Wednesday, 26 May 2010

BANKS REVIEW
ANZ Banking Group (ANZ) Commonwealth Bank (CBA)
Same offices, different strategies | 8 Connaught Place, Hong Kong

Analyst Email Contact

| | |

Stewart Oldfield soldfield@baillieu.com.au 03 9602 9255

Disclosure: The author owns no shares in ANZ or CBA.

E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

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ANZ BANKING GROUP (ANZ)

Short Term: Long Term: Risk: Price: Price Target: Hold Hold Medium $21.34 $23.94

COMMONWEALTH BANK (CBA)

Short Term: Long Term: Risk: Price: Price Target: Buy Buy Medium $50.31 $57.75

Snapshot Monthly Turnover Market Cap Shares Issued 52 Week high 52 Week Low Sector $6,200.7m $54,070m 2,533.7m $26.23 $14.90 Financials

Snapshot Monthly Turnover Market Cap Shares Issued 52 Week high 52 Week Low Sector $7,050.0m $77,916m 1,548.7m $60.00 $33.95 Financials

12 month Price and Volume

12 month Price and Volume

E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

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ANZ is not the only Australian major bank offering exposure to Asia
We believe that it is wrong for investors to consider that ANZ represents the only meaningful leverage to Asian growth in the financial services industry. It is true that ANZ has the most aggressive expansion plans of the major Australian banks. But thanks to its growing footprint in Asia and its status as having the biggest bank presence in the China-leveraged Western Australian economy we see CBA as offering lower risk yet still credible leverage to the globes fastest growing region. For instance CBA chief Ralph Norris has said publicly that BankWest could contribute between 10 percent and 12 percent of domestic bank earnings within 18 to 24 months as bad debts subside and the Western Australian economy reasserts itself as the countrys engine room. Within the next five years we expect CBA to derive a meaningful and sustainable if not significant (currently significant profit contribution is about $350 million for CBA) profit directly from its Asian operations as it, for instance, doubles its footprint in Indonesia. In other words from a scale perspective Asia is a medium to long term play for CBA. Unlike ANZ, CBA is not under pressure to make decisions in the short term that are key to meeting long-term goals. With Chinese banks such as Industrial and Commercial Bank of China (ICBC) looking to aggressively expand outside the mainland through acquisition we do not see the current time as ideal for ANZ to be looking to grow through acquisition in Asia. In hindsight a decade ago when Asia was gripped in its own financial crisis now looks in hindsight to have been the best time to expand.
$A

reputation in Asia amongst regulators and other key stakeholders. With ANZ planning a site visit of their Asian operations in June we believe that it is an ideal time for investors to review the strategies of both ANZ and CBA in the region. ANZ and CBA are pursuing very different growth strategies in Asia. In simple terms ANZ is pursuing more of a crossborder strategy while CBA is focussed on in-market growth in a limited number of countries. ANZ has historically fostered trade business which CBA did not target. This allows it to pursue a more traditional growth strategy in Asia for instance by targeting trade finance activities. Traditionally trade finance, cash management, global markets and general banking are seen as the easiest means to enter a new market as an international entrant. Consumer and SME banking work less well as these segments usually require local scale and depth.

The typical ramp up in Asia by a foreign player

Open an unprofitable representative office which is essentially devoted to meeting and greeting. Establish a subsidiary. Start with trade finance and foreign exchange Offers cash management and other deposit services. Enter some capital markets operations such as derivatives on interest rates Start lending to Australian companies operating in the region. Start lending to multi-nationals operating in the region. Start credit assessment work Then take on some national corporations.

Market capitalisation - Chinese banks win

300 250 200 150 100 50 0 ICBC CCB BOC CBA WBC ANZ NAB

CBA looks to be at least five years behind ANZs rollout and is adopting a more measured approach to expansion. In contrast we believe it is possible that ANZ could contemplate a transforming deal in a number of jurisdictions including either Hong Kong (the headquarters of its institutional business or Singapore (the base of its retail operations) if one became available. We see these two markets as more mature with greater competition. In our view neither bank can yet claim sufficient critical mass in Asia for a sustainable operation but ANZ is obviously closest to that goal. Number of branches in Asia CBA ANZ How many countries? CBA ANZ 7 13 80 about 170

Neither CBA or ANZ has the trackrecord in Asia of the most successful foreign participants HSBC or Standard Chartered. However the two Aussie banks are amongst only a handful of foreign banks with the capacity or inclination to aggressively expand in the region over the next few years. Others banks looking to expand their regional presence in Asia include a handful of banks out of Japan and China. Unlike ANZ, CBA has the premier retail banking franchise in Australia on which to build its Asian franchise, it trades at a significant premium to its peers and has at least as good a

E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

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The current profitability of the two businesses is very different. The financial disclosure by CBA on its Asian operations is not extensive. In the December half CBAs International Financial Services Asia business made just $22 million profit, double the same period a year earlier. However IFS Asia does not include the institutional banking and markets and Colonial First State global asset management businesses operating out of Asia. We expect CBA could double its profit contribution from Asia again this year on the back of a strong performance from its Chinese investments in particular. By contrast ANZ made $230 million out of the Asian Pacific operations in the March half, 10 percent of group profit. If European and American operations are included this rises to 13 percent of group profit. Unlike CBAs disclosures this includes institutional and wealth businesses. But with acquisition opportunities in its home market limited by competition concerns we believe CBA is now more aggressively looking to Asia as a source of future growth. The GFC has elevated the stature of the Australian banks to a new level encouraging them to push more aggressively into overseas markets. In the past two years ANZ has attracted some impressive talent from the likes of HSBC, Standard Chartered Bank and Citi as it rolls out its platform in the region. CBA has also attracted some talent. The recent hiring of Indonesian specialist Tony Costa from Rabobank as President Director (Head) of CBAs Indonesian Bank (PTBC), is evidence of CBAs growing ambitions and stature in Indonesia. Prior to the GFC we doubt an Australian bank could attract someone of Costas calibre into their Asian operations. CBA looks to be taking a long-term and necessarily patient approach to building its business in Asia. ANZ is a higher risk proposition in our view.

Longer term all the major banks have to look beyond Australian shores for higher growth rates and we expect Asia to be the premier source of global growth for decades to come.

National Australia Bank may disagree but we believe Australian banks have little to offer European or American banking markets. By contrast, Australia operates in Asias time zone, is geographically closer and has stronger trade linkages.

