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Melanie Kirk: Hello, and welcome to the results briefing for the Commonwealth Bank of Australia for the half year ended 31 December 2025. I'm Melanie Kirk, and I'm Head of Investor Relations. Thank you for joining us. For this briefing, we will have presentations from our CEO, Matt Comyn, with an overview of the results and an update on the business. Our CFO, Alan Docherty, will provide details of the results, and Matt will then provide an outlook and summary. The presentations will be followed by the opportunity for analysts and investors to ask questions. I'll now hand over to Matt. Thank you, Matt.
Matthew Comyn: Thanks very much, Mel, and good morning, everyone. It's great to be with you today to present the bank's half year results. We recognize the cost of living pressures, global uncertainty and rapid change are weighing on many Australians. In this environment, we've remained focused on supporting and serving our customers. That focus has delivered disciplined growth across our core customer segments. Cash net profit increased by 6% on the prior comparative period and earnings per share increased by $0.19. We maintained strong liquidity, funding and capital positions. And our operating performance and capital position has allowed the Board to declare a fully franked dividend of $2.35, up $0.10 on the prior corresponding period. This marks the 11th consecutive period of DRP neutralization. There are 2 features of this result to stand out. The first is the market context. We've seen high credit growth, low loan losses, supportive funding markets and intense competition. The second, which is a key strength, has been maintaining stable margins while growing volume at or above system across all major segments. Over the past 12 months, mortgage balances grew by $45 billion or 7% and business lending grew by 12% at 1.3x system. Deposit balances increased by $44 billion in the half. This was our strongest domestic deposit and lending balance growth in a half year reporting period since 2008. Australia is currently experiencing relatively strong nominal growth and private sector demand. In this environment, banks play a critical role in supporting credit growth for productive investment while maintaining unquestionably strong capital positions. Doing this sustainably requires profitable banks that can generate capital organically to support the economy. The last time credit growth was at this level, apart from a brief period during COVID, returns across the industry were materially higher. In normal conditions, such an environment would favor disciplined competition so that scarce capital is deployed where it earns an appropriate return. However, the competitive landscape is materially shifting due to differing business models, regulatory settings and architecture, customer offerings and return hurdles. Against this backdrop, we believe CBA is uniquely positioned to adapt and perform strongly. Our deep customer relationships and franchise strength allows us to compete effectively and profitably. That profitability allows us to support higher growth across the economy, invest to improve the customer experience and deliver consistent returns for our shareholders. Disciplined growth and margin management drove operating income growth of 6.6%. Operating expenses increased by 5.5%, excluding restructuring and notable items. This reflected inflationary pressures and higher investment in technology, resilience and our frontline teams to improve customer experience. Credit conditions remained very benign, contributing to 6.1% cash profit growth. The performance and long-term health of our franchise is underpinned by a simple relationship-led model. Deep trusted customer relationships drive more frequent and meaningful engagement. That engagement provides deeper insights into customer needs, enabling us to deliver superior customer experiences. Over time, this creates enduring value for customers and sustainable returns for our shareholders. This model has long underpinned our leadership in retail banking and over the past year -- over the past several years, has accelerated growth in our business bank. Technology continues to amplify this advantage, enabling more personalized, timely and scalable customer engagement. Our financial performance reflects customer focus, disciplined execution and investment in our franchise. We track the strength of our customer relationships through Net Promoter Score, and this remains an important indicator of trust and advocacy. We currently hold leading NPS positions among major banks in consumer and institutional banking. And following 15 months at #1, we dropped to the second position in business banking in the half. Operationally, this is translating into scale and momentum across the group. On average, each week, we settle more than 3,000 home loan purchases, lend around $900 million to businesses and process almost 150 million payments, and alert customers around 280,000 times to suspicious card activity. We continue to build scale and depth of primary customer relationships, which underpins long-term franchise health. We've consciously increased investment in data, technology and AI to improve customer experience, safety, security and operational resilience. The retail bank has performed well with pre-provision profit growth of 5%. We've maintained the leading Net Promoter Score for 38 consecutive months. Retail MFI share has increased slightly to 33.5%, but remains below its 35% peak. Customer engagement remains a core strength with 9.4 million CommBank app users and 14 million daily log-ins. We now hold 12 million retail transaction accounts, a 35% increase since the start of COVID and an increase of 585,000 in the past year. As a result, our deposit growth has been strong. Home loan balances increased by 7% in the past year to $622 billion. 97% of these customers hold a transaction account with us. Digitization and technology continue to drive performance in home lending. 70% of proprietary home loan applications are auto decisioned on the same day. We're focused on continuing to strengthen our MFI share and investing in AI-enabled digital experiences. The Business Bank has had another period of strong performance. Pre-provision profit growth was 8% and cash profit growth was 14%. MFI share increased to 26.9%, which is a 310 basis point increase since the start of COVID. We added 85,000 transaction accounts in the past year, which is a 7% increase. And the business bank is now the Commonwealth Bank's largest source of transactional deposits. We grew lending at 1.3x system, increasing balances by $18 billion in the year. Business Banking lending balances have increased by 87% or $78 billion in the past 6 years, supporting growth and jobs in our economy. Approximately 90% of business loans are linked to a CBA transaction account, reflecting the depth of our primary relationships. This supports credit quality with loan losses of 6 basis points in the half. It also allows us to use data and automation to substantially improve lending and servicing processes. For small businesses, we've doubled the volume of loans auto approved through BizExpress over the past 2 years and have reduced annual loan maintenance activity by 85%. We also launched a national AI, cybersecurity and digital capability initiative, supporting up to 1 million small businesses to lift productivity and competitiveness. The combination of deep customer relationships and prudent lending growth is delivering sustained earnings performance. Our institutional business is also performing well with pre-provision profit increasing by 13%. We've regained the #1 position in NPS, supported by improvements in client experience and execution. Our institutional bank plays an important role in providing $64 billion in net deposit balances and supporting markets activity. We've seen growth in new transaction banking mandates, enabling the institutional bank to further support the group in deposit funding. The markets business has had a particularly strong half. We led the market in debt capital market performance and last year topped the Bloomberg combined lead table. In New Zealand, ASB performed well with operating income growth of 8%. ASB is the highest reputation score of the major banks in New Zealand and has been a Digital Bank of the Year for the past 4 years. ASB saw 1.3x system growth in home lending and business and rural lending. Deposits grew at 1.2x system. Customer deposits and home lending balances have both increased by 41% in the last 6 years by $26 billion and $24 billion, respectively. The credit environment remains benign. Troublesome and nonperforming exposures decreased following upgrades or external refinancing activity. The number of home loan customers in hardship declined by 28% since June 2024, and we remain well provisioned for a range of economic scenarios. We hold total provisions of $6.3 billion, which is $2.8 billion above our central economic scenario. Our balance sheet remains strong with 79% deposit funding. Our weighted average maturity of long-term funding is 5.2 years and liquid assets are $199 billion. Our capital ratio of 12.3% is $10 billion above minimum regulatory requirements. A strong balance sheet allows us to invest for the long term and respond to any deterioration in market conditions. We've seen record inflows of deposits in the half. We've also seen $15 billion increase in redraw balances and offset accounts. Customers having surplus funds available is a significant predictor of arrears performance, and so this behavior has a positive capital impact. 