generation supporting good levels of organic growth, despite a capital intensive life insurance franchise.
*Near term pressure offered by falling investment markets may hurt the near term earnings picture, particularly given that bank investors do not generally differentiate between a $ of earnings from this source versus annuity earnings streams.