Further there is the old adage that the banking services in developing economies expand faster than growth in gross domestic product. Therefore while China grew its GDP by less than 10 percent last year its retail and commercial banking markets each expanded by more than 30 percent. Experienced banking executives in the region see no reason for this level of growth to moderate in the short-term.

Why Australian banks should be expanding into Asia

Currently each of the major banks source more than 80 percent of their profits from Australia and New Zealand.

The challenges
In hindsight the best time to deals in Asia would have been in the wake of the tech boom. Like now the Australian banks were relatively strong, but unlike this time around, the Asian banks were then in relatively poor shape.

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Bank values Indonesia Hong Kong Malaysia Singapore Australia

P/E (2011) 11.5 11 12.5 12 12.2

P/B (2012) 2.4 1.7 1.9 1.4 1.8

With shareholders money already in its back pocket ANZ can undertake transactions that are dilutive in the short to medium term. ANZ maintains that attractive acquisition opportunities in Asia still exist particularly as capital constrained foreign banks wind back their operations in the region. One of the most obvious is the Chinese and Indian operations of RBS. The sale of the assets that RBS wants to sell in these countries looks to have been delayed by regulatory issues. We estimated that ANZ could spend more than $2 billion on an acquisition in Asia without threatening their conservative capital levels. We note that ANZ CEO Mike Smith has also flagged the possibility of a transformational deal within five to 10 years. In presentations to the market ANZ has warned investors not to expect the same returns from Asia in the mean time as the bank has been able to generate in Australia as it builds up its Asian footprint. ANZ commented in 2008: Below group average ROC in early years supported by high organic growth They partly attribute this to the capital intensity of the startup phase. This should serve as a warning to shareholders with a short to medium term focus in our view. We see execution, acquisition and key-man risk (Mike Smith) all being more prevalent with ANZ than CBA. This should not be seen as a personal slight against the efforts of ANZ. The first years of a multi-year transformational strategy of any organisation are inherently the most risky. However this does mean that the risk profile of ANZ should be seen as fundamentally different to CBA and Westpac (NAB should also be considered higher risk because of its exposure to the basketcase UK economy).

We see CBA as having a lower-risk strategy that is not dependent on acquisitions that are becoming more difficult to execute at attractive multiples as the world recovers from the GFC. Chinese banks are now expanding aggressively in the region. For instance we understand that Chinese interests were underbidders to the sale of a stake in Bank International of Indonesia which forced Maybank of Malaysia to eventually pay more than four times book for the asset. Valuation of Asian banking stocks have risen 70 percent in the past year.

Bloomberg Asia Pacific Banks Index

240 220 200 180 160 140 120 100 80

Back closer to longer-term average price to book multiples

4 3.5 3 2.5 2 1.5 1 0.5 0

CBAs strategy in Asia

CBA is following an In market strategy essentially as a domestic bank in the Asian countries it is targeting. They are attracted to the higher net interest margins, higher top line growth and diversification benefits of Asia. CBAs footprint is well defined, with the focus being on the high growth Chinese, Indonesian and Vietnamese markets. Their other exposures in Japan and India are considered longer term and more difficult prospects. They see themselves as being able to offer potential partners a high level of intellectual capital transfer.

CBA is not under the same market pressure to do deals in the short-term as is ANZ and we see this as an attraction of the stock. There is more imperative for ANZ to expand in Asia as it does not have the same strength in retail distribution of banking products as CBA has in its home market.

There are two prongs to CBAs strategy in Asia: life insurance and banking ie a bancassurance model that is not dissimilar to the strategy being adopted in the Australian market. The intent is to broaden the offering of financial services products over time.
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Like ANZ, CBA has a different strategy in each Asian country in which it operates. In general however we see CBA as being more focussed on developing countries in Asia rather than developed markets such as Singapore and Hong Kong, where ANZ has a greater presence. This is a justifiable approach given CBAs in market strategy. Unlike ANZs bent towards commercial lending and trade finance, the focus is more likely to be lower risk retail and SME segments, in which CBA already has expertise. The strategy is probably more organic growth focussed than that of ANZ. While there are no explicit profit targets each country is expected to grow profits on a consistent basis. So far this has been largely achieved. In the six months to December, CBA doubled its profits from the region. We expect profits from the region to more than double again this financial year. While the profits from the Indonesian operations are being invested back into the roll out of new branches the two Chinese bank investments look to be dramatically growing their profitability. For instance we believe that Bank of Hangzhou could generate $300 million in profits this year (of which CBA is entitled to a 20 percent share while Qilu Bank could generate up to $100 million in profits).

CBAs management in Asia

Who is Simon Blair? Simon Blair CBA Group Executive International Financial Services Simon Blair was appointed Head of International Financial Services in June 2009. In this role, Simon is responsible for the Groups offshore growth in the Asian region. He is also responsible for managing the Groups existing Asian banking and life operations in China, India, Indonesia, Hong Kong and Vietnam, as well as its Western Australian subsidiary Bankwest. Simon joined the Commonwealth Bank Group in November 2006 as the Managing Director for Sovereign, the Groups insurance arm in New Zealand. Prior to this, Simon was Chief Operating Officer of Medibank Private, Australias biggest health insurer.

CBAs history in Asia

Unlike ANZ, CBA have been reasonably consistent with their strategy in Asia over the past decade, focussing on China and Indonesia and the high net worth and SME segments within those geographies. However they have been slower than ANZ in entering key markets such as China and Vietnam which could hamper growth. The strategy was initially championed by former CEO David Murray. When Ralph Norris was appointed CEO we raised concerns that CBA might exit its Asian exposures but with the likes of globally-focussed John Schubert and Harrison Young on the board we should not have been concerned. Much of the current footprint can be attributed to former head of International Financial Services Garry Mackrell. Garry Mackrell was appointed Head of International Financial Services in September 2001 but stepped down from the position last year.