87% of home loan customers are now in advance of their scheduled repayments. On average, 35 payments in advance. When adjusted for redraw and offset savings, household debt has now returned to levels not seen since 2015. The transmission of monetary policy in Australia means that our banks pay very competitive interest rates on at-call household deposits compared with other markets. On average, at-call deposits in Australia are attracting an interest rate, which is 5x higher than in the U.S. and 10x higher than in Europe. We've seen a strengthening in the economy in the past 6 months, driven by consumer demand. Spend has been increasing across all customer age cohorts. Most age groups are broadly maintaining discretionary spending and increasing savings levels. GDP growth in mid-2026 was 2%, more than double the same period a year ago. Most noticeably, economic growth has shifted from being primarily driven by public demand to being driven by household consumption. Last week, we saw the Reserve Bank raise interest rates to 3.85% in response to inflation, which is running higher than the target band. Almost 1/3 of the increase in the CPI basket is driven by housing with utilities a substantial contributor to that category. Our purpose, building a brighter future for all guides how we allocate capital, manage risk and invest for the long term. It reflects our long-term commitment to Australia, our customers and our communities. Some of the ways we're delivering on our purpose include significantly increasing funding for new residential housing development, delivering $190 million in benefits to consumers through CommBank Yellow, migrating our core banking system to the cloud to improve resilience, delivering 30% more technology changes, reducing critical incidents and improving recovery times by 65%, rolling out new AI tools and training programs to our teams to build capability and deliver better customer experiences and maintaining our strong balance sheet settings, sending around 40,000 alerts a day to customers about suspicious activities and deploying more than 2,900 AI bots to engage and disrupt scammers. Importantly, our strong performance enables us to continue supporting our 18 million customers, protect communities, support Australia's economy and invest for the long term. As cost of living pressures persist, we are providing targeted support to households under strain, including 63,000 tailored payment arrangements for customers most in need. We supported more than 79,000 households to buy a home, including through dedicated support for first home buyers. And we lent $25 billion to businesses supporting growth, jobs and economic activity. We're investing $1 billion a year to help more people protect themselves from scams and fraud. Our strong balance sheet allows us to support customers and communities while delivering sustainable long-term returns for shareholders, including $4.4 billion in dividends this half, benefiting more than 14 million Australians. We will continue to support our customers, protect communities and invest for the long term to provide strength and stability to the Australian economy. I'll now hand to Alan to take you through the result in more detail.
Alan Docherty: Thank you, Matt, and good morning, everyone. Starting with the results overview. We've set out the key aspects of our current operating context, how we are responding and how those actions are contributing to the long-term strengthening of our franchise. At a macro level, we are seeing strong system growth in both credit and money supply. Competitive intensity within the banking sector remains elevated. Technological innovations continue at pace and geopolitics remains a source of potential tail risks. Against that backdrop, our response has been deliberate and disciplined. We have carefully managed volume and margin trade-offs, continue to invest and extend our leadership in both technology and proprietary distribution and maintained conservative balance sheet settings. This approach is yielding strong financial outcomes. Pre-provision profit growth is healthy. Our dividend per share continues to reflect the strong compositional quality of our earnings. And our balance sheet settings give us confidence in our ability to continue supporting customers, growing the franchise and delivering sustainable returns to shareholders over the long term. This slide sets out the usual reconciliation between statutory and cash profits for the half. There were only modest movements in the usual noncash items during the period. As such, both statutory and cash profits on a continuing operations basis totaled around $5.4 billion. Breaking down the components of that cash profit, Operating income grew 6.6% year-on-year as our investments in technology and proprietary distribution continue to yield strong operational outcomes. That top line performance allows us to continue to invest in the franchise with underlying operating expenses increasing 5.5% on the prior comparative period. Notable expense items totaled $170 million over the last 6 months, largely due to the settlement of a long-standing legal proceeding in New Zealand during the September quarter. Loan impairment expense was flat year-on-year and lower versus the second half, reflecting the benefits of our conservative settings and the resilience we continue to see in customer and portfolio credit quality. This resulted in growth in cash profits of a little over 6% on both the prior corresponding period and the second half of last year. It's worth noting that the effective tax rate for the half was 30.3%. Looking ahead, you can assume that will settle closer to 30% for the 2026 financial year. On operating income, we delivered growth of 6.6% over the prior comparative period. Net interest income increased strongly, up $761 million, supported by profitable above-system growth in lending and deposits. Other operating income also contributed, growing $163 million over that period, assisted by one-off gains. This slide sets out some of the drivers of long-term franchise strength that we have been targeting, deeper customer relationships, deposit-led growth in our core segments that underpins and proceeds lending growth and productivity improvements within our frontline teams. Our retail bank continues to build foundational banking relationships, adding 3 million net new transaction account customers over the past 5 years. In home lending, we continue to prioritize and grow proprietary distribution with $55 billion of new fundings originated over the last 6 months through our own channels. And our strategic focus on business banking continues to deliver strong outcomes with double-digit compound annual growth in both deposits and lending over recent years. Our investments in building a more digital, customer-focused and streamlined business bank for our people and our customers can be seen in the productivity improvements delivered over the last 5 years with fundings per banker up 65% over that period. Turning to the net interest margin and looking at the movement over the most recent 6-month period. The main driver of the 4 basis point reduction over the half was the increased mix of low-margin liquid assets and institutional repos. Excluding those items, margins were 1 basis point lower with competitive pressures and the impact of a lower cash rate, largely offset by the replicating portfolio and the favorable portfolio mix effect of strong deposit growth. Margins were a little stronger in the December quarter, largely due to the benefit of higher swap rates on our replicating portfolio. You can see here that we're managing margin outcomes carefully, balancing competitiveness with returns and staying focused on building lasting primary relationships with our customers rather than chasing unprofitable volume growth. On operating expenses, they increased 5.5% on the prior corresponding period. The drivers are largely unchanged over recent years. We are seeing inflationary impacts on wages and IT vendor cost inflation continues to run higher than CPI. At the same time, we continue to invest behind the franchise with higher cloud consumption and software licensing costs and our ongoing investment in technology infrastructure and AI capabilities alongside enhanced frontline capacity and operational resilience. We are self-funding much of that investment through productivity initiatives, realizing approximately $222 million in incremental cost savings over the past 6 months. Turning to credit risk. Loan impairment expense for the half was $319 million, broadly consistent with the prior comparative period and improving versus the second half. Across the portfolio, we continue to see broadly stable to improving conditions. Households have been supported by the strength of the labor market and rising disposable incomes. We have seen this reflected in higher prepayments and lower consumer arrears. In the corporate portfolio, troublesome assets and nonperforming exposures continue to trend lower as a proportion of the portfolio. Given the uncertainty in global macro and geopolitics, we've maintained strong provisioning coverage. Total recognized provisions are approximately $6.3 billion. And importantly, we continue to hold a material buffer above the central scenario. This slide provides the usual additional detail on sectoral considerations. We marginally reduced base provisioning and forward-looking adjustments in areas where conditions have improved, including consumer, construction and retail trade. This was partly offset by an increased level of provisioning relating to our downside economic scenarios where we take into account the risk of exogenous shocks to the domestic economy. Overall, our approach to provisioning remains grounded, forward-looking and appropriately conservative. Our funding and liquidity profile has continued to strengthen. We continue to be predominantly deposit funded, supported by a strong deposit gathering franchise. Total customer deposits grew at an annualized rate of 10% over the last 6 months, taking our customer deposit ratio to 79%. We also maintained a historically low proportion of short-term wholesale funding. This combination of deposit growth, consistent term issuance across diverse funding markets and strong liquidity buffers, we remain well positioned to support the current strong level of customer demand for lending growth. On capital, our common equity Tier 1 ratio remained at 12.3% with organic capital generation continuing to support franchise growth and dividends. Growth in risk-weighted assets was largely a function of lending volume growth with credit risk weightings remaining broadly stable over the past 6 months. The interim dividend increased $0.10 to $2.35, representing a headline payout ratio of 72% and a normalized payout of 74% after adjusting for the benign first half loan loss rate. The dividend will be fully franked and the dividend reinvestment plan will be offered with no discount and fully neutralized. Delivering franchise growth while maintaining returns above our shareholders' cost of capital allows sustainable and consistent accretion and dividend per share over the long term. This slide sets out our long-term approach to capital management. We prioritize profitable franchise growth as the first and best use of organic capital generation. We invest in line with our strategic priorities aimed to pay sustainable dividends, and we carefully manage our share count and surplus capital in a disciplined way. Over time, you can see we've balanced capital generation with capital distribution, supporting franchise growth when lending demand is elevated, while also returning excess capital to shareholders, primarily through dividends as well as through the selective utilization of buybacks. Ultimately, we remain focused on optimizing long-term shareholder outcomes while maintaining the balance sheet resilience that underpins our ability to support our customers and the broader economy through the cycle. In closing, this long-term approach has again assisted in delivering consistent and superior shareholder returns. Our combination of a high return on equity and strong payout ratio continues to compare favorably with domestic and global banking peers. Our strategic investments are yielding measurable improvements in franchise growth and productivity, underpinning our continued outperformance in net tangible assets and dividends per share. I'll now hand back to Matt for the economic outlook and closing remarks. Thank you.
Matthew Comyn: Thanks very much, Alan. Australian economic growth has strengthened more quickly and proven more resilient than expected. This was driven by increases in consumer demand and rising investment in AI and energy infrastructure. Household consumption has risen, including across discretionary categories. Supply side constraints mean that the economy is struggling to meet this increased demand. And as a result, inflation is now expected to remain above the Reserve Bank's target band for some time, placing further upwards pressure on interest rates. Australia has remained highly resilient despite a volatile global environment. To date, there has been limited economic impact from trade and tariff disruptions. A global AI investment cycle is supporting growth. Elevated geopolitical risks are likely to generate ongoing shocks, reinforcing the importance of economic and operational resilience. We will continue supporting our customers with their financial resilience during this period. We're optimistic about the prospects of the economy and we will play our part in building a brighter future for all. So in summary, the market has seen a period of high growth, low loan losses and intense competition. The Commonwealth Bank is well placed to adapt and perform against this backdrop. We remain committed to supporting and protecting our customers, reimagining customer experiences by investing in technology and AI and providing strength and stability for the Australian economy and delivering sustainable returns. We will stay focused on consistent, disciplined execution and investment for the long term to deliver for our customers and build a brighter future for all. I'll now hand to Mel to go through your questions.
Melanie Kirk: Thank you, Matt. For this briefing, we will take questions from analysts and investors. When the line opens for you, please introduce the organization that you represent and limit your questions to 1 to 2 maximum questions. The briefing will then have the -- sorry, we'll then take the first question from Andrew Triggs.
Andrew Triggs: Matt, in your prepared remarks for the first quarter trading update, you talked about the competitive concerns -- sorry, the competition concerns you had and potential responses and onsettings. Could you sort of elaborate on those? You seem to have sort of reiterated some of those comments this morning. And specifically, what size of the balance sheet are you referring to there? It does seem at odds with a stable underlying margin in the half and the slight improvement in NIM that you've seen in the December quarter.
Matthew Comyn: Yes. No, thanks. Look, I guess I'd contrast between -- as I said in the opening remarks, I think the strength of this result has been our ability to maintain a very good and disciplined volume growth and a part of that is underlying stability in the margin performance across all of our customer-facing segments. I think when we look at, let's say, last calendar year, I think the market is and the competitive context is shifting. I think clearly, this demonstrates our ability to be able to perform well in that. But I mean, if you look at the period of the last 5 years, we've seen the most rapid growth by one competitor in household deposit share growth. In fact, I think it will be close to double the previous growth rate. I think we've seen a pretty sharp reduction in household balances. I think the greatest over that 5-year period outside the major banks. I think even if you went back to 2008. And I think that's interesting in the context of the backdrop. We've got, as we talked about, higher system credit growth. We've seen that clearly in retail and also in non-retail. We expect that there's going to be a maintenance of higher credit growth on the back of higher nominal growth and of course, I hope a pickup in investment. If you look at the organic capital generation across peers and really the sort of volume and NII returns that are being generated, I think that sort of marks quite a shift. Against that sort of credit environment, you'd actually expect there to be much greater pricing discipline. And look, clearly, there are different choices that are being made around business model and customer proposition. Some part of that's being informed by the regulatory architecture and choices. I mean it's for us to understand and adapt to the environment to be able to execute as well as we can, both in the 6- or the 12-month period, but also most importantly, to position the organization for the future. And we think a lot about how do we build on the scale, durability, resilience, investment in the franchise while continuing to perform well in any given period and deliver sustainable, reliable returns to our shareholders.
Andrew Triggs: And maybe perhaps for Alan. Just the pick apart maybe a little bit more of the slight improvement you referred to in NIM in the second quarter. You put that down to the replicating portfolio, but that tends to come through more slowly. What were the other drivers? And given we've had a rate hike in February, potentially another one in May, what does it mean for the outlook for the NIM into the second half?
Alan Docherty: Yes. Thank you, Andrew. Yes, between Q1 and Q2, I guess there was a couple of things that changed. I mean, importantly, the replicating is a major factor. The 5-year swap rate, I think, increased 30 basis points between Q1 and Q2. And as the tractors gone through over that period, we've seen the pickup there. Also, there was a bit more of a cash rate headwind in Q1. So if you look at the weighted average overnight cash rate that was down, I think, 40 basis points Q1 to the second half of last year and only down a dozen basis points over the second quarter relative to the first. So you had that cash rate headwind in Q1 sort of be much more neutral, I guess, in Q2. And the other aspect was very strong growth as we've reported in particularly business transaction accounts in that December quarter. So that was pleasing. And so we picked up a bit of a mix benefit on BTA growth through Q2. Now an element of that is seasonal, we get seasonally stronger growth in the December quarter. But you can see what the changes we've seen in swap rates. So that will continue to feed through in our tractors in the period ahead.