A timeline of CBAs presence in Asia

In general, we get the sense that CBA is happier with its existing footprint in Asia than ANZ. ANZ has suggested that its footprint in Asia could be modified as it seeks the best platform for growth. For instance recent reports have suggested ANZ is looking at selling it 10 percent stake in Sacombank as it focuses on its ANZ branded business. Singapore branch opened in 1982 Tokyo branch opened in 1986 Hong Kong branch, established in 1986 Beijing Representative Office opens in 1994 Shanghai Representative Office in 1995 CBA enters 50/50 joint venture with Bank International Indonesia (BII) in 1997 Establishment of 49 percent China Life CMG life insurance (Shanghai) JV In 2000, CBA invests $50 million to become majority shareholder in BII.
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2004 CBA buys 11 percent of Jinan City Commercial Bank 2005 CBA buys 20 percent of Hangzhou City Commercial Bank Ho Chi Minh City branch opened in 2008 2010 opens branches in Mumbai and Shanghai. 2010 announces plans to take up to 20 per cent of Vietnam International Bank.

fold increase on current levels. (This would be far in excess of expectations of every analyst in the land). We should also acknowledge here that ANZ is focussing on exploiting the linkages between Australias resource sector and Asia. For instance in a recent presentation, ANZ claimed to be generating revenues three times other 3 major domestic banks combined from its natural resources client base.

What next for CBA in Asia?

This year we are expecting more obvious progress from CBA than last year. For instance in April it announced a strategic partnership with Vietnam International Bank with a plan to move to 20 percent ownership within the next couple of years. With a 10-year trackrecord, CBA looks to be becoming more aggressive with its aspirations for Indonesia. PT Bank Commonwealth has 74 branches in Indonesia with plans for further significant growth. They are also investing further capital to the BoCommLife insurance joint venture in China to support the roll out of new branches. In China they are also examining the merits of taking 100 percent of a country banking operation, which is allowable under Chinese regulation. The attraction of this move is that such branches can write local currency business from day one, while the downside are the geographical challenges. Following a soft opening on April 1 CBA is planning a formal opening of its new office in Mumbai India in August. Previously there was a representative office in Bangalore. A briefing on their Asian footprint is possible in conjunction with ANZs tour slated for June.

A timetable of ANZs presence in Asia

1969 | 1984 | 1989 | 1993 | Establishes representative office in Tokyo, Japan Purchases Grindlays Bank Establishes a backoffice and IT presence in Bangalore Joint venture established with PT Panin Bank, Indonesia Opens a branch in Hanoi and a representative office in Ho Chi Minh City, Vietnam Opens a branch in Shanghai and a representative office in Guangzhou, China 1996 | 1998 | 2000 | 2004 | 2006 | 2007 | ANZ opens its second Vietnamese branch at Ho Chi Minh City Acquires stake in PT Panin Bank, Indonesia Sells Grindlays to Standard Chartered Bank Flags, then withdraws, planned investment in Thai Military Bank. Completes 20 percent investment in China's Tianjin City Commercial Bank Mike Smith is appointed CEO and details his strategic vision to become a Super Regional Bank in Asia. Completes investment in Malaysia's AMMB Holdings Berhad, China's Shanghai Rural Commercial Bank, Vietnam's Saigon Securities Incorporation and ANZ Vientiane Commercial Bank, Laos 2008 | Receives licence for incorporation in Vietnam Opens new regional hub office in Hong Kong for business expansion throughout Asia 2009 | Acquisitions of RBS Asia Opened their first rural bank in western China making ANZ the first Australian bank, and one of the first international banks, to enter Chinas rural market. 2010 | Receives preparatory approval for local incorporation from the China Banking Regulatory Commission.

The leverage to Asia offered by BankWest

CBA is the bank most leveraged to the economy of Western Australia thanks to its purchase of BankWest in December 2008 for $2.2 billion, representing a 30 percent discount to the then book value. We therefore see CBA as offering useful leverage to the China growth story through its WA operations. China is Western Australias major trading partner and the States largest export market. The State Government recently its GDP forecast from the state from 2.25 percent to 3.75 percent. CBA chief Ralph Norris has said publicly that BankWest could contribute between 10 percent and 12 percent of domestic bank earnings within 18 to 24 months. In the December half BankWest generated cash net profit of just $64 million following a near three fold increase in bad debt charges half on half to $313 million. If we assume that BankWest generates about 10 percent of domestic bank earnings in FY2012 we are talking about a business generating at least $600 million in profit, ie a five

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ANZs strategy in Asia To become a super regional bank Expectations for the Asia Pacific by 2012

ANZs Asian expansion plans were formally enunciated by CEO Mike Smith in December 2007. ANZ sees itself as a pan Asian bank similar to Standard Chartered Banks Asian operations but with a lower tilt towards retail banking. The bank aspires to generate $1.5 billion in profit out of the region by 2012 through a network of 300 branches and 1,000 ATMs. This represents about 20 percent of forecasted group profit compared with about 7 percent achieved in FY2007 and 10 percent achieved in the first half. Since a restructuring in September last year American and European earnings are also now counted towards the Asian operations. Including this contribution the region contributed 13 percent of group profit in the first half. ANZ says it will achieve its financial goals by leveraging ANZs home grown products and expertise including a perceived competitive technology advantage. Liability growth is, and will remain, fully funded by deposits. ANZ warn against pursuing strong organic market share growth ie well above system. Instead it has evolved a niche strategy targeting high net worth customers on a segmented basis. An important part of the ANZ proposition in Asia is to offer a seamless experience across Asia including access into the Australian market. They are targeting a 50/50 institutional/ retail split for the business. This is comparable to the strategy of Standard Chartered before it moved into investment banking. Like CBA, the ANZ strategy in Asia differs from country to country.

However there are some common themes. ANZ is focusing on the top 5 per cent to 10 per cent of Asias most wealthy retail customers rather than compete head-to-head with giant regional players such as Standard Chartered or HSBC. This is an acknowledgement that they cannot compete with these big scalable banks in retail and wealth across Asia. ANZ aims to attract rich customers to the retail banking services rather than chase market share. It has probably been the most aggressive higher in the Asian region over the past two years increasing its headcount by more than 60 percent in the region to about 8,000. It has suggested that it could have about 10,000 people in Asia by the end of next year. As mentioned above ANZ has country specific strategies. ANZ wants to be a top four foreign bank operating in greater China and India and a top four locally-incorporate bank in Vietnam, Malaysia and Indonesia. ANZ is seeking to build a full-service franchise in Vietnam Indonesia, Malaysia, Greater China and India. Institutional, commercial, retail and wealth services will be offered in each of these markets. In more mature markets, ie Hong Kong and Singapore, institutional and private banking services will be offered with wealth services offered only at the wealthiest end of population. Finally in other Asian counties only institutional banking services will be offered to top end corporate clients. ANZ bought RBSs unprofitable portfolio of Asian banking assets outside of India and China last August for $US550 million ($602 million). This deal brought US$3.2 billion of loans and US$7.1 billion of deposits. This included operations in Singapore, Taiwan, Indonesia, Hong Kong, The Philippines and Vietnam. We understand that one reason that ANZ was able to secure these assets was because incumbents such as Standard Chartered were not bidders given they already had adequate presence in the countries in which RBS had operated.
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The number of people employed at ANZ's Asia-Pacific division surged from 5500 to 8000 in the past two years.