Melanie Kirk: The next question comes from Jon Mott.
Jonathan Mott: Jon Mott here from Barrenjoey. I've got a question on Slide 96. I know it's a long way in, but if we can just click over there. Just looking at the deposit side and well done, just really shows the strength of the franchise with the great growth of the deposits coming through. But I wanted to drill down into it. So if you look at the growth in retail transaction accounts, pretty steady, good numbers growing 3% in the half, 5% year-on-year. It's been growing pretty steadily. But then when we look over at the retail deposit mix, a big jump, and I think this is the biggest jump you've ever had in transaction deposits in the retail bank. And if you go on the average balance sheet, you can also see they're coming in noninterest-bearing deposits, so excluding offset accounts. You're seeing huge growth. And given the comments from the first quarter, it didn't appear to be there. So it really looks like it's come through in the December quarter. To put it into perspective, I just backs that the average transaction account in Australia jumped by $700 from just over $10,000 to $10,700. So what happened in that December quarter to see such massive growth, not in the number of transaction accounts, but in the balance? And when you think about how it's going to go going forward, is this just a seasonal and then get drained into savings or higher interest rate accounts over this next half? Or are you going to see really strong growth in noninterest-bearing deposits really support the NIM through the second half of '26 and into '27? So can you just explain what happened?
Alan Docherty: Yes. I mean one element of that transaction account growth is growth in the offset accounts. We've seen very strong consistent growth in offset through both Q1 and Q2. I mean that's, I think, a healthy sign of continued growth in excess savings across the economy, and we called out in the -- in one of the macro slides, the improvement that you can see in the savings rate that we continue to see through the course of that half. Yes. And in terms of the performance of the underlying ex offset growth in the retail bank, that's continued to improve. I mean we've seen relatively consistent growth in average balances per retail customer account. So that's continued to grow in the period. And of course, we've continued to attract more customers. And so very strong growth, another, I think, year-on-year, 600,000 growth in customer transaction accounts in the retail bank. Retail customer numbers are up 3 million over the 5-year period. So again, that's been relatively steady. But I think it's a function of just that continued growth in savings across the broader economy, and we've seen a large share of that come through the retail bank.
Jonathan Mott: Okay. Just digging into that a bit more. I just going over to the retail bank in the actual result. And if you look at the noninterest-bearing transaction accounts in the -- you can see there, this obviously excludes offset accounts. Big jump again there by $4 billion. So is there anything in particular that happened in that fourth quarter that just drove this much higher because this isn't you're seeing steady customer account growth, it's unusual. And then obviously, this implies what happens into the next half.
Alan Docherty: Yes. No, I mean it's very pleasing. I think a more like-for-like comparison is going to be December to December growth in noninterest-bearing trend in the retail bank. We do get a fair amount of seasonality into that June period. So going into June, as you come out of the March quarter into June, you tend to have a higher level of spot non-retail transaction account deposits, which then dip quite significantly into the 30 June period. We see a lot of switching, particularly small business owners injecting cash in other businesses as they get to the 30 June financial year-end. So we've been pleased with the growth, probably the better underlying measure of that growth, I think, is the year-on-year 6% growth between the $47.5 billion we had this time last year and the $50 billion that we landed at 31 December. So yes, strong growth, but I wouldn't annualize the 6-month growth.
Matthew Comyn: Yes. I think there's a bit of seasonality for sure. And Jon, I think Alan touched on it all. I mean, obviously, we'd like to think with all the work that we're doing around the engagement of main bank proposition that's attracting higher balances. We did see obviously a run-up in incomes across the economy. But I think it's hard to then just extrapolate the fourth quarter was strong for us in a number of areas, including both in business and retail deposit growth at an account and average balance number.
Melanie Kirk: The next question comes from Richard.
Richard Wiles: I've got a couple of questions. The first relates to the mortgage market and the second relates to the benefits of scale. So on the mortgage market, your major bank competitors have been pretty clear in communicating their desire to invest in and grow their proprietary distribution. So that leads me to ask whether your expectation that you can grow at or above system in the mortgage market is premised on a belief that you won't lose any share of proprietary distribution or that third-party broker share of the industry's mortgage origination will fall from its current levels?
Matthew Comyn: Yes. Look, Richard, I mean, we don't, as you know, sort of -- we, at any period, seek to grow sort of at or around system. We're going to make lots of different choices. I think there's a couple of different sides to it. Clearly, the proprietary distribution has been a strength for some time, and the team have executed really well. I think we're now, we think, 54% of proprietary mortgage origination. On one side, the other banks joining and having a greater focus on that, maybe that helps a little bit to change the perception or customer preference more broadly in the market. I mean, secondly, the broker channel is a really important distribution for us and it will be going into the future. So I mean, it's predicated really on the continuation of what we have been doing. And I think we'll be able to maintain between both our CBA Yello brand, BankWest, which is obviously heavily concentrated in broker and our digital proposition, a balanced portfolio in terms of distribution. And then, of course, while serving our customers, we've sought to optimize for cohorts and individual segments where there's structurally higher margins like there are in investor.
Richard Wiles: Okay. And my second question really relates to some of the slides and your comments pointing to very strong growth in the franchise since 2019, whether it be deposit balances or number of customers or number of accounts, you called that out in your opening remarks. That should suggest that you'll get increasing benefits from scale. But if we look at the cost-to-income ratio, in rough terms, it's somewhere in the mid-40s. That's where it is today. That's where it was back in 2019. Do you think it's fair to view the cost-to-income ratio as a measure of whether you're delivering benefits from scale? And can investors expect or cost-to-income ratio at CommBank over the coming years?
Matthew Comyn: Yes. Look, I mean, it's -- and look, I'm certainly a believer in increasing returns to scale and how they might compound over a long period of time. I think the drivers, particularly on the cost side for us, I guess, as we reflect over the last, whatever, 5 or 8 years have been deliberately targeted in a couple of areas. First and foremost, we've significantly increased the investment, and we think that's really important to both underpin the durable competitive advantages. But I think that's one of the major sources of scale. And we've substantially increased sort of operational and regulatory risk management. Of course, without giving any sort of clear guidance, you might recall early on in our collective tenure, we gave some cost-to-income ratio guidance and then the cash rate promptly fell several times after that. So we're not likely to repeat with that.
Richard Wiles: That was early 2019.
Matthew Comyn: It was. It was, Richard. We remember it well, I'm sure you do. So look, I think we definitely have aspirations to perhaps over the medium term, definitely shift the trajectory of that cost. But we also, I guess, in any period, we're prepared to sacrifice near-term returns if we believe that we can deliver the best long-term outcome. And I do think the next 5 years will be quite different in terms of where the investments will come from. I do think there's a lot of consistency around technology. Probably the other area that I think occurs to Alan and I in this result is in terms of where the increased investment over and above the areas that we're used to calling out is there's just a lot more going into resilience more broadly. And I mean cyber has been a theme. So we do think the importance of being able to continue to invest in differentiated experiences but also just core resilience and protection of our customers. You need to be able to generate a strong organic return profile to be able to fund that investment to be able to simultaneously provide lending to the economy and distribute dividends. So it's probably a long-winded way of saying no change to guidance, believe in returns to scale strongly. I think there will be opportunities for us to improve our cost trajectory and ratios over time.
Melanie Kirk: The next question comes from Andrew Lyons.
Andrew Lyons: Andrew Lyons from Jefferies. Alan, just a question on costs. Firstly, the first quarter, you spoke to seasonally low IT vendor costs, but the first half cost performance was a particularly good one, and it wasn't particularly apparent that, that came through in the second quarter. How should we sort of think about that seasonality comment from the first quarter? Should we be seeing a bit of a step-up in those costs being expensed through the P&L in the second half just as you continue to invest in the business?
Alan Docherty: Yes. You'll notice in the detail of the investment spend disclosures we have. We have dropped the capitalization rate in the current period. We're capitalizing less, more of that's flowing through into the P&L. That goes with the change -- slight change in mix that we've seen from a strategic investment perspective. So more weighting towards productivity and growth initiatives, a little bit less proportionately on some of the infrastructure spending. The infrastructure spending by nature is more capitalization heavy than other forms of spend. There is a little bit of seasonality in Q1. We've seen some of that reverse in Q2. It's fair to say that we've called out IT vendor cost inflation pretty consistently over the past 12, 18 months. It's an area that we continue to be very cognizant of, very focused on. We see that as over the medium- to long-term potential source of above CPI, above domestic inflation source of cost growth. So it's something that we're managing carefully, but something we keep an eye on, and that's why we made the comment in the first quarter because you didn't really see it as a source of cost inflation there. But again, that was a quarterly timing issue.
Andrew Lyons: Yes. Okay. And perhaps a question for Matt. It was a particularly strong result in business banking. Your loans are up 9% on PCP NIMs up 3 bps over the same period and 5 bps in the half. That does somewhat fly in the face of the view that the market is facing elevated competition driven by both the big 4 and also other players in the space. So can you perhaps just talk about the competitive environment in business banking? How do you see it playing out? And what is CBA basically doing to sort of try and insulate the margin as much as possible as you do grow?
Matthew Comyn: Yes. Look, I mean, I think the competitive context is intense. And against that, I think the team have executed extremely well. I mean some of the things I think that stand out to us is a continuation of what we've now seen for many years in terms of transaction liability-led strategy, strong growth in account numbers, strong growth in balances, as Alan touched on, particularly in the fourth quarter. I think a very good track record over the last 5 or 6 years of high-quality risk identification in terms of lending, really leveraging the main bank relationship and having a much broader relationship with our customers. We've seen also capabilities that the team have developed. It is probably one of the things that stood out to us as well as like a very good performance in small business. I touched on some of the growth in products like BizExpress, which is largely unsecured, and we've gone from sort of $30 million to $130 million. Now at some level, they're still relatively small numbers, but it's been a diversification of the lending growth that's been good. Small business would probably be roughly twice the margin of some of the other segments. They've been very disciplined up and down throughout all of the segments. We monitor closely in terms of the value of deals that we won't originate due to pricing, the value of deals we won't originate due to credit conditions. And I think leveraging some of the technology both in the decisioning -- speed of decision as well through to funding but also in terms of giving us the confidence to be able to originate across broader cohorts of customers where we've got that main bank relationship. We've also been able to again, leveraging some of the technology to automate some of the account management processes, substantially free up banker time. And so we're seeing much improved productivity in terms of facilities per banker. So I think in aggregate, the team have executed extremely well. I think the result is another very strong one.
Melanie Kirk: The next question comes from Carlos.
Carlos Cacho: I'm Carlos Cacho from Macquarie. You spoke to in the retail section lower deposit margins due to competition and shifting into high-yielding savings deposits. Can you give us any color on the mix shift you're seeing there from lower rate products like NetBank Saver into the higher gold saver or potentially higher rates on some of the NetBank Saver accounts that's driving that.
Alan Docherty: Yes. I mean, I guess that's been a consistent trend. I mean, I talked earlier about the things that had changed between the first quarter and the second quarter, but one 1 thing that didn't change was the very strong level of growth that we continue to see into the GoalSaver product. So that's running multiples of the growth rate. And we're still growing in NetBank Saver, but the key driver of savings account growth in the retail bank has continued to be GoalSaver. And so the sort of mix effect and we've called out previously the very strong level of balances that are attracting that high the bonus rate on GoalSaver. So that's now up to 87% of balance is attracting that high rate. We can see then on the quarterly trends on margin, it's a consistent headwind. So very consistent over Q1 and Q2, it was about a basis point headwind in each of those periods due to the mix effect of that the growth in that higher rate product.
Matthew Comyn: Yes, I think specifically -- sorry, I was say we're using the GoalSaver product, particularly, we've got some targeted offers in market. I think we see a little bit more switching into the saving, but there's probably less churn than we would have seen in other periods from savings into TD. And I think, again, the team have done a good job of optimizing across the various customer segments and trying to make sure we're getting the right overall margin outcomes whilst growing a bit above system as well.
Carlos Cacho: Great. The other question I want to ask you is more around the thinking longer-term asset investments you make. You're clearly investing a lot of money into technology and AI. And I spoke to those vendor inflation headwinds, which appear to be as the tech companies wanting to return on their investment, how do you think about return on those investments you're making? And I guess, particularly how you think about that flowing through higher revenues versus potentially more productivity or lower cost in time?
Alan Docherty: Yes. I mean we've been very pleased with the yield from the investment. And I think it's particularly there's a number of proof points in this result that we've called out. I think sure that we are getting a measurable return on those investments. We called out the productivity that we've seen as we've continued to digitize, importantly, the work of a business banker. We've got much better mobile and digital platforms for our business banking customers, getting them to the sort of levels that we achieved in previous years for retail. Customers, and you see that coming through. I mean that's a big driver of the MFI growth that we've continued to see within the business bank continue to underpin the transaction account growth. And then we've got sort of 97% conversion of those transaction accounts into lending relationships, which has seen us continue to grow well above system in the business bank over the last 12 months. So yes, the yield from the technology investments we're seeing measurable returns, both on the revenue side and in the cost side. So we've been pleased with that. To your point, and again, that's why we call out the IT vendor cost inflation, there is over the next few years, we're going to continue to see where the returns emerge from newer technologies between the technology companies themselves and the corporates who have deployed those tools. Certainly, over the past period of time, we've been pleased with the return that we're generating through our franchise, but that's something that we'll continue to manage, ensure we've got compatibility with lots of different vendors. We're able to switch providers in various areas, maintain that flexibility to ensure we maintain competitive -- have a competitive tension with some of our key technology providers, which I think is going to be important for every corporate over the next 5, 10 years.
Melanie Kirk: The next question comes from Matt Wilson.