Retail in Asia is expected to contribute 10 percent of profit by 2012 through 200 branches, 10 million credit cards and 1.5 million customers, up from just 131,000 in 2008. Because they are not aggressively pursuing mortgage and credit card loan growth ANZs net interest margins are not going to be attractive as some peers in the region. But it is worth emphasizing that Asian bank income is less balance sheet focused and more focused on trade payment and fee generation. This means that net interest income makes up about half as much of total income in Asia as it does in Australia.

Whats next for ANZ in Asia?

They have previously expressed a preference for expanding in the region by buying the local operations of departing foreign banks rather than the takeover of listed or family owned institutions. They believe that acquisition opportunities still exist in Asia despite improving economic conditions. Mike Smith was recently quoted as saying that he hoped for a transformational transaction to take place in five to ten years once ANZ had built its Asian foundations. The same reports linked ANZ to the sale process of a US equity funds controlling stake in Korea Exchange Bank, a deal that could be worth more than $4 billion. While the bank says it will look at every acquisition opportunity on its merits we think the Korean deal is unlikely. We see the reported potential buyout of the Gunawan familys 46% stake in PT Bank Panin as more likely and more on-message. Based on current exchange rates, the Gunawan familys stake is worth about $1.6 billion. The stock currently trades at 15 times 2011 earnings equal to 2.1 times book.

Who is Alex Thursby?

Alex Thursby is Chief Executive Officer, Asia Pacific, Europe and America. Alex joined ANZ in 2007 after 20 years with Standard Chartered Bank where he held various senior wholesale banking roles in Hong Kong, London, Indonesia and Singapore. Most recently, he had held the positions of Senior Managing Director and Group Head of Corporate and Institutional Client Relationships, Wholesale Banking in Singapore. Alex, who is British by birth, completed his secondary and tertiary education in Australia.

ANZs divisional breakdown Institutional Asia headed by MD Mark Whelan

The institutional business targets Asian regional corporates, local corporates in each jurisdiction in which it operates and Australian, New Zealand and European corporates operating in Asia.
Forecast Asian insto banking CAGR - 13% between 2007 and 2012 Forecast Australian insto banking CAGR - 6% between 2007 and 2012

Panin - value is now well recognised in the market

1300 1200

Institutional banking in Asia, based in Hong Kong, aims to generate 10 percent of group profit by 2012, through a more than doubling of staff compared with 2008 levels and a five fold increase in customers to 5,000. Key industries being targeted include natural resources, agriculture, infrastructure and financial institutions.

1100 1000 900 800 700 600 500 400 300 Jun- Jul-09 Aug09 09 Sep09 Oct09 Nov09 Dec09 Jan10 Feb10 Mar10 Apr10 May10 Jun10

Retail Asia headed by MD Wendy Lim

The retail business targets affluent customers through its own network and mass affluent and SME customers through its partners. Asia is forecast to have more than 4 million households with at least US$100,000 of assets.
Forecast Asian retail banking CAGR - 17% between 2007 and 2012 Foreast Australian retail banking CAGR - 5% between 2007 and 2012

ANZ already has a 39.5% stake in PT Bank Panin which focusses on mass market banking. The bank also appears to be emphasising the benefits of organic growth in the short-term rather than growth through acquisition.

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In short, the bank has three options in Asia.

A dilutive but strategic transaction that rebalances the bank decisively towards its super-regional aspirations. Bolt on acquisitions that are more palatable amongst shareholders but do not have a dramatic impact on the distribution of profit. Focus on organic growth

them into contact with local businesses which may have a different approach to doing business than what CBA is used to in its home market where it is a significant player and used to getting its own way. Minority stakes and joint ventures also bring inherent risks which are not present when a bank owns 100 percent of a foreign operation. Any renewed strength of the Australian dollar against the US dollar, to which some of CBAs Asian earnings are tied, will push against short-term profit growth. The expansion of its life insurance operations will not yield instant results in terms of profitability. It is worth remembering that AXA Asia Pacific has taught us that growing a life insurance business from scratch is about growing embedded value as opposed to NPAT in the early years. This means that NPAT growth will not be the best indicator of the short-term growth prospects of CBAs bancassurance model.

They have also previously suggested their footprint of partnerships could be modified over time. ANZ have previously signalled that the best way to grow in the affluent retail space is through organic expansion (see below).

Some caution for ANZ in Asia

Although ANZ is building its Asian footprint rapidly, the bank's presence throughout the region remains piecemeal in our view. Even with the addition of RBS's banking assets in Taiwan, Singapore and Indonesia and Hong Kong, the bank has a modest presence in those markets. Its focus is also distracted by the need to integrate the assets from RBS and manage a mix of wholly-owned and partly owned businesses. While ANZ has done wonderfully well in expanding the bench strength of its Asian executive team, key man risk associated with CEO Mike Smith remains an issue. Mr Smith was effectively a top five executive with HSBC as its head of Asia. However like every other foreign banker who has operated in the Asian region over an extended period of time he has his supporters and critics in political and corporate spheres. There are also obvious risks in the doubling of headcount expected to be completed by 2012. While ANZ has generally hired opportunistically and well, there remains risks associated with such a rapid headcount increase. ANZ has specifically cited the strength of the Australian dollar as a significant headwind for future earnings growth, with a potential FY10E negative EPS impact of 4 to 5 percent. (This was prior to the recent correction in the currency against the US dollar.) But they have tipped ''high growth in earnings'' during 2011. There is also the issue of what changes to the Asian strategy new ANZ chairman John Morschel will bring following his replacement of noted Asia-phile Charles Goode and his failure to install his preferred successor Sir Rod Eddington, a former CEO of Cathay Pacific who was highly respected in Asia. Mr Morschel is yet to formally enunciate his approach and priorities as chairman of the bank.
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ANZ maintains that there remain acquisition opportunities amongst foreign banks departing the region. However there are now an increasing number of buyers for potential assets. Last year it added about 1,000 staff and we suspect that a similar number will be added by the end of the current financial year. In our view the most compelling deal would be a friendly merger with Hang Seng Bank but given that this bank is 62.1 percent owned by HSBC such a deal looks unlikely. There is also little prospect of a tie up with Standard Chartered. We assume that the most likely buyer of that business is the Singaporean Government via Temasek, which increased its stake from 12 to 19 percent in 2008. Alternatively ANZ could target a relatively cheap listed Singaporean bank such as OCBC: market cap A$22.2 billion, forward P/E of 13.6 times and 1.5 times book.