Matthew Wilson: Matt Wilson, Jarden.Two questions, if I may. If you look through the long term, CBA's key point of differentiation has been your largest ticker low, no cost deposit base, and you're very effective at growing it as we can see today, and your major bank peers have failed to close that gap through the decades for various reasons. But today, we have sort of 2 new challenges out there. Macquarie who's the fourth peer and perhaps should appear in every slide where there's a peer comparison now going forward to put a line in the sand and then you've got AI. If we embrace your enthusiasm for AI, then does it follow that we'll all have a personal AI bot that will automatically direct our savings and transaction accounts into the highest-yielding accounts and a machine will do that for us. And on that basis today, they move to Macquarie. I've got a second question.
Matthew Comyn: Yes. Look, Matt, I think on your first question. I mean, look, I think what the result demonstrates is our ability to perform in the current context. We think we've got to see good strategic assets and sources and the team have executed really well. We're, of course, alert to lots of different shifts in the competitive context. I mean, specifically, maybe it's a little bit of a flow on to car losses. Question, in terms of AI and technology, we've got a bit of balance between sort of flexibility and scale. I think in the near term for heavily regulated institutions, I think it adds both complexity and governance. I do think one of the important things that we're certainly spending time on is where do we think AI has the potential to change the economics of the industry, what might the impact be around sort of competitive moats or enduring sources of advantage, how might that show up. I think there's lots of different ways that we envisage that we can compete extremely effectively in that environment. So I think we are both planning for the long term, lots of different sort of scenarios. We think we've got the scale to invest. We think we're uniquely placed. And I think the team are highly motivated and very focused on execution. At least in this period, I think it's a good example of it, and we certainly intend to maintain that focus, discipline and execution ability.
Matthew Wilson: And then a second question, probably linked to Richard's second question as well. If we look back over the last 5 years or so, headcount at the enterprise is up nearly 20% despite investments in AI and technology that should be driving efficiencies. But at some stage in the future, there's obviously a big dividend to be reaped by taking people out of the organization. Could you comment on that opportunity?
Matthew Comyn: Yes. Look, I mean, I think that's right. In banking in Australia, there's been a significant increase in headcount. At least in some of our areas, though, as well. I mean it's our approach to the management of important risk types like financial crime has strengthened considerably. There's large operational and FTE requirements with that today. When we think about that more broadly, economic crime, across scams, fraud, cyber. Clearly, the vector of threats that we need to be able to deal with is increasing on a daily basis. And absolutely, some of the technology that we're deploying at the moment in time, I think we'll be able to make a meaningful improvement to the level of automation and efficiency with which we're allowed to deliver those services. A lot of the other increases have been in and around technology. Obviously, that's supported much higher levels of investment, also into key frontline roles, notwithstanding the fact that we've been able to improve productivity on a per role basis, but I think that's enabled us to grow at a faster revenue rate than peers, which we think is important. So I guess to Alan's answer earlier, I think there's both revenue and cost benefits that are being delivered in this period. We obviously and Alan is tracking those benefits very carefully and clearly, we think it's really important to continue to sort of push for further sources of competitive advantage. I think that takes time. But clearly, we think there's some opportunities to manage the cost base over the medium term.
Alan Docherty: I'd just add one point, Matt, around the 5-year growth in the FTE, of course, about half of that growth just related to the in-sourcing that we had within our technology teams. So we've moved away from third-party suppliers in many respects, brought our own engineers in-house. We're seeing a much more -- much greater velocity, much greater quality, much greater productivity over that 4, 5-year period, as we've conducted that in-sourcing. So that's been a big part of the overall FTE growth. Actually, we're seeing again -- we've called out some of the benefits we're seeing in terms of the engineering capability. Change deployments is up 30%. Over the past 12 months, we're seeing that deployment at greater pace, greater speed and greater quality. And so the work that we've done to in-source into our FTE base the engineering capability, we think is paying dividends.
Melanie Kirk: Our next question comes from Brian.
Unknown Analyst: Thank you. And first of all, congratulations on the stonking result. But more to the point, since you've been speaking, you put on a lazy $3 or $4 a share. So I had two questions. The first one is that if we have a look at CommBank, we can see that you've got excess liquidity, long-term funding. You look at your software. You're increasing the expensing profile. You've got incredibly strong provisioning. We're not a look at the profit after capital charge. It's up -- you're saying that you normalize the dividend payout ratio for the current low loan losses. I just would be interested to hear what is the scenario where we'd start to see your harvesting the latency. And does that basically mean that we see a continued dividend growth even when system becomes more averse? And then I have another question as well, please.
Matthew Comyn: Yes. Maybe I'll start, and then Alan can add to it specifically. I mean, Vijay, as I know, we've had this conversation before. I mean a lot of that the way we think about things is sort of maximizing value over the long term. We're consistently trying to find ways to invest in the earnings potential. We're prepared to not seek to sort of maximize our performance in a particular period because we want to have the flexibility over a long period of time to both deliver very strong earnings growth and momentum but also to have substantial flexibility to be able to deal with a range of different scenarios. And so look, I think this is clearly above the central scenario. I think the largest excess we've had at $2.8 billion. This is clearly still tail risks, particularly on a global basis and some of those are hard to accurately predict and price. But I mean, I think, there's a number of different areas where we've got a lot of flexibility in the organization. But most importantly, we want to translate a lot of the investments into long-term earnings potential going well beyond 2030.
Alan Docherty: Yes. I mean the balance sheet settings, we continue to take us sort of through the cycle view. As Matt says, I mean, the provisioning, we're pleased to hold the provisioning at the broadly around stable levels, albeit we're growing the lending side of the balance sheet very quickly. We've seen record levels of lending growth. So the coverage ratio, the provisions as a proportion of the risk-weighted assets has drifted a little lower. And so you've seen some unwind of the provisioning that we held maybe 12, 18 months ago. But yes, we take it through-the-cycle view. We like having that latency, and I think that gives us a more stable through-the-cycle performance, which our shareholders really value.
Unknown Analyst: Just a second question, if I may. Once again, I really want to congratulate the entire management team on the results. If we have a look at some of the global in financial services, in particular, as they seem to hit a kind of more adverse environment, they basically seem to be pulling the pin quite aggressively to shared labor. I'm just wondering, when we have a look at CommBank, is there a point at which you -- how close are we at the point to which technology replaces people? And I'm not saying you necessarily have to go to retrench people, but natural nutrition probably gets you. But do we actually get to the point where we actually see basically the headcount element of the total operating cost fall. And in that context, can you see a point, Matt, and I never thought I'd ask this question where it's difficult to find more incremental to spend on technology?
Matthew Comyn: I think in terms of tech spend and investment and software, I think demand across the economy still sort of outstrip supply. But I mean, clearly, the potential to be able to deliver a lot more change, I mean, significantly more than we're currently doing in year is clearly there. And I think some of the leading firms globally, outside of banking are already seeing some of that automation. Look, I think there's going to be multiple sort of speeds for how AI is adopted across the organization, how it's able to improve and automate some of the processes. I do think also it's important and certainly the approach that we're taking is thinking through that very carefully and thinking about the individual tasks and skills. I think it's really important to build the capability across the organization. I think anything that is disruptive like this technology is, it's really important to engage inside the organization, maintain the very high levels of engagement and motivation. I don't think some of the more pessimistic scenarios around labor force disruption will materialize. I think it does take quite a bit of time. I think the sort of the performance of the models is quite jagged. There's also a number of different things that you can do really well. There's others that candidly, you can't. But I think the potential over time to improve certainly the performance of every individual to provide greater output and then in time through more automation. And there's also just a number of customer processes, we think we can manage on an automated basis. I mean we believe in having to be able to service our customers in real time dealing with scams and disputes and fraud and to be able to perform and close those tasks out through an agentic framework to be able to serve many of our customers more directly and comprehensively. We've already got the capability to be able to monitor the environment and an automated basis, deploy new rules in to pick up and detect fraud. I think we're just scratching the surface of the potential here. And I don't think we're going to be talking about it in very significantly different ways at our full year results in August, but I think in a sort of 3- and a 5-year time frame, I think there certainly is some significant potential. And there's a lot of things that need to be managed as a highly regulated industry. I mean I do think sort of governance and transparency and explainability and most importantly, trust with customers and with employees. I think that will be a very important part of what we need to do well. We've obviously started communicating externally with some of the work that we're doing. And yes, I think we're trying to think about this comprehensively and over a long period of time, and we believe it's going to be a source of competitive advantage for CBA.
Melanie Kirk: Our next question comes from Brendan.
Brendan Sproules: Brendan Sproules from Goldman Sachs. I just have a couple of questions. Just in terms of the impact of higher interest rates as we look forward into the second half. Obviously, in this looking backwards this half had record lending growth, particularly strong deposit growth in business banking as touched on earlier on the call. But when you look back to when the cash rate was last, 4.35, you showed us a number of slides similar to Slide 18, which showed negative spending and cost of living pressures in the household sector and you also saw quite a slowdown in business credit. Just want to get your view on how sensitive you think the current system growth rate in both lending and deposits will be to these higher rates over the next 6 to 12 months?
Alan Docherty: Yes. I mean, it's going to be -- to your point, I mean one of the things I called out in my opening was very strong level of credit, growth leads to very strong growth in broad money and money supply. And that's a factor that we look closely at in terms of, I mean, we see a lot of that money supply growth come through our deposit accounts. That puts more money in people's hands ultimately across the economy, and there's an inflationary element, obviously, to that mechanism. So of course, the reason that rates are being hiked as in order to maybe slow down some of that demand more broadly across the economy slowdown in that spending. And so we would expect to see some impact to that. We've had a very strong period for system growth across both home lending and non-retail lending across the system. We've got -- our economics team has got a range of between 6% and 8% across the total system credit over the next couple of years. Obviously, we're running at the top end of that as we sit here today. So I think there's maybe some -- you would expect some impact on system levels of credit growth and a higher rate environment. I guess the big question will be how many rate rises do we see from here because that will determine the sort of size of the slowdown you see from a credit perspective.
Matthew Comyn: Yes. I think, I mean, if you assume there's a couple of rate hikes. I think it have a modest impact maybe even if it took a percentage point of housing credit growth. I think the non-retail credit growth has been very strong. Certainly, everything that we see is there, we think sort of higher nominal growth is going to support that. I think boosting investment is going to be an important driver of productivity. I think there's certainly investments in technology across the economy that are going to support that. And I think that's the importance of having the right sort of capital settings and deploying that lending growth into the right risk-adjusted returns, and certainly, we've kind of extended out the sort of credit growth that we've seen over the last couple of years. And I guess that's sort of our base case to make sure we're going to perform optimally in that environment.
Brendan Sproules: That's great. And the second question, just on NIMs on Slide 27, obviously one of the better parts of today's result is the lack of compression on your funding cost. To what extent is this a timing issue in terms of the switch in the rate cycle that sort of happened towards the end of the fourth quarter? Obviously, with the RBA pushing rates higher earlier this month. We have seen some deposit product pricing move higher with that. To what extent is that going to play out in the second half, a bit of catch-up in terms of deposit pricing for these higher rates?
Alan Docherty: Yes. I mean I think that as we've long said, I think the -- I mean, deposits are very competitive, and we're going to continue to see the mix, unfavorable mix impact of that growth in our high rate products. So I think that's likely to continue. The other element that we watch closely is wholesale funding spreads. I mean, I guess you've seen a very benign period. I mean, in the last 6 months, the 5-year funding cost and the wholesale funding markets fallen another 10 basis points. You tend to find there's a real correlation between what happens in wholesale funding markets and the level of deposit competitive intensity and deposit pricing. And so one of the forward indicators or lead indicators that we'll be looking carefully at around the likely outlook for deposit pricing and competition as that level of wholesale funding spread. We've had a benign period. We're below historic averages in a number of those long-term funding products. So we'll keep a close eye on that in terms of how that -- there's a potential for that to revert and that to lead to more deposit competition in the second half, but we don't know that today. We'll keep a close watch on that.
Melanie Kirk: Our next question comes from John Storey.
John Storey: Good set of results. I just wanted to touch quickly just on the business model and potential construction to business model. You've seen it in the last few days. Insurance broking firms have obviously been impacted by the threat of AI, right, in terms of distribution. Just thinking about it in terms of the mortgage market share in Australia, how prevalent brokers have become -- I mean, what are your views on the likelihood of AI disrupting mortgage brokers. So the disintermediators are becoming intermediated. And around that, how well or how prepared is CBA in terms of its own business model for something like that, that could potentially eventuate?
Matthew Comyn: Yes. No. I mean, look, we've tried to think through all the various sort of potential sources of disruption not limited to mortgages and how to most effectively prepare for that. I think we feel we've got the right combination of distribution assets to perform well in that particular environment. I mean I know from speaking to a number of mortgage brokers and some of the leaders of those mortgage brokers firms, that's definitely on their mind. I think like a lot of businesses, perhaps the sort of speed and rate of disruption is also a question of debate. I think one of the things that has been important in terms of why our customers will still preference a face-to-face experience with either a mortgage broker or a proprietary lender is it's a significant decision I think people still value that. I would have incorrectly forecast the proportion of mortgages that would have gone to digital when we started sort of thinking about this 15 years ago, and it's been a lot slower. So -- but look, I think it's important to think things through and assume they're going to happen more rapidly. I think in our case, we think we're well prepared and I think there's very few sectors of the economy that aren't thinking about some of the disruptive potential and obviously, the rate and pace of change, particularly some of the genetic services that are out even in the last month. Certainly, there's been some pretty significant share price reactions to a number of global industry and software providers.
John Storey: One, just quickly on a second question. Obviously, a lot of talk, I guess, is on certainly over the last few weeks, months, around increased levels of competition put in the market. And obviously, you've got a very interesting slide, Slide 73, 74, just around new business volumes that are significantly 24% half-on-half, right? I wanted to just get your views on to what extent this growth that you've often seen reflects some of the competitors actually stepping back from the market, right? So I'm thinking specifically around some of the regional banks. And then obviously, ANZ going to a period of restructuring. How sustainable is this level of new business growth that CBA is showing?