Cautions about CBAs Asian strategy

CBA are a later entrant to most Asian markets than ANZ. They are also adopting an in market strategy which is not the typical means of expansion into the region by foreign banks. This will put them in competition with local banks which will invariably have a stronger market presence. It also puts

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The danger with (ANZs) targets

The danger with targets is that the market can be too focussed on them being achieved as signs of definitive progress rather than focussing on the long-term growth potential of a business. We note that in a recent presentation ANZ refers to its goal of 20 percent of profit from the Asia Pacific by 2012 as its strategic direction. Back in 2008 ANZ was a little more definitive about what they expected to achieve by 2012.

Indonesian banking assets have been keenly sought in recent years. In 2008 Maybank paid US$2.7 billion or more than four times book value when it bought a majority stake in Bank Internasional of Indonesia. The price was rumoured to have been bid up by the participation of Industrial & Commercial Bank of China, the worlds biggest bank by market capitalisation. ANZ CEO Mike Smith reportedly described suggestions that China Merchant Bank would pay three times book value for Hong Kong-based Wing Lung as crazy. ANZ was reportedly an underbidder for Wing Lung. CMB ended up paying about 2.9 times.

Spot the difference

ANZ presentation in 2008, note specific reference to ANZ deriving 20 percent of its profits from Asia Pacific by 2012.

Why has there been less focus on CBAs Asian strategy?

For a start CBAs expansion is less aggressive and its footprint smaller than that of ANZ. In a recent presentation 2012 had been replaced by strategic direction Unlike ANZ, CBA sees little value in talking up its Asian aspirations. There are no external targets presented to the market. This is not to say that CBA does not see wonderful opportunities in Asia. It is just that in the medium term they do not see the point in talking up their Asian progress. Instead they prefer to talk about the opportunities for growth they have in the Australian market: for instance the cost savings from a new technology platform and the integration of BankWest. Under new Asian chief Simon Blair, CBA is running its Asian business to a series of internal five year and ten year goals. By contrast, ANZ CEO Mike Smith has necessarily had to present a simple and sensible for his aggressive expansion into the region. He has done this through his target of being a Super Regional bank. ANZ has more at stake in Asia than CBA and this is reflected in the higher profile its Asian strategy has taken over the past three years including the hosting of another roadshow of its Asian investments in June.

In the March half results we note that the 2012 target had been reinstated. In the March half Asian profits represented just 10 percent of group underlying profits. Since a restructuring in September last year American and European earnings are also now counted towards the Asian operations. Including this contribution the region contributed 13 percent of group profit in the first half.

Missed opportunities
ANZ has had a coherent strategy for expansion in Asia since 2007 but it is worth remembering that prior to that its commitment to the region has been sporadic. Its decision to sell Grindlays in 2000 now looks short-sighted. We are also old enough to remember the aborted plan to buy a stake in Thai Military Bank in 2003 following an overly negative reaction from ANZ shareholders to the plan. Former ANZ chief executive John McFarlane took what could be described as a more opportunistic approach to expansion in Asia with a commitment to undertaking transactions that were EPS accretive in their first year. There have been a number of transactions in the region in recent times that have been executed at comparatively high multiples in which ANZ may have been an underbidder. Last October, ING Group sold its Singapore-based ING Asia Private Bank (IAPB) to Singapore-based Oversea-Chinese Banking Corporation Ltd (OCBC). OCBC paid US$1.45 billion for the purchase.

Three strategically important Asian markets 1) The Chinese banking market

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Chinese banking system -Total assets at end of 2009 RMB (100m) Market share YonY growth State owned commercial banks Joint stock commercial banks City commercial banks Other including foreign banks Total 400890 117849 56800 212150 787689 51% 15% 7% 27% 26% 34% 37% 26%

CBA in China
Any foreign bank participation in the Chinese financial services industry must be viewed within a 15-year time horizon in our view. The approach taken by CBA to China is that it must accrue a number of options for expansion in the absence of certainty about the single best means of expansion. CBA has 20 percent equity stakes in two banks Bank of Hangzhou and Qilu Bank which was previously referred to as Jinan City Commercial bank. It also has a share in the First State Cinda Fund Management Company Limited, the joint venture between Colonial First State Global Asset Management (CFSGAM), and China Cinda Asset Management Corporation, and has a 49 percent stake in BoCommLife Insurance Company. Last August CBA injected another $160 million in Bank of Hangzhou to support growth, raise the banks capital holdings ahead of proposed regulatory changes and maintain its stake at 20 percent. The performance of the bank has been strong recently reporting non performing loans of less than 0.8 percent of gross loans. On March 26 CBA formally opened its first proprietary branch in Shanghai. If, after three years, the branch has a two year track record of profitability, then it will be allowed to begin lending in local currency. We believe CBA has the necessary patience to expand judicially in the Chinese market including seeking regional banking investments of which it can hold 100 percent and through which, even more importantly, it can write local currency loans from day one. There remain many attractive rural banking opportunities that CBA could target. One example might be Wujiang, which is 54 kilometres from Shanghais international airport. Wujiang has a population of about 1 million with a high proportion of high salary earners thanks to a clever strategy of offering rental incentives to those with post graduate qualifications.

To put CBA and ANZ in context in the size of the Chinese banking market their operations Market structure State-owned commercial banks (SCBs). The four SCBs have a dominating position in the banking sector, holding 51 percent of the assets in the banking system. They collect more than half of all the deposits in the country, but extend only 43 percent of the loans. Joint-stock commercial banks (JSCBs). There are total 12 JSCBs, and hold 15 percent of the total assets in the banking system. These banks are more active at the provincial or regional level. Although Bank of Communication is the largest among these banks, many of them are comparable in size. City commercial banks (CCBs) and urban credit cooperatives (UCCs). These are small financial institutions that operate in urban areas. In 2007, there were 124 CCBs, and 42 UCCs, reflecting consolidation efforts undertaken during the decade to transform more than 1,000 small UCCs into larger CCBs. Policy banks (PBs). There are three policy banks in China. Unlike the other banks, these policy banks collect few deposits (less than 1 percent of total), but provide more than 15 percent of the loans in China. Rural credit cooperatives (RCCs). There are several thousand RCCs that provide loans to the rural population. Each RCC has local monopoly power, in the sense that a farmer can borrow only from the RCC of her village and cannot shop around for better conditions (theoretically a farmer can request a loan from a city commercial bank, but this is not done in practice). RCCs are net creditors, as they collect more deposits from the rural population than provide loans to. Foreign banks (FBs).There are 29 foreign banks in China (there were many more foreign bank branches), and their total assets was only 2 percent of total assets of the banking system. These banks are active in the interbank market as they lend much more than their deposit base. To put CBA and ANZs current operations in context, they would currently rank at the top end of the biggest city commercial banks or the bottom end of the joint stock commercial banks.

Life insurance in China

Last June Bank of Communications (BoCom) said it would replace China Life as the 51 percent partner in the renamed BoCommLife Insurance Company joint venture with CBA. China Life was required to sell down its exposure as part of conditions associated with its listing. CBA believes that it has gained considerable experience over the previous decade through the JV with China Life. The company says it wants to grow the business nationally by tapping into BoComs resources and enormous distribution network. The goal is to create a leading and competitive life insurer that covers the national market.
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E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

BoCom has 2,600 branches in 143 cities, 10,000 selfhelp machines, and 350 wealth management centers in China. CBA says it is delighted with its new partnership with BoCom. Despite being early days the bank says the sales results so far have been outstanding. CBA is investing less than $50 million to support the rollout of new branches along Chinas east coast. The joint venture currently has access to 2,000 branches around China

A key attraction of the Indonesian banking market is that it imposes relatively few restrictions on the expansion of foreign banks into the local market. Indonesias economy proved resilient during the global downturn because of that governments management of the economy, its large domestic market and relatively low dependence on external trade. Economic growth in Indonesia is expected to top 5 percent in 2010. Indonesias economic prospects are supported by the governments commitment to infrastructure development and to continued economic reform.

ANZ in China
ANZ describes China as a strategically important market and they therefore have a long term commitment to continue to invest and broaden their business there. ANZ has three foreign bank branches in Shanghai, Beijing and Guangzhou, a sub-branch in Shanghai and a rural bank in Liangping county, Chongqing. ANZ has strategic partnerships in two of Chinas key growth regions a 19.9 per cent stake in the Shanghai Rural Commercial Bank and 20 per cent stake in the Bank of Tianjin. ANZ recently received preparatory approval for local incorporation from the China Banking Regulatory Commission. Local incorporation will allow ANZ to continue the expansion of its existing network in China by progressively seeking approval to open additional outlets. ANZ said it would apply for renminbi licences to meet the needs of local retail customers in key cities upon the establishment of the new entity.

2. The Indonesian banking Market

Indonesia is Southeast Asia s largest economy Fifteen large banks dominated the majority (71 percent) of industry assets, claiming an additional Rp165.8 trillion (10.4 percent), which saw total assets expand to Rp1,759.5 trillion for the group. We see Indonesia as being an under banked and under insured market which is growing rapidly.

The countrys strengths in natural resources and agriculture mean it was well placed to benefit from Asias continued growth, which is expected to be around seven per cent in 2010, excluding Japan. Net interest margins are seen as relatively attractive in Indonesia and there are growing trade links between Indonesia and Australia. Indonesia looks to be an attractive expansion opportunity for CBA and ANZ with the economy improving and the market considered to be under banked and under insured. Previously CBAs Indonesian presence has emphasised deposit gathering but it is now shifting its focus to lending. We see further acquisition opportunities in Indonesia as being possible given that there are more than 100 banks operating in Indonesia, many of them sub-scale family-controlled businesses.

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CBA in Indonesia
From the outset CBAs strategy in Indonesia was to target affluent families and their businesses and Australian related companies. CBA expanded its presence in Indonesia opportunistically in 2000 when it moved to majority ownership. By assets, we estimate that CBA is now a top 20 bank in Indonesia but a top five foreign bank in that country. We believe that the appointment of Tony Costa is evidence of CBAs commitment to the country. Tony has operated in Indonesia for the past 16 years. Before joining CBA at the end of March, headed Rabobank in Indonesia. If CBA were to make an acquisition we believe it could well be in Indonesia where its 10-year trackrecord gives it some confidence that it understands the drivers of the local market. However acquisition targets are becoming more difficult to find. CBA was reportedly an underbidder to HSBCs purchase of Bank Ekonomi in Indonesia in late 2008. HSBC went on to pay just over four times historical book value for the business. CBA believes it is making good organic progress in that country. CBA currently has 74 branches in Indonesia across all major cities which compares with ANZ which has 29 branches following its purchase of RBS last year. CBA is targeting a footprint of about 150 branches. In Indonesia, CBA believes it has built up some local know how which could be to cope with further acquisitions. We expect a doubling of staff numbers in Indonesia over the next five years from 1600 staff at present. Much of the potential profitability of the Indonesian operations has been reinvested in branch openings.

The effective merger date was set for December 31, 2007. Effective from January 2, 2008, Bank ANK began operating as an integral part of the Commonwealth Bank.

ANZ in Indonesia
ANZ operates in Indonesia through its 85 per centowned subsidiary PT ANZ Panin Bank, trading as ANZ. ANZ is in advanced discussions with Panin Bank to acquire an additional 14 per cent interest in PT ANZ Panin Bank. This business has a sizeable credit card operation. Last years RBS acquisition and their own organic growth plans will see them invest up to $US100 million in capital in Indonesia this year and expand their presence to a total to 28 branches across 11 cities with almost 1,000 full-time employees. ANZ expects to complete the acquisition of the RBS retail and commercial businesses in Indonesia in June 2010, subject to regulatory approval.