Matthew Comyn: Well, I mean -- we'll see, it remains to be seen. But I mean, I think, we executed well in the period. We certainly planning to continue to do that. I mean, look, I do think it's quite interesting in terms of some of the share shift on the deposit side. And then on the asset side. I think where your returns are under pressure and you're not able to generate returns above the cost of capital, it's pretty hard to grow it system. Yes, there's disruption. I guess the other point is it occurs to us as we look at both capital ratios across the industry and where we would anticipate the DPS profile might be at some of those institutions, it would probably start -- it would tend to support pretty disciplined pricing. And so I think clearly, where there's volume share shifts between institutions, that tends to at times lead to not particularly disciplined pricing. I think it's been a really good period for the half. I think it's quite a -- I think it's an interesting equation, at least as we look forward and think about, well, if it's higher credit growth and the RWA the consumption that comes with that, shouldn't plan as a base case that record low loan losses are going to continue investment, certainly, for us, we're increasing. And we think that's important from a competitive perspective as well as to be able to support broader resilience objectives. I think -- but maybe that financial equation looks a little challenged, perhaps for some. And so I mean, look, I think we're thinking about how best to compete in that environment. And I think, hopefully, at least this 6-month period has been probably one of our better periods of execution in market.
Melanie Kirk: Our next question comes from Matt Dunger.
Matthew Dunger: Yes. Could I ask a deposit question in a different way? The 79% deposit funding stands out versus the peers. You flagged you're expecting higher growth in higher rate deposits and we noticed that NetBank Saver didn't reprice as much as some of your peers through 2025. So why compete on price when you're already leading deposit growth? Is there a target at CBA to continue to strengthen the deposit funding mix?
Alan Docherty: Yes. I mean we're always -- we're predominantly deposit-funded and we want to keep it that way. We've been impressed with the execution on the deposit gathering and it's a foundational relationship. It drives MFI drives, as you can see in the numbers we've disclosed, relationship between retail transaction account and home lending, propensity to have your home loan with CBA higher in the business bank. So we -- it's an important part of the franchise. We want to continue to gather deposits. Now we're in a competitive market for deposits. And hence, we've got a very attractive offer on not only GoalSaver, very, very attractive rate. On GoalSaver, we've a very high proportion of balances that achieve that rate. We also got very competitive term deposit offer. So the 12-month term deposit especially that you've seen across the industry, I mean, they're up 45 basis points in the last 6 months. So it's an important part of the franchise. We'll compete effectively in there. We've got -- we've been happy with the improvement in the deposit ratio. I think as a game of inches, though on the deposit ratio. It's a large balance sheet. We're continuing to compete well for deposits. We don't have particular targets that we set around that particular ratio. We want to keep funding as much of our lending growth as possible through deposits. And pleasingly, in the 6-month period deposit growth outpaced lending growth even though we had a very high level of lender growth relative to a very high system. So we were able to retire a couple of billion dollars of long-term wholesale funding, which again helps in terms of the overall earnings profile and net interest margins. So we don't have particular targets that we set around that. We just try and keep things in balance and make sure we've got a strong deposit gathering franchise.
Matthew Dunger: And if I could just follow up on the credit quality side, you're talking about bad debt charges being low. You just referenced some of the peer selling capital returns policies based on that. You've seen the external refinancing of corporate exposures, bringing down the arrears. Just wondering if this reflects your conservative lending settings. Or are you seeing competition after this corporate business as it refis out?
Alan Docherty: Yes. We've continued to see -- I mean there's always going to be an element of external refinancing across each of the bank's portfolio. So we've seen some of that over the last sort of 6 and 12 months in particular, within our business bank, in particular. It's a competitive market. There's -- we've seen some continued aggressive pricing offers in market, particularly at that top end of the business bank. I think we called that out 6 and 12 months ago, that's continued in over the last couple of quarters. We are seeing some banks compete more on credit risk appetite, and we've seen some external refinancing. from our portfolio. So I think that's a function of the competitive market for business bank and that we're in at the moment.
Melanie Kirk: The next question comes from Ed Henning. We might just move to the next question, and perhaps we can come back to Ed if the line comes back. The next question will take is from Tom Strong.
Thomas Strong: Tom Strong from Citi. Just a couple of questions. The first on the replicating portfolio, it contributed basis points in the half, and the commentary suggested that much of that came in the December quarter. How should we think about the replicating portfolio over the next couple of halves just given the material step-up in swaps that sits sort of 50 to 100 basis points above the tractor rates now?
Alan Docherty: Yes. Yes, there will be -- the tractors will perform well at current swap rates. Now the swap rates have proven to be, obviously, fairly volatile over the past 12, 18 months. But current levels of swap rate, I mean there'll be a pickup in each of the tractors. So if you think about the size of our replicate portfolio, it's something like $2 billion that we'll reinvest at current swap rates each month. And so yes, that will be a function of the where swap rates move expectations for interest rates more broadly and the level of the deposits that we choose to hedge at any point in time. So yes, that will be a supportive element. I mean the equity tractor we called out last time around, if you go back 3 years, where swap rate was then, it's pretty similar to where swap rate today in the 3-year part of the curve and so we're not going to see much tailwind on equity tractor but replicating portfolio, given it's a 5-year tractor. We've probably got another 2, 3 halves of positive earnings momentum as those if you go back sort of for years, we were still in some pretty low in a pretty low rate environment. Some of the tractors that we put on there are coming up for reinvestment at much higher current rates. So yes, 2 or 3 halves of earnings momentum from replicating remain.
Thomas Strong: Great. And just a second question around business deposits. I mean we look at the strong growth in the business bank, but net of offset accounts, a lot of this growth has come from more expensive TDs and the business MFI did sort of slipped slightly half-on-half. I mean how are you seeing competition for business deposits more broadly given a number of your peers spending pretty considerably to emulate your success here?
Alan Docherty: Yes, I mean, it's a competitive market for deposits both for REIT on the retail side and the business bank side. We've been pleased with the deposits that we've gathered. I mean, the new business transaction account openings have continued at pace. I think we're up 7% in net BTA accounts opened over the past 12 months. So we're pleased with that. Yes, we did -- I think there's a little bit of volatility. It's a 6-month moving average on MFI. I think we're up 40 basis points year-on-year in the longer-term trend I think we're up 300 basis points over the last 5 years. So you'll see some oscillation one half to the next. But the overall momentum within MFI, I think, goes to the good execution within that franchise over multiple years. And yes, there's been, I think, some as I mentioned earlier, we've got some attractive rates on the term deposit product as well, and that did particularly well in the 6-month period within the business bank, which we're pleased with. It's a good stable source of funding for the strong lending growth that we're doing in that division.
Melanie Kirk: Thank you. That brings us to the end of the briefing. Thank you for joining us, and please reach out if you have any follow-up questions. Thank you.