3. The Vietnamese banking market

With a young population of 87 million, a rapid uptake of internet and mobile phone technologies and only around 15 percent of the population currently using banking services, we expect the demand for financial services in Vietnam to increase significantly in the coming years. Bank account ownership in the four major cities climbed from 14 percent in 2001 to 35 percent. However we note that income per capita is still less than US$900 per year according to the World Bank. The margins in Vietnam are not as attractive as China or Indonesia despite it being a smaller market that has not so far attracted as many foreign players. The five state-owned commercial banks account for 7080 percent of the total market share. The four urban joint venture and foreign bank branches make up the next 10-15 percent of market share, while another 35-plus joint-stock banks have the remaining 10-15 percent. To date, five 100 percent foreign-banks have been licensed in Vietnam. The regulatory framework is not as developed as it is in Indonesia or China. Large foreign banks are balancing their strong interest in serving multinationals in Vietnam and frustration with continuing restrictions on their activities There is also a wariness of foreign banks, that is not present in Indonesia for instance. Last year the country grew its economy by 5.3 percent its worst performance in a decade.

CBAs timetable in Indonesia

In 1997, a new entity, PT BII Commonwealth was established to provide corporate banking services to Indonesian and other corporate entities. In 2000, PT BII Commonwealth changed its name to become Commonwealth Bank, with the CBA as the majority shareholder. In early 2007, the Commonwealth Bank offered to acquire a majority stake in Bank ANK (83 percent). With the acceptance of the offer by Bank ANKs owners and following the signing of the acquisition deed on July 26, 2007, preparations began for Bank ANK to be merged into the Commonwealth Bank.

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Australia is home to the second largest Vietnamese population outside Vietnam so the trade linkages are significant.

Australian financial institutions and its banks in particular have product suite and skill base that should give them a competitive advantage in operating in the Asian region. Therefore, we believe banks should be eyeing exposure to developing markets in particular Indonesia. Be under no illusions that it is a long term play. Australian companies track record in Asia is patchy at best and the danger of dramatic short-term moves is that we repeat that history. Having the best retail footprint in Australia gives CBA a strong base from which to expand into Asia. It trades at a higher multiple than ANZ, which means that any future acquisitions funded by fresh capital raisings can be more easily made earnings per share accretive. We have a Buy recommendation on CBA with a 12 month price target of $57.75 and a Hold recommendation on ANZ with a price target of $23.94.

CBA in Vietnam
CBA sees Vietnam as a long-term, perhaps a 10 year story. In April this year CBA committed to its most significant investment in an Asian bank outside of China and Indonesia after agreeing to buy 20 per cent of one of Vietnam's newest commercial banks Vietnam International Bank (VIB). Given the bank currently has a market capitalisation of about US$240 million this would suggest that CBA would have to commit about US$50 million. Upon completion of the deal they would expect to be a top five private joint stock commercial bank in Vietnam CBA was a comparatively late entrant to Vietnam.

ANZ in Vietnam
ANZ has been in Vietnam since 1993, making it one of the first foreign banks to start operations there. Last year it established a 100 percent owned retail franchise and recently opened its 10th branch. Its presence has been bolstered by the acquisition of the Royal Bank of Scotland Group plc operations. ANZ announced in March it was selling its 10 per cent stake in Sacombank which was acquired in 2005.

Other countries in which CBA has a presence

We see CBAs presence in India and Japan as being longer-term plays for CBA.

Other countries in which ANZ has a presence

Indian banking licence has been pre-approved. On March 4, it said it would open an Indian branch in a year.

Conclusion
We believe Australian investors need to seek increased exposure to Asia, the fastest growing part of the world economy. We consider it a national tragedy that the exposure AXA Asia Pacific offered to the region is likely to be lost to Australian investors.

E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

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E.L. & C. Baillieu Stockbroking Ltd Australia and New Zealand Banking Group Limited (ANZ)
Analyst: Date: Share Price: ($A) Issued Shares: Market Cap:
Stewart Oldfield 25 May 2010 $21.34 2,533.7m $54,070m 2010 (E) 10,536.4 3,548.7 15,109.0 6,916.6 -2,111.8 4,328.0 4,789.0 2011 (E) 11,227.4 4,216.8 16,628.3 7,482.4 -1,534.5 5,470.2 5,481.2 2012 (E) 11,836.9 4,580.6 17,770.7 8,070.5 -1,309.0 6,031.7 6,031.7

Recommendations: Short Term: Long Term: Valuation: Price Target

Ratios Year End: September 30 Return on Assets (%) Return on Equity (%) Cost to Income (%) Interest Margin (%) Book Value Per Share Price to Book Valuation Year End: September 30 Cash EPS Reported EPS Cash EPS Growth Cash PE DPS Yield (%) Franking (%) Asset Quality Year End: September 30 Total Impaired Assets Net Write-Offs

Hold Hold $22.68 $23.94 2009 (A) 0.7% 11.5% 45.7% 2.3% 11.3 2.1 2010 (E) 1.0% 14.4% 45.8% 2.4% 13.3 1.8 2011 (E) 1.1% 15.4% 45.0% 2.4% 14.4 1.7 2012 (E) 1.2% 15.5% 45.4% 2.3% 15.4 1.6

Financial Performance ( $m) Year End: September 2009 (A) 9,808.0 Net Interest Income 3,337.0 Non-Interest Income 13,610.0 Total Income 6,225.0 Operating Expenses -3,005.0 Bad Debts 2,943.0 Reported NPAT Significant Items 3,383.0 Cash NPAT

Balance Sheet and Capital Adequacy ( $b) Year End: September 2009 (A) 2010 (E)

Australia housing Australia non-housing Total Australian loans New Zealand housing New Zealand non-housing Total New Zealand loans Overseas housing Overseas non-housing Total overseas loans
Total Average InterestEarning Assets RWA Total Equity Tier-one Capital Total Capital Tier-one Ratio Total Capital Ratio

141.7 106.6 238.4 44.7 36.2 80.9 1.7 17.4 19.1 427.5 252.0 32.4 26.6 34.4 10.6% 13.7%

155.0 106.6 255.7 42.0 33.6 75.6 3.9 21.1 25.0 442.4 259.8 34.1 27.2 32.4 10.4% 12.5%

2011 (E) 167.7 107.1 274.8 44.6 35.6 80.1 4.4 25.5 29.9 475.8 283.5 37.2 29.1 33.7 10.3% 11.9%

2012 (E) 181.4 114.0 295.3 47.3 37.7 85.0 5.1 29.7 34.8 516.5 308.9 40.6 31.1 34.9 10.1% 11.3%

2009 (A) 149.6 129.5 -3.6% 14.3 103.3 4.8% 100%

2010 (E) 189.4 171.1 26.6% 11.3 113.7 5.3% 100%

2011 (E) 213.0 212.6 12.5% 10.0 138.4 6.5% 90%

2012 (E) 230.8 230.8 8.4% 9.2 150.0 7.0% 80%

2009 (A) 5,468.0 1,889.0

2010 (E) 4,350.5 2,010.2

2011 (E) 5,886.2 740.9

2012 (E) 5,442.4 1,199.6

Recommendations Buy: Share price expected to appreciate by more than 10% during next twelve months. Accumulate: Share price expected to appreciate by more than 10% during next twelve months, however further short-term weakness possible. Hold: Share price expected to trade between +10% and -10%. Lighten: Share price expected to fall by more than 10% during next twelve months, however share price may appreciate marginally in short term. Sell: Share price expected to fall by more than 10% during next twelve months.

E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

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E.L. & C. Baillieu Stockbroking Ltd Commonwealth Bank of Australia (CBA)

Analyst: Date: Share Price: ($A) Issued Shares: Market Cap:
Stewart Oldfield 25 May 2010 $50.31 1,548.7m $77,916m 2010 (E) 12,065.4 7,344.7 19,410.1 -8,606.4 -2,439.4 6,013.5 5,970.5 2011 (E) 12,752.1 7,649.1 20,401.2 -8,949.5 -1,954.0 7,084.5 6,988.5 2012 (E) 13,780.6 8,619.1 22,399.7 -9,327.3 -2,085.1 8,181.8 8,085.8

Recommendations: Short Term: Long Term: Valuation: Price Target

Ratios Year End: June 30 Return on Assets (%) Return on Equity (%) Cost to Income (%) Interest Margin (%) Book Value Per Share Price to Book Valuation Year End: June 30 Cash EPS Reported EPS Cash EPS Growth Cash PE DPS Yield (%) Franking (%) Asset Quality Year End: June 30 Total Impaired Assets Net Write-Offs

Buy Buy $54.41 $57.75 2009 (A) 0.8% 16.3% -45.3% 2.1% 19.7 2.8 2010 (E) 0.9% 18.2% 44.0% 2.2% 23.0 2.4 2011 (E) 1.0% 18.5% 43.5% 2.1% 25.4 2.1 2012 (E) 1.1% 18.9% 41.3% 2.0% 27.9 1.9

Financial Performance ( $m) Year End: June 30 2009 (A) 9,595.3 Net Interest Income 6,731.0 Non-Interest Income 16,326.3 Total Income 7,282.0 Operating Expenses 2,935.0 Bad Debts 4,723.3 Reported NPAT Significant Items 4,360.3 Cash NPAT

Balance Sheet and Capital Adequacy ( $b) Year End: June 30 2009 (A) 2010 (E)

Home lending Personal lending Business lending Total lending Non-lending interest Securitised home loans Total average non-interest

279.6 19.3 160.1 459.0 75.2 0.0 93.7

317.9 21.6 152.8 492.3 76.8 12.0 74.1

2011 (E) 357.2 23.3 162.1 542.6 83.1 13.0 78.7

2012 (E) 393.8 25.2 175.3 594.4 89.8 14.1 83.5

2009 (A) 305.6 331.2 -14.2% 16.5 228.0 4.5% 100%

2010 (E) 388.9 391.4 27.2% 12.9 280.4 5.6% 100%

2011 (E) 443.9 450.4 14.1% 11.3 332.9 6.6% 100%

2012 (E) 501.0 506.7 12.9% 10.0 375.7 7.5% 100%

2009 (A) 4,210.0 1,056.0

2010 (E) 4,532.1 2,102.9

2011 (E) 3,524.9 2,255.2

2012 (E) 2,865.2 2,474.1

Total Average InterestEarning Assets RWA Total Equity Tier-one Capital Total Capital Tier-one Ratio

481.6 297.4 30.3 23.3 30.3 8.1%

476.0 298.6 35.8 28.9 35.8 9.7%

517.1 320.6 40.5 33.3 33.3 10.4%

568.2 337.8 40.5 38.5 45.6 11.4%

Recommendations Buy: Share price expected to appreciate by more than 10% during next twelve months. Accumulate: Share price expected to appreciate by more than 10% during next twelve months, however further short-term weakness possible. Hold: Share price expected to trade between +10% and -10%. Lighten: Share price expected to fall by more than 10% during next twelve months, however share price may appreciate marginally in short term. Sell: Share price expected to fall by more than 10% during next twelve months.

E.L. & C. Baillieu Stockbroking Ltd ABN 74 006 519 393 www.baillieu.com.au Please read the disclaimer at the end of this report.

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Disclaimer

Contact Details
E.L. & C. Baillieu Stockbroking Ltd A.B.N 74 006 519 393 Website: www.baillieu.com.au Melbourne
Level 26, 360 Collins Street, Melbourne Victoria 3000 PO Box 48, Collins Street West, Melbourne Victoria 8007 Ph (03) 9602 9222 Fax (03) 9602 2350 Email: baillieu@baillieu.com.au

This document has been prepared and issued by E.L. & C. Baillieu Stockbroking Ltd. Australian Financial Services Licence No 245421. Participant of ASX Group. Disclosure of Potential Interest and Disclaimer E.L. & C. Baillieu Stockbroking Ltd and/or its associates may receive commissions, calculated at normal client rates, from transactions involving securities of the companies mentioned herein and may hold interests in securities of the companies mentioned herein from time to time. Your adviser will earn a commission of up to 50% of any brokerage resulting from any transactions you may undertake as a result of this advice. (a) In preparing the advice, the licensee did not take into account the investment objectives, financial situation and particular needs of any particular person; and Before making an investment decision on the basis of that advice, the investor or prospective investor needs to consider, with or without the assistance of a securities adviser, whether the advice is appropriate in light of the particular investment need, objectives and financial circumstances of the investor or prospective investor.

Sydney
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Bendigo
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(b)

Newcastle
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No representation, warranty or undertaking is given or made in relation to the accuracy of information contained in this advice, such advice being based solely on public information which has not been verified by E.L. & C. Baillieu Stockbroking Ltd. Save for any statutory liability that cannot be excluded, E.L. & C. Baillieu Stockbroking Ltd and its employees and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person. E.L. & C. Baillieu Stockbroking Ltd assumes no obligation to update this advice or correct any inaccuracy which may become apparent after its given.